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Whilst there is clearly a cacophony of different issues for him to tackle, it did remind me of this excellent article in Reuters back in October which was already tracking the moves being made in the investment funds industry to continue the meteoric rise of ESG investment strategies.

For those that are very late to the party, ESG stands for environmental, social and governance and the story of ESG investing actually began back in January 2004 when former UN Secretary General Kofi Annan wrote to over 50 CEOs of major financial institutions, inviting them to participate in a joint initiative under the auspices of the UN Global Compact and with the support of the International Finance Corporation (IFC) and the Swiss Government. The goal of the initiative was to find ways to integrate ESG into capital markets.

Whilst the concept has become an undoubted success, getting it to this position has not been without challenges. Ignoring those that thought ESG might just be something of a fad, one of the more interesting issues came from institutional investors who argued that making investment decisions on the basis of these principles was actually a breach of their fiduciary duties to their shareholder base.

This has caused extensive debate, but a strong argument was being made in many circles that the pursuit of financial gains should always be the sole focus. It became litigious in a number of jurisdictions, where investment managers were challenged on both their principles and ethics, although in almost every case, it was where the financial gains had not matched the expectations of the investors.

But both the UK and the EU decided to take this out of the hands of the courts and the new disclosure requirements for investment managers and advisers with respect to their ESG policies will apply in the European Union from 10 March 2021 and new climate-related disclosures will apply to investment managers under a UK disclosures regime that is expected to be phased in from 2022.

We will ignore the impact of Brexit for the purposes of this short article, but it does appear that all of Europe is united on this front. What is interesting to watch is that the regulatory landscape in this area is undoubtedly evolving and when you add these new initiatives to the Shareholder Rights Directive, the UK Stewardship Code, the Principles for Responsible Investing and the UK Corporate Governance Code, it is now the case that European managers will be operating within these parameters indefinitely.

Figures show that assets in sustainable investment products in Europe are forecast to reach €7.6 trillion over the next five years, which will then outnumber conventional funds. Part of this drives comes from a critical mass of pension funds and insurers deploying capital exclusively to asset managers with ESG capabilities.

Whilst this level of market dominance has not yet been reached in the US, largely due to some of the scepticism highlighted above, the clearer path that the Democratic party now have in the US may well see their domestic capital providers follow a very similar path, especially in a market with greater maturity that really is looking for a transformation for the better.

This article was originally published by funds europe.

The Virgin Islands Data Protection Act 2021 (the Act) is now in force. The Act imposes a number of obligations upon investment funds in relation to the processing of personal data that they will inevitably collect as part of the investor onboarding procedure.

In order to ensure compliance with the Act, investment funds should:

Provide investors with a privacy notice

Update their offering and subscription documentation

Revisit service agreements with third parties, most importantly, the fund administrator

Overview

The Act governs how a data controller may process, use and retain personal data. Anyone who falls within the definition of a "data controller" (of which an investment fund domiciled in the BVI clearly does) must now comply with the seven principles in the Act in relation to any personal data processed by the fund. Where a data controller engages a third party (such as an administrator or investment manager) to process personal data on its behalf (defined in the Act as a "data processor"), the data controller must ensure the data processor has appropriate safeguards in place in respect of the personal data.

In addition to governing how a data controller processes, uses and retains personal data, the Act also sets out the rights of individuals to control their personal data and implements a series of offences and enforcement measures designed to ensure compliance. The Act is broadly designed to reflect the General Data Protection Regulation (GDPR) and the Cayman Islands Data Protection Act (both of with which many clients will already be familiar), however there are a number of differences that you should be aware of.

Application of the Act to investment funds

Any investment fund structured as a BVI company or partnership, or any foreign company registered in the BVI that acts as a general partner of an investment fund will be subject to the Act and will be a data controller.

Investors in a BVI investment fund will routinely provide certain personal identifying information to the investment fund such as their name, address, date of birth, bank details etc and this is to be regarded as "personal data".

Although the persons whose data is gathered under the Act ("data subjects") have to be natural individuals, the Act will still apply in connection with corporate investors who provide personal data for their beneficial owners, directors, employees and members.

The individual to which the personal data relates does not need to be in the BVI or a citizen of the BVI in order for the Act to apply.

What must an investment fund do to comply with the Act?

As a data controller, an investment fund must ensure that it complies with the seven data protection principles contained in the Act. See our guide BVI introduces data protection regime for further information.

