Hedge fund managers want to domicile their funds in trusted, well-served offshore jurisdictions (or international financial centres - IFCs), which meet the requirements of their investor base. New managers are wary of deviating from leading jurisdictions, wanting to avoid queries over domicile when they have their work cut out convincing investors to part with their cash in support of their investment strategy. Larger managers can diversify according to investor profile and appetite, and across jurisdictions with different levels of regulation.
As new products and themes develop, nevertheless there are opportunities for jurisdictions to carve a niche as innovators in particular sectors such as crypto-assets, or in environmental, social and governance (ESG) themed funds.
The Cayman Islands remain the default IFC for UK-based managers, but inroads continue to be made by other jurisdictions because of the increased level of regulation there, for example in relation to anti-money laundering (AML) compliance. EU-based alternative investment fund managers (AIFMs) have the option of using the passport available under the alternative investment fund managers directive (AIFMD) when managing and promoting EU funds, almost invariably domiciled in Ireland and Luxembourg, and some in Malta.
For managers targeting US investors, Delaware remains the default contender as the domicile for feeder funds, although managers setting up their fund in, for example, Cayman and Jersey, have the option of keeping their master and feeder funds in the …