Our Cayman Unit Trusts team advises investment managers, investment advisers and their investors on establishing and operating Cayman unit trusts operating as hedge funds. We advise on all types of funds, including: absolute return funds; market neutral funds; systemic quantitative funds; and fundamental strategy funds. We work with funds adopting a broad range of investment strategies, including: global macro; long/short equity; distressed securities; risk arbitrage; special situations; relative value; fixed-income; multi-strategy; fund of funds; and commodities.
We are experienced advisers on the use of Cayman unit trusts for private equity funds, including: venture capital funds; real estate funds; infrastructure funds; technology funds; energy funds; health care funds; art funds; pre-IPO funds; buy-out funds; and distressed assets funds.
We advise on the key terms of hedge fund unit trusts, including: management and performance fee terms; allocations; hurdles and high-watermarks; equalisation; subscription and redemption charges; liquidity terms; lock-ups; gating provisions; suspensions; key man provisions; side pockets; synthetic side pockets; and Cayman regulation of hedge funds.
For private equity unit trusts, our services include advising on: investor allocations and distributions; carried interest waterfalls; preferred returns; catch up provisions; hurdles; other fee provisions; default provisions; clawbacks; key man provisions; and advisory committee terms.
About Cayman unit trusts
The Cayman exempted unit trust is a flexible structure ideally suited for use as an open-ended investment vehicle which allocates subscriptions across its asset classes as they are received. Alternatively, it can be used as a closed-ended investment vehicle permitting investment during a limited capital raising period and drawing down capital commitments in order to fund investment opportunities and operating costs as they arise.
The Cayman exempted unit trust is broadly a contractual arrangement between its unitholders and the trustee of the fund which issues units to its investors. The trustee has overall control of the trust and will delegate the management of the trust assets to the investment manager. The trustee – and possibly also the manager – also has additional fiduciary responsibilities to act in the best interests of the beneficiary unitholders of the unit trust. Cayman unit trusts can be established as stand-alone vehicles or as parallel funds, feeder funds or co-investment vehicles to address the particular needs of investors in the fund structure.
Hedge Fund unit trusts formed in Cayman fall within three broad categories of regulation:
- The regulated fund is open-ended, has a minimum initial investment requirement of USD 100,000 and is required to register with the Cayman Islands Monetary Authority.
- The regulated master fund has one or more Cayman-regulated funds conducting more than 51% of their investing directly or indirectly in it, and is also required to register with the Cayman Islands Monetary Authority.
- The exempted fund is open-ended, has no more than 15 investors and allows a majority of its investors to replace its trustee.
Private Equity unit trusts, as closed-ended vehicles, will generally not need to register with the Cayman Islands Monetary Authority.