The Cayman Islands has launched a fightback against attempts by Singapore and Hong Kong to rival it as a favourite destination for Asia’s hedge funds and super-rich to park assets.
Cayman Islands financial services minister André Ebanks visited Singapore and Hong Kong this month to advance plans to set up an office in one of the two Asian cities. It would be the Cayman Islands’ first base in Asia, and its officials would help investors to set up and manage funds based in the Caribbean territory.
The move comes after Singapore and Hong Kong approved new fund structures that offer international investors a way to shelter money in lightly taxed vehicles, with government subsidies to cover some set-up costs.
Use of Singapore’s new “variable capital companies” has exploded since they were introduced in 2020, with 889 set up so far — a pace investors say has taken even regulators by surprise as Chinese money floods into the city-state.
Uptake of Hong Kong’s “open-ended fund companies” has been slower, but 64 were set up in 2022, up from 40 a year earlier.
There are far more such vehicles in the Cayman Islands, but officials in the British overseas territory “think there’s a threat to their position”, said a Hong Kong-based funds specialist briefed on the initiative. “They haven’t had as much competition before.”
The Cayman Islands had been planning to set up an office in Asia for years, but the rapid take-up of the Singapore and Hong Kong vehicles has prompted more urgency, according to two people with knowledge of officials’ thinking.
“Minister Ebanks and I . . . had meetings with a number of local officials, agencies and law firms [in Hong Kong and Singapore] on matters related to opening and operating a Cayman Islands government office,” said Gene DaCosta, the Cayman Islands’ representative for Asia, in response to questions from the Financial Times. “No decision has been taken as yet on the location.”
The Cayman Islands delegation met hedge fund executives, fund lawyers and trade bodies for the private equity, hedge fund and venture capital industries, said people with knowledge of the trip.
One financier whose firm uses Cayman funds said the officials were seeking to reaffirm their relationship in the face of what was likely to become sharper competition from Hong Kong and Singapore.
“It was very much a two-way process, for the [Cayman Islands] government to meet stakeholders and get feedback about the jurisdiction,” said Ann Ng, a Hong Kong-based partner at the Cayman Islands law firm Maples Group who accompanied the officials to some of their meetings.
The pitch to Asian investors considering the Hong Kong and Singapore vehicles was that “Cayman funds represent the ‘old faithful’ of the investment world — tried, tested and trusted”, said a Singapore-based adviser who had talks with the delegation.
The Cayman Islands “have one particular strength: they are far away from the long arm of the Beijing government”, said another Singapore-based financial adviser who met the Cayman Islands delegation.
“Hong Kong can’t really argue that, and Singapore might have trouble, too, down the track with how things are going with mainland inflows,” the adviser said. A rush of capital from wealthy Chinese people into Singapore has become a politically sensitive issue in the city-state.
Several of the people said Hong Kong’s deeper capital markets and longer history as a global financial centre would until recently have made it the obvious choice for the Cayman Islands office. However, large numbers of companies, funds and family offices have relocated to Singapore in recent years.