Emerging fund managers in the Middle East—particularly those targeting sub-US$50 million in assets under management —face critical decisions when launching their first fund. While the region's domestic markets are maturing, and offer a compelling alternative in certain circumstances, for first time managers selecting an offshore jurisdiction may be the better choice. The Cayman Islands and the British Virgin Islands offer cost-effective, internationally respected platforms that simplify fund formation, enhance credibility with global investors, and provide a neutral, well-understood legal framework. This article outlines the key advantages of these two jurisdictions and explains how their structures can align with the strategic needs of new managers in the region.

Why emerging managers look offshore

While distinct in their offerings, the Cayman Islands and British Virgin Islands share several foundational features that make them attractive to first-time fund managers. These jurisdictions provide a stable, tax-neutral environment, which is crucial for pooling capital from diverse international sources without adding layers of tax complexity. This, combined with their regulatory efficiency, creates a powerful value proposition:

Global recognition and investor confidence – Both are leading international finance centres recognised by institutional investors, regulators, and counterparties worldwide. This global standing enhances a new fund's credibility and significantly simplifies the investor onboarding and due diligence process.

Strong legal foundations – Based on English common law, both jurisdictions offer clear, predictable, and commercially-minded legal frameworks. This provides certainty on matters such as shareholder rights, director duties, and creditor protections, which is highly valued by sophisticated investors.

Political and economic stability – As British Overseas Territories, they benefit from long-term constitutional stability and a reliable court system, with an ultimate right of appeal to the Privy Council in London. This insulates fund structures from local political and economic volatility.

Cost efficiency – For emerging managers, budget is paramount. Startup fees, annual government fees, and professional service costs in these jurisdictions are often substantially lower than in major onshore financial centres, making them ideal for lean, entrepreneurial teams.

Speed to market – Both jurisdictions feature streamlined and efficient regulatory registration or approval processes. This allows managers to launch their funds quickly and predictably, enabling them to capitalise on fundraising opportunities without being delayed by bureaucratic hurdles.

Cayman Islands: Global standard-setter

The Cayman Islands is the world's leading offshore fund domicile, with tens of thousands of funds registered with the Cayman Islands Monetary Authority. This depth of experience has created a sophisticated ecosystem of world-class service providers. The jurisdiction offers two primary fund structures relevant to emerging managers:

Mutual Funds – Ideal for open-ended strategies with liquid assets (eg hedge funds) where investors can subscribe and redeem on an ongoing basis. These funds are regulated by the Cayman Islands Monetary Authority and must appoint a Cayman-based auditor and a licensed fund administrator, ensuring robust governance and independent oversight.

Private Funds – Designed for closed-ended strategies with illiquid assets (eg private equity, venture capital, real estate) where investors commit capital for the life of the fund. While still required to register with the Cayman Islands Monetary Authority and appoint appropriate service providers for cash monitoring, valuation, and safekeeping of assets, the overall regime is more flexible than for mutual funds.

Cayman remains the default choice for many institutional investors due to its regulatory maturity and deep investor familiarity. However, the mandatory app...