In practical terms, an investment fund can demonstrate compliance with the data protection principles by taking the following actions:

Send a privacy notice to existing investors, whether as a separate document or part of an update to the offering document

Update subscription documents to include a privacy notice for new investors as well as obtain certain acknowledgements, representations and warranties

Update offering documents

Update agreements with any third parties that would be regarded as a data processor on the basis that they process personal data on behalf of the data controller

Privacy notices

If the investment fund is already subject to GDPR then it may have already adopted a GDPR compliant privacy notice. If that is the case, then a few amendments to the privacy notice to reflect the Act are all that are needed.

If the investment fund has not yet adopted a privacy notice, then it should prepare one in order to communicate the required information to its investors and we would be happy to assist with this drafting where required.

In either case, the privacy notice should be sent to existing investors and/or made available on an investor or fund administrati...

After a highly educational trip down to Buenos Aires at the end of last year, I couldn't help but be encapsulated by everything that was going on in Argentina. It absolutely felt like a country that was finally moving in the right direction and the Tax Amnesty was a large part of that. On that basis, I took the time out to interview the head of our Montevideo Office, Horacio Woycik to gauge his views on how 2017 is playing out:

Thanks for taking the time to speak to me Horacio. I noted that on 31 March 2017, Argentina concluded one of the world's most successful tax amnesties, something of which you must be very proud of as a native Argentinian. Could you tell our blog readers a little more?

Thanks Phil. Although the Argentina Government was cautiously optimistic when announcing the Tax Amnesty on various assets[i] a year ago, the results exceeded all expectations, with $116.8 billion assets declared in total. This is impressive, particularly compared to the $1.7 billion declared under the former government's Tax Amnesty programme between 2013-2015.

That's a truly incredible result. What do you put it down to?

Some may attribute this success to investor confidence in Argentina's new Government, led by Mauricio Macri, but in my opinion, this only partially explains the results. Another deciding factor in the Amnesty's success was the unanimous consensus from local legal, tax and financial advisors that sooner rather than later, there would no longer be a safe place for undeclared assets and they actively encouraged all of their clients to participate. The Amnesty was seen as a "last chance" opportunity for taxpayers to regularise assets before the unprecedented flow of financial information amongst Tax Authorities following the implementation of the OECD's Common Reporting Standard (CRS) in September 2017.

That's interesting as clearly the CRS has been a huge topic of conversation down there for a while. Has it made that much of an impact?

Absolutely. CRS, FATCA and FATCA's bilateral Intergovernmental Agreements (IGAs) are reshaping the international financial system, and compliance with local tax obligations will soon be monitored by financial institutions more closely than ever before. In this context, tax amnesties are just another preliminary step in a coordinated global effort.

As a matter of fact, Argentina's Amnesty programme is only one of many Tax Amnesty programmes taking place simultaneously worldwide. Chile successfully closed its Tax Amnesty programme in December 2015 with $18.7 billion in assets declared. Meanwhile, Brazil recently extended its Amnesty programme until 31 July 2017, with $54 billion in assets declared to date. Additionally, countries like Colombia, Peru and Mexico have ongoing Tax Amnesty programmes.

So this is absolutely going to be become the norm. What can we expect after these various tax amnesties take place?

The high adherence to the different tax amnesties will likely trigger a wave of asset restructurings by high net worth individuals, with tax efficiency as the main driver. It's likely that there won't be a "one size fits all" solution for the structuring needs of clients from different countries, as structuring will be very dependent on local tax legislation, and solutions will vary from country to country.

Accordingly, private clients' increased use of fund structures for tax and estate planning purposes is likely to drive growth in Latam's fund industry.

That's very interesting and I'm our funds blog readers would like to know a little more about why that is.

I can see three obvious reasons why:

Funds are a natural vehicle for asset repatriation. Tax residents in Latam are disclosing billions of dollars through the ongoing tax amnesty programmes, most of which are held abroad. Some of those assets are likely to return to their investors' countries of residence once the "invisible barrier" of being undeclared is lifted. It could be expected that investment funds will channel a signifi...

After a highly educational trip down to Buenos Aires at the end of last year, I couldn't help but be encapsulated by everything that was going on in Argentina. It absolutely felt like a country that was finally moving in the right direction and the Tax Amnesty was a large part of that. On that basis, I took the time out to interview the head of our Montevideo Office, Horacio Woycik to gauge his views on how 2017 is playing out:

Thanks for taking the time to speak to me Horacio. I noted that on 31 March 2017, Argentina concluded one of the world's most successful tax amnesties, something of which you must be very proud of as a native Argentinian. Could you tell our blog readers a little more?

