ICAV vs RAIF vs NAIF vs Cayman

TSWP · Post by **TSWP** » Mon Oct 31, 2016 12:12 pm

As you probably know from other previous threads posted, I am about to launch a hedge fund with a US partner in early 2017.

The fund will be based in the US, and we will have a good AUM to start there, well above the typical startup fund launch.

Although starting out in the US, we want our fund to have global investors, and we are evaluating a presence in Europe (also because I am european and based in Europe at the moment).

There have been a number of new fund structures as of lately coming up, namely:

ICAV (Ireland)

RAIF (Luxembourg)

NAIF (Malta)

Some people think that these structures may challenge Cayman structures for collective schemes.

I wonder if any of you has any comment on the chances that any of these new structures could work better for capital raising in Europe, vs. a Cayman structure.

What I am interested is the weak spots, something that could lead to make any of these structures not usable in the future, if any of you have considered them and discarded for any reason.

HitmanH · Post by **HitmanH** » Mon Oct 31, 2016 12:34 pm

ICAV has a lot of potential - however the cost of setting it up and running it (compared to a traditional Cayman (/BVI or Bermudan) product is very high.

rickyvic · Post by **rickyvic** » Thu Nov 17, 2016 12:57 pm

In mainland Europe the real advantage is UCITS, other than that professional funds might be better recognisable by investors but still they do not make much of a difference.

In the states everyone goes for Cayman and a US feeder structure for US taxpayers, actually MS prime once recommended a friend of mine to go for Cayman anyway even for EU clients.

If you need to go for a professional EU fund I would go for Lux SIF, since it is seen as a better jurisdiction by the non-experts, again institutionals do not make a difference with this and look at the way it is structured, basically internal systems to prevent fraud.

The important thing is the management firm, having sound procedures internally and a good jurisdiction (US good).

Last but not least do not spend money if it is not necessary, it is just not worth it. Keep costs low and try to be profitable from day one (as a business) and find ways to minimise your work so you can focus on trading.

These recommendations come from past mistakes (mine and from others), I hope it helps you or any other in your situation.

TSWP · Post by **TSWP** » Thu Nov 17, 2016 3:00 pm

Guys thanks for the input.

So basically a Cayman fund would act as a sort of catch-all for global investors and american offshore entities (e.g. pension funds, reinsurers, etc.) and would remove the need to have also a european structure.

I thought Cayman funds were potentially in trouble with EU passports, but I guess I am uninformed or outdated?

HitmanH · Post by **HitmanH** » Thu Nov 17, 2016 3:56 pm

Cayman funds are in trouble with EU passports - but most people just reverse inquiry around it.

WHOLLY agree with Ricky - "Keep costs low and try to be profitable from day one (as a business) and find ways to minimise your work so you can focus"

rickyvic · Post by **rickyvic** » Fri Nov 18, 2016 6:18 pm

About Cayman, you better check with a good lawyer since I haven't done anything in this field since 2013, so I might be the one outdated.

The relevant EU directives are in the AIFMD that changes a lot so you need counsel, hard to find good counsel too.

In any case all you need to know about marketing is there.

About passport your only choice is reverse enquiry, easy, hitman is right.

ComteZero · Post by **ComteZero** » Fri Nov 18, 2016 7:32 pm

It all depends your final client; more specifically in Continental Europe, most big insurers won't ever look at Cayman funds. Most don't even look at AIFM, they're UCITS only. They will prefer 1) Lux 2) IRL (and depending their tastes local such as AMF, CONSOB... before Lux or not).

For individuals, depends if there's a packaging in life-insurance policy. If there is, RAIF is appealing, but still new and not stabilized yet AKAIK (some abuses have already been spotted).

Malta may look dodgy to many in Europe.

I'm surprised MS prime recommended Cayman, but again depends clients. Sophisticated individuals/PB wouldn't care much.

TSWP · Post by **TSWP** » Fri Nov 18, 2016 8:18 pm

I am starting to think I just want to migrate to the US and forget Europe and all its ridiculous AIFMD red tapes...

HitmanH · Post by **HitmanH** » Mon Nov 21, 2016 11:22 am

RE: "I'm surprised MS prime recommended Cayman, but again depends clients. Sophisticated individuals/PB wouldn't care much"

I'm not at all. Vast majority of HF investors in the world are still US; and US investors are comfortable with Cayman; or Cayman with US feeder - so makes perfect sense...

ronin · Post by **ronin** » Mon Nov 21, 2016 11:58 am

@TSWP,

If you already have AUM in the US, go with US/Cayman to start with. You can always change the structure later, or set up a separate structure for Europe.

Raising money in Europe isn't easy. It's not something you do by the way. As in, "by the way, let's raise a couple of yard in Europe" - it just doesn't work like that.