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The Cayman Islands will open an office in Singapore by the end of the year, as the Caribbean offshore financial services centre seeks to capture more business from Asia’s hedge funds and wealthy families.
An office in Singapore would allow the Caribbean territory to “better capitalise on the many new business opportunities . . . that the Asian region has to offer”, said André Ebanks, Cayman Islands financial services minister, on Friday.
The city-state’s connectivity and “relatively neutral position in the region” made it the right choice for the country’s first Asian base, Ebanks added. The Cayman Islands had also considered Hong Kong, which he said remained an “important locale”.
The opening of the office also represents a pushback against Singapore and Hong Kong, which have stepped up efforts in recent years to compete with traditional tax havens to serve Asia’s growing population of wealthy investors.
The Asia-Pacific region accounts for about 42 per cent of global wealth, or $218tn, according to a McKinsey report last year, up fourfold since 2000. In 2021, the wealth of households with investable assets of $100,000-$1mn in Asia totalled $2.7tn, according to the consultancy, a sum projected to climb to $4.7tn by 2026 as incomes continue to rise across the region.
With the move to Singapore, “the Caymans aren’t just rolling out the red carpet for Asia’s wealthy; they’re laying down a runway for private jets”, said Kher Sheng Lee, co-head of the Alternative Investment Asset Management Association for Asia.
Singapore and Hong Kong have launched fund structures in recent years to lure business from low-tax havens such as the Cayman Islands, Mauritius and the British Virgin Islands. The schemes allow investors to hold money in lightly taxed vehicles with generous government subsidies.
Singapore, which has long prospered as a stable and predictable environment for business, has had more success than Hong Kong in attracting managers and wealthy family offices to establish funds.
Singapore’s new “variable capital companies” have exploded in popularity since their introduction in 2020, with 937 set up as of August. The uptake of Hong Kong’s “open-ended fund companies” has been slower, with 112 registered with the city’s Securities and Futures Exchange as of the end of last year, according to law firm Deacons. Hong Kong’s OFC regime was launched in 2018.
The vehicles are popular with family offices, hedge funds and other private equity firms managing money.
“While Cayman fund structures remain the gold standard, new offerings from Singapore and Hong Kong are welcome challengers,” said Lee.
“Investors have compelling reasons to consider the Cayman Islands, given their tried-and-true fund structures. While Singapore’s VCCs and Hong Kong’s OFCs offer new avenues, the Caymans bring a legacy of reliability.”
Lee said the new Caymans office would target a broad spectrum of opportunities in Asia, extending beyond finance to maritime and other strategic sectors.
The Cayman Islands’ push may also benefit from a recent crackdown in Singapore, where a series of arrests last month in a money laundering investigation has unnerved some Chinese nationals, according to two people familiar with the situation, including an adviser for a wealth management firm catering to Chinese family offices.
“I have spoken to a number of PRC [People’s Republic of China] nationals staying here who are looking at shifting their money somewhere else because they are worried about asset seizures,” the adviser said.
Additional reporting by William Langley in Hong Kong