The opening theme at the 1st Annual Offshore Investment Funds Summit was presented by Cayman Islands Government representative Dax Basdeo, who addressed the subject of experience and credibility of the world’s principal offshore fund domicile. The event was held in São Paulo last Wednesday (21 Sep) and was organised by DMS, a company specialising in structuring and operating offshore funds.
Still during the opening remarks – which counted with over 70 attendees, including independent fund managers and representatives of private banks and assets – the director of dms Brasil, Francine Balbina, outlined the importance of the event, highlighting the unique opportunity for Brazilian fund managers to have visibility abroad by using offshore vehicles, especially now that the country is increasingly attracting the attention of overseas investors.
Cayman Islands Financial Services Department director Dax Basdeo presented recent data on the country’s growth after the financial crisis, and highlighted its global leadership position in the hedge funds industry. Half of the island´s economy is based primarily on tourism and the other half on its financial market, where, according to Basdeo, over ninety thousand companies are registered, and the funds domiciled in the country hold around 1.5 trillion dollars in assets.
Basdeo also stressed the commitment to integrity and professionalism in Cayman Island operations. "We are members of the OECD (Organisation for Economic Co-operation and Development) and we currently have 25 agreements on tax information exchange between countries. In the coming months we will also have an agreement with China" he said. Several MOUs have also been signed with Comissão de Valores Mobiliários – CVM, the Brazilian securities commission.
Distribution aspects and operational factors of structuring funds in the Cayman Islands were the theme of the first panel´s debate. Don Seymour, the founder of DMS, pointed out that 80% of the world’s offshore funds are presently domiciled in the Cayman Islands, a country that is on OECD’s "white list".
According to Seymour, a former director of the Cayman Islands Monetary Authority, the country’s highly flexible regulatory environment that allows the creation of sophisticated products like nowhere else has attracted global interest. "We have a lot of talent there, and the quality level of service providers is very high", he claimed.
PriceWaterhouseCoopers (PWC) Cayman partner Colin Hanson, who also participated in the panel, declared that one of the main factors for choosing the Cayman Islands is agility: "a complex product can be structured in Cayman in just a few days". Conyers Dill & Pearman partner Alan Dickson added that what investors seek is a combination of goals and strategy aligned with good performance, management and dividends rates.
The panel also discussed the importance of independent directors in funds. Don Seymour declared that “fund governance became an important point after the financial crisis, this is the new rule in the international market. It is not possible to have an efficient fund if it does not have a solid governance structure".
Delaney made a presentation on the importance of investment security. He mentioned how the 2008 crisis and the Bernard Madoff case still cause concern to investors. "You have to know where the assets are" he says. According to Delaney, due to increasingly better monitoring within UCITS and QIF structures, it is extremely unlikely that a new Madoff case will occur.
A panel mediated by Safdié Asset Management director Otávio Magalhães and attorneys Joseph Suh, partner in New York’s Schulte Roth & Zabel law firm, and Cristian de Lima partner of Ramos, Zuanon e Manassero Advogados addressed the reasons for Brazilian fund managers to diversify their bases for attracting American institutional investors.
Other issues mentioned in the panel are the heavy tax burden and bureaucracy in Brazil, which are the main reasons that keep international investors away. Brazil currently has about 140 different taxes, according to a recent survey. "Another difficult thing to do is to open or close a company in this country, and this has a direct effect on the creation of asset management companies" Cristian says.
The event’s closing panel was mediated by PwC Brazil partners João Santos and Marcelo Alencar, and it covered the Brazilian investment fund market. The debates addressed the importance of accuracy in financial statements and accounting practices. "The manager must have a deeper participation, must understand and be involved in the financial statements, as only he has sufficient knowledge for including explanatory notes on the product’s risk and adversity" Santos declared.
These accounting aspects are, according to the specialist, essential to the business, as international investors get their understanding of the fund’s context from examining these statements. "This is what investors expect when they see Brazil as an offshore opportunity" he concluded.
DMS is the largest Cayman Islands firm focused on structuring and operating funds in any major offshore jurisdiction. Founded in 2000, it operates in the world’s main offshore jurisdictions and currently manages funds with assets of over US$ 265 billion. It is headquartered in the Cayman Islands and has operations in Europe, Hong Kong, Brazil, and now also in New York. dms Brazil works as a "one-stop-shop", offering Brazilian and Latin American fund managers a comprehensive range of professional services for offshore investment.