Back in July we looked at the changes to the Cayman Islands Stock Exchange (CSX)'s listing rules following the switch to the XETRA platform. Here we look at why investment funds would chose to list in the Cayman Islands, and the benefits listing can offer various types of investment funds, and in a companion piece we look at the listing process itself.
Cayman Island Funds
The Cayman Islands is the largest hedge fund domicile in the world, with 75% of the world’s hedge funds incorporated in the jurisdiction. Recognized worldwide as a leading centre for investment funds the islands also offers the 'one stop shop' of local legal advisors who are also listing agents, saving funds both time and money. Funds domiciled in approved overseas jurisdictions are free to appoint directors and service providers in their local jurisdiction where it helps the fund operate efficiently.
International recognition and memberships
The exchange is one of the world’s leading listing venues for investment funds. It has status as a ‘recognised stock exchange’ by the UK’s HMRC, so interest on its listed securities can be paid without deduction of UK tax, and as 'qualifying investments' they can be held by Personal Equity Plans (PEPs) and Individual Savings Accounts (ISAs). It is the only offshore exchange to be a member of the USA’s Intermarket Surveillance Group (ISG), whose members share information with other members on surveillance, investigation and enforcement. It is an affiliate member of the international standard setter for securities markets, the International Organization of Securities Commissions (IOSCO), whose members regulate more than 90% of the world's securities markets. It is also an affiliate member of the World Federation of Exchanges ("WFE"), the leading international body for Exchanges and Clearing Houses, and a full memberof the Cayman Islands Alternative Investment Management Association (AIMA) Charter.
Benefits of listing: Mutual funds
As well as providing a greater level of transparency and third party oversight, listing on the CSX offers funds a marketing advantage and gives the fund access to a wider investor base. Listing can also benefit investors in closed–ended funds who are unable to redeem their investment, as it gives them a secondary market with a trading platform.
Tailor made rules for sophisticated investors
The CSX has listing rules which have been specifically tailored to meet the needs of debt issuers and to accommodate the latest sophisticated structures and products. These include specialist debt securities, ‘plain vanilla’ eurobonds, convertible debt securities, securities issued by supranational bodies and securities guaranteed by a company or a government, as well as derivative warrants and both sponsored and unsponsored depositary receipts. The exchange is also suitable for Equity, Mortgage, or Hybrid Real Estate Investment Trusts (REITs). These trusts invest directly in property, and benefit from special tax considerations and by being listed offer a liquid method of investing in real estate.
1) Information on a CSX listed fund’s net asset value (NAV) is available on the Bloomberg Financial Markets Information Service, and the CSX dedicated website has both current and historic NAVs and news announcements.
2) The CSX is committed to providing initial comments on a listing application within ?ve business days, and processing the documentation three days thereafter. In the right circumstances, it can take as little as between 3-6 weeks to list a fund.
3) Shares are traded on the CSX’s new XETRA-based trading platform.
4) Listing costs are competitive, and the CSX offers discounts for umbrella funds and fund families.
5) There are no minimum subscription levels (although funds with a minimum subscription per investor of less thanUS$100,000 may be subject to additional requirements).
6) There are no investment policy restrictions, nor on redemption provisions (provided the redemption provisions are clearly disclosed in the listing document and shareholders are treated fairly and equally).
Securities issued by mutual or hedge funds and specialist debt securities are the most common securities to be listed on the CSX. All applications for listing need to be sponsored by a recognised Listing Agent, unless they are specialist debt securities, eurobonds, depositary receipts, derivative warrants and securities, which are the subject of a secondary listing.
The CSX has positioned itself to be an efficient and costs effective choice for the listing of securities and the combination of existing in a no tax jurisdiction whilst having HMRC “recognised stock exchange “ status makes CSX particularly attractive for UK based debt issuer and REIT structures. Solomon Harris is a recognised Listing Agent for the CSX and is authorised to sponsor all suitable listing applications and is always willing to discuss the process with entities considering listing.