The Cayman Islands is one of the leading offshore jurisdictions for hedge funds, thanks to legislation that positions Cayman very well and regulation that is neither too onerous nor too lax.
In addition, the business is bolstered by the support of very well qualified service providers including some of the world's leading administrators as well as highly specialised lawyers and accountants. However, there's plenty of competition from other centres. Cayman can't afford sit back on its laurels and luxuriate in being the top domicile for hedge funds when other jurisdictions such as the British Virgin Islands, Bermuda and the Bahamas are making a determined effort to capture the market.
Cayman is already on the map today as one of the world's largest banking centres, but today hedge funds are spearheading the islands' evolution into a more broadly-based financial services jurisdiction. Funds are a substantial and growing business that has now joined banking as one of the twin pillars of Cayman's financial industry. It's important that this development is not taken for granted and we do everything in our power to build on this position.
In the past, with offshore centres including Cayman under pressure from a series of initiatives from international bodies such as the Organisation for Economic Co-operation and Development, the Financial Action Task Force, the Financial Stability Forum and the International Monetary Fund, the islands' financial industry was understandably more concerned about meeting these challenges than raising its international profile.
Today, however, Cayman has comprehensively demonstrated its commitment to the highest international standards. It has adopted the latest rules to prevent money laundering and terrorist financing, introduced retrospective know-your-customer due diligence on bank clients that many onshore jurisdictions rejected as too difficult, and adopted the European Union's Savings Tax Directive to help the EU countries enforce their tax policy.
The Cayman government and the funds industry have agreed to increase the resources available to the Cayman Islands Monetary Authority from regulatory fees to ensure that supervision can draw on the best possible technological and human resources. And law firms are assisting many managers of Cayman funds prepare to be regulated by the US Securities and Exchange Commission.
These efforts to ensure the compliance of the financial industry with today's global norms make this the perfect opportunity to blow Cayman's trumpet rather louder than in the past. Efforts are already underway to improve the islands' promotional capability, and within the past year the government has hired a full-time employee dedicated to this.
However, this effort is still in its infancy. The opportunity before Cayman requires the different professions and branches of the financial industry to come together with government to deliver a single message, and really promote the territory. The various players all have the interests of Cayman at heart, but now is the time to match this with the same degree of organisation and resources that other jurisdictions, often with much less to shout about, are putting into promoting themselves.
Around half of the world's hedge funds are registered in Cayman, which is home to 90 per cent of the new hedge funds being launched in the US market. Those are great statistics, but the industry must strike while the iron is hot to capitalise on its dominant position with a proactive approach to building and maintaining the islands' international image.
Canover Watson is general manager of Admiral Administration