Thanks Phil. Although the Argentina Government was cautiously optimistic when announcing the Tax Amnesty on various assets[i] a year ago, the results exceeded all expectations, with $116.8 billion assets declared in total. This is impressive, particularly compared to the $1.7 billion declared under the former government's Tax Amnesty programme between 2013-2015.

That's a truly incredible result. What do you put it down to?

Some may attribute this success to investor confidence in Argentina's new Government, led by Mauricio Macri, but in my opinion, this only partially explains the results. Another deciding factor in the Amnesty's success was the unanimous consensus from local legal, tax and financial advisors that sooner rather than later, there would no longer be a safe place for undeclared assets and they actively encouraged all of their clients to participate. The Amnesty was seen as a "last chance" opportunity for taxpayers to regularise assets before the unprecedented flow of financial information amongst Tax Authorities following the implementation of the OECD's Common Reporting Standard (CRS) in September 2017.

That's interesting as clearly the CRS has been a huge topic of conversation down there for a while. Has it made that much of an impact?

Absolutely. CRS, FATCA and FATCA's bilateral Intergovernmental Agreements (IGAs) are reshaping the international financial system, and compliance with local tax obligations will soon be monitored by financial institutions more closely than ever before. In this context, tax amnesties are just another preliminary step in a coordinated global effort.

As a matter of fact, Argentina's Amnesty programme is only one of many Tax Amnesty programmes taking place simultaneously worldwide. Chile successfully closed its Tax Amnesty programme in December 2015 with $18.7 billion in assets declared. Meanwhile, Brazil recently extended its Amnesty programme until 31 July 2017, with $54 billion in assets declared to date. Additionally, countries like Colombia, Peru and Mexico have ongoing Tax Amnesty programmes.

So this is absolutely going to be become the norm. What can we expect after these various tax amnesties take place?

The high adherence to the different tax amnesties will likely trigger a wave of asset restructurings by high net worth individuals, with tax efficiency as the main driver. It's likely that there won't be a "one size fits all" solution for the structuring needs of clients from different countries, as structuring will be very dependent on local tax legislation, and solutions will vary from country to country.

Accordingly, private clients' increased use of fund structures for tax and estate planning purposes is likely to drive growth in Latam's fund industry.

That's very interesting and I'm our funds blog readers would like to know a little more about why that is.

I can see three obvious reasons why:

Funds are a natural vehicle for asset repatriation. Tax residents in Latam are disclosing billions of dollars through the ongoing tax amnesty programmes, most of which are held abroad. Some of those assets are likely to return to their investors' countries of residence once the "invisible barrier" of being undeclared is lifted. It could be expected that investment funds will channel a signifi...

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Fund policies and arrangements

A PIF is required to maintain a valuation policy setting out the applicable procedures for the valuation of fund property, the preparation of reports on the valuation and setting out the mechanisms for sharing valuation information with investors (Valuation Policy). A PIF must ensure that the person appointed as its valuation "appointed person" values fund property in accordance with the valuation policy.

A PIF should also have a safekeeping policy and adequate arrangements in place for the safekeeping of fund property (Safekeeping Policy).

On an annual basis, a PIF should review its Valuation Policy and Safekeeping Policy to ensure compliance with BVI legislation.

Maintenance of records and financial statements

A PIF must maintain records that are sufficient to show and explain its transactions, to enable its financial position to be determined with reasonable accuracy at any time, to enable it to prepare financial statements and make returns and, if applicable, to enable its financial statements to be audited.

A PIF must prepare financial statements for each financial year that comply with:

The International Financial Reporting Standards, promulgated by the International Accounting Standards Board

UK GAAP

US GAAP

Canadian GAAP; or

Internationally recognised and generally accepted accounting standards equivalent to the accounting standards referred to above

Anti-money laundering obligations

The BVI anti-money laundering (AML) regime applies to all funds as they are classified as "relevant persons" under the Anti-Money Laundering Regulations 2008. In addition to appointing an officer to the fund or another individual as MLRO (as mentioned above), a fund will be required to:

Put in place investor on-boarding procedures which address typical "know your client" requirements.

Put in place and maintain a written and effective system of internal controls which provides appropriate policies, processes and procedures for forestalling and preventing money laundering and countering the financing of terrorism (the Manual). The Manual should be reviewed annually to ensure compliance with AML regime in the British Virgin Islands.

Report suspicious transactions to the Financial Investigation Agency (FIA) in the BVI

Report the identity of its appointed MLRO to the FIA

The BVI rules do provide for funds to outsource all and any of these obligations to functionaries based outside of the BVI, such as an administrator or investment manager. Any outsourcing must, however, be documented in writing.

Obligations under FATCA and CRS?

PIFs are required to register for a Global Intermediary Identification Number (GIIN) with the US Internal Revenue Service. Funds are also required to enrol with the ITA. Enrolment for FATCA reporting is made through the ITA's online portal, called BVI Financial Account Reporting System, and for CRS is made by email to [email protected].

PIFs will need to identify reportable accounts and start to report the necessary information to the ITA. The reporting deadline for US FATCA, UK FATCA and CRS is 31 May.

The information that must be reported under US and UK FATCA and CRS is broadly similar and includes: the name, date of birth, tax identification number (TIN) (for Specified US Persons where available); National Insurance Number (for Specified UK Persons, where available); jurisdiction of residence (for reportable persons under CRS only); the account number; name and GIIN of the reporting financial institution; and the account balance (some minimums apply under FATCA).

Here is a way to start an article like no other; what a fantastic year 2020 has been. The obituary of the hedge fund industry has been written many times, but for some, it was written in indelible ink in 2008 following the financial crisis. Commentators blamed the industry for its part in the global collapse, notwithstanding the fact that a huge majority of fund vehicles during that time were actually victims themselves. Ignoring the huge layer of red tape that subsequently encased the industry, this wasn't actually the largest cause for concern.

The bigger problem was that once the S&P settled down, its solid and consistent performance led to a benchmark that the industry simply couldn't match. Many funds struggled to provide the exceptional returns they were once capable of and with new products like exchange-traded funds combining performance with a lower risk profile and lower fees, the glitz and glamour of AW Jones' product had truly been eroded. However, the inflow of investment remained, and while the lack of true performance caused general resentment, a shock to the global financial system might cause the passive investment models to fail and suddenly the two and 20 would look like money well spent. So the script for 2020 couldn't have been better written by Hollywood, although probably would have had a little more Dwayne Johnson. The flash crash in March could have lead to the industry flourishing from that point forward.

Dog funds

Sadly, a record 150 funds were classed as poor performers in the "Spot the Dog" list compiled by wealth manager Tilney Bestinvest, which names and shames the worst-performing investment funds and reported a 65 per cent increase in the number of "dog" funds, up from 91 in February. Interestingly, this is consistent with the tough time value investors have generally had over the last decade. Buying shares in companies which appear cheap given their fundamentals became a true art form, but the markets simply haven't played to the same rule book and one obvious explanation for this is the rise of tech firms, which are simply impossible to analyse using standard valuation tools. Brand strength and user adoption models seemingly become far more important than the profit line, for example. With a pandemic forcing the entire planet to go online simultaneously, the arguably overvalued tech stocks somehow continued to grow exponentially.

Those companies that remained well placed to increase in value consistently if the world had continued on its "normal" course, suddenly found that the very solid foundations they were sensibly built on were destroyed from under them. Hugely dependable industries were decimated in a matter of months which even the very best minds in the hedge fund industry couldn't readjust to quickly enough. Where you have such a fundamental and novel shock to the system, the largest funds will always have the biggest problem with turning their tanker around. Just looking at the Top 20 Dogs, all but one of them is over a billion and you can see some truly institutional names. On a wider basis, the ten largest hedge funds reporting to eVestment remain some 4.61 per cent in the red year-to-date, despite posting a 1.31 per cent gain in July. In contrast, hedge funds overall are now flat for the year, having registered a 3.43 per cent rise in July to successfully claw back losses suffered in H1.

Market neutrality achieved? Being nimble and able to pivot in this type of market was always going to be advantageous.

Digital rise

From our own anecdotal evidence, given we have the pleasure of working with a large number of emerging managers, we certainly have clients who are putting some very significant numbers up on the board this year. It has been especially noticeable in the digital asset slice of this market. Whether you believe in the digital gold theory of bitcoin or not, there is no doubt that with so much uncertainty out there, investors are looking for interesting alternatives to ...

But will the OFC and proposed tax changes really entice Hong Kong based hedge fund managers to set up funds in Hong Kong?

Much of the talk of the "advantage" for a Hong Kong manager in setting up an OFC over a Cayman domiciled fund relates solely to a requirement for dealing only with the Securities and Futures Commission (SFC) and not also the Cayman Islands Monetary Authority (CIMA).

This seems to me a little simplistic.

As a starting point, with a Hong Kong manager directly managing a Hong Kong fund, and without any offshore manager, there will be no opportunity for any management or performance fees to be earned at the Cayman level and tax-deferred.

Moreover, hedge funds are cross-border by their very nature. Most hedge funds have investors from a lot of different countries and have investments in a lot of different countries. Accordingly, managers will already need to be considering the securities laws of various countries.

All the investors in a hedge fund will have their own local tax obligations, so as a very base condition a manager is seeking to domicile their fund somewhere with no additional taxes. However, this is not enough.

A manager also needs to domicile their fund somewhere that provides investors from a lot of different countries the relevant level of comfort to place their investments in such a vehicle. There are some very important factors that are considered by the type of sophisticated investors that invest into hedge funds in determining this comfort level. Such factors that a jurisdiction must exhibit include the absolute rule of law, respect for property rights and access to a sophisticated judiciary free from political interference.

The Cayman Islands is a jurisdiction that fulfils these requirements and has reliably proven itself to do so over decades. As a result, over 85 per cent of the world's hedge funds are domiciled in the Cayman Islands.

Hong Kong is a jurisdiction that some might consider is rapidly being subsumed into the People's Republic of China.

Even when you drill down into more of the minutiae of the OFC regime it appears that the Cayman Islands remains a clear leader. The level of prescription and oversight which is contemplated by the OFC regime, whilst it may be familiar to operators of Hong Kong retail funds, is far more than would be familiar to hedge fund managers, or than applies to private Cayman funds.

The OFC's governing document is required to contain certain prescribed provisions, including the kinds of property in which the OFC can invest. Any change to this governing document will require the SFC's approval. There are no restrictions imposed by the Cayman regime on investment strategies of Cayman funds or their use of leverage. A Cayman fund does not have prescribed provisions in, and CIMA's approval is not required for any changes to, its memorandum and articles of association.

The appointments of the directors of an OFC are subject to the SFC's approval, and the SFC will require the directors to be appropriately qualified and experienced. By contrast, CIMA requires directors to register via a web portal but does not impose an approval process nor any requirements as to qualifications, experience or independence.

An OFC must appoint a custodian approved by the SFC which meets the eligibility requirements set out. In practice, many hedge funds appoint one or more prime brokers, and many prime brokers may not, and may not wish to, meet these eligibility requirements. A Cayman fund sold in Hong Kong by private placement is not required to appoint a custodian.

The OFC regime requires that the valuation and pricing of the OFC's property is the investment manager's responsibility. This is inconsistent with the typical hedge fund model, where valuation and pricing is typically delegated to the fund's administrator.

Any change of name of an OFC is subject to the SFC's approval. No approval is required to a change of name of a Cayman fund.

Transfers of OFC shares will be subj...

The Cayman Islands is the leading jurisdiction for the offshore investment funds industry due to its combination of flexible and appropriate regulation, an approachable and effective regulator, professional service provider expertise, high reputation among investors and a tax neutral fiscal regime.

Investment funds established in the Cayman Islands fall into two broad categories: open-ended funds and closed-ended funds.

Open-ended funds provide investors with voluntary redemption or repurchase rights and closed-ended funds do not provide investors with those rights. Typically, open-ended funds will invest in liquid assets which can be readily realised to fund redemptions (eg listed, liquid, tradable securities) and closed-ended funds will invest in non-liquid assets requiring time to liquidate/realise value (eg real estate, unlisted companies).

This guide sets a summary of the regulatory regime of open-ended investment funds, which is supervised by the Cayman Islands Monetary Authority (CIMA).

For an overview of the regulatory regime that governs private funds please see Guide to Private Funds in the Cayman Islands.

Fund vehicle options

Companies

Exempted companies limited by shares are the most common form of entity used for the establishment of open-ended investment funds, with an investor's liability being limited to the amount paid or agreed to be paid in respect of their shares. Please see our Guide to Exempted Companies for more details.

Segregated portfolio companies

An exempted company may register as a segregated portfolio company (SPC), which is similar to a segregated cell company in many other jurisdictions.

An SPC may establish any number of segregated portfolios. Assets and liabilities attributed to a particular segregated portfolio are legally separated from the assets and liabilities attributed to any other segregated portfolio. A creditor who is party to a contract involving a particular segregated portfolio will have restricted recourse and will be entitled to recover only against assets attributed and credited to the specific segregated portfolio to which the contract is also attributed.

SPCs can be useful as multi-strategy vehicles and platform vehicles. Savings by using multi-strategy SPCs are often not as great as anticipated however and SPCs with multiple segregated portfolios do require a greater degree of care to ensure assets are properly segregated, contracts are entered into on behalf of the correct segregated portfolio and inadvertent cross-collateralisation does not occur. Please see our Guide to Segregated Portfolio Companies for more details.

Limited liability companies

Limited liability companies (LLCs) can be incorporated in the Cayman Islands in a form closely aligned to the Delaware LLC. LLCs may be used in investment fund structures where a flexible structure similar to a limited partnership is required, but where the vehicle needs to be established as a body corporate distinct from its members. LLCs are regulated by their LLC agreement and the Limited Liability Companies Act. Please see our Guide to LLCs for more details.

Exempted limited partnerships

While an exempted limited partnership (ELP) is the most common vehicle for closed-ended funds including private equity, venture capital and real estate funds, they are also used for open-ended funds. An ELP has many similarities to its Delaware equivalent vehicle but an ELP is not a separate legal person and for this reason, it is popular with managers and investors in a number of jurisdictions. An ELP is managed by its general partner. Please see our Guide to ELPs for more details.

Unit trusts

Cayman Islands unit trusts are established under and governed by the Cayman Islands Trusts Act and, save as modified under that law, generally applicable principles of English trust law. With a unit trust, investors contribute funds to a trustee which holds those funds on trust for the investors and each investor is directly entitled to a pro rata s...

The Cayman Islands is the leading jurisdiction for the offshore investment funds industry due to its combination of flexible and appropriate regulation, an approachable and effective regulator, professional service provider expertise, high reputation among investors and a tax neutral fiscal regime.

Investment funds established in the Cayman Islands fall into two broad categories: open-ended funds and closed-ended funds.

Open-ended funds provide investors with voluntary redemption or repurchase rights and closed-ended funds do not provide investors with those rights. Typically, open-ended funds will invest in liquid assets which can be readily realised to fund redemptions (eg listed, liquid, tradable securities) and closed-ended funds will invest in non-liquid assets requiring time to liquidate/realise value (eg real estate, unlisted companies).

This guide sets a summary of the regulatory regime of open-ended investment funds, which is supervised by the Cayman Islands Monetary Authority (CIMA).

For an overview of the regulatory regime that governs private funds please see Guide to Private Funds in the Cayman Islands.

Companies

Exempted companies limited by shares are the most common form of entity used for the establishment of open-ended investment funds, with an investor's liability being limited to the amount paid or agreed to be paid in respect of their shares. Please see our Guide to Exempted Companies for more details.

Segregated portfolio companies

An exempted company may register as a segregated portfolio company (SPC), which is similar to a segregated cell company in many other jurisdictions.

An SPC may establish any number of segregated portfolios. Assets and liabilities attributed to a particular segregated portfolio are legally separated from the assets and liabilities attributed to any other segregated portfolio. A creditor who is party to a contract involving a particular segregated portfolio will have restricted recourse and will be entitled to recover only against assets attributed and credited to the specific segregated portfolio to which the contract is also attributed.

SPCs can be useful as multi-strategy vehicles and platform vehicles. Savings by using multi-strategy SPCs are often not as great as anticipated however and SPCs with multiple segregated portfolios do require a greater degree of care to ensure assets are properly segregated, contracts are entered into on behalf of the correct segregated portfolio and inadvertent cross-collateralisation does not occur. Please see our Guide to Segregated Portfolio Companies for more details.

Limited liability companies

Limited liability companies (LLCs) can be incorporated in the Cayman Islands in a form closely aligned to the Delaware LLC. LLCs may be used in investment fund structures where a flexible structure similar to a limited partnership is required, but where the vehicle needs to be established as a body corporate distinct from its members. LLCs are regulated by their LLC agreement and the Limited Liability Companies Act. Please see our Guide to LLCs for more details.

Exempted limited partnerships

While an exempted limited partnership (ELP) is the most common vehicle for closed-ended funds including private equity, venture capital and real estate funds, they are also used for open-ended funds. An ELP has many similarities to its Delaware equivalent vehicle but an ELP is not a separate legal person and for this reason, it is popular with managers and investors in a number of jurisdictions. An ELP is managed by its general partner. Please see our Guide to ELPs for more details.

Unit trusts

Cayman Islands unit trusts are established under and governed by the Cayman Islands Trusts Act and, save as modified under that law, generally applicable principles of English trust law. With a unit trust, investors contribute funds to a trustee which holds those funds on trust for the investors and each investor is directly entitled to a pro rata share in the trust's a...