Caribbean crews

Levels of activity in the Caribbean offshore jurisdictions, particularly the Cayman Islands and the British Virgin Islands, hit new heights in 2008. In July, the number of hedge funds registered in Cayman surpassed the 10,000 mark. The value of assets held in registered funds and companies is now measured in the trillions of dollars. And despite the global financial crisis, there were still as many as 586 funds authorised between July and November last year. The financial crisis meant that terminations were up from 219 between July and November of 2007 to 311 for the same period in 2008. Nevertheless, this is still a tiny fraction of the active Cayman Islands-authorised funds, which remain at over 10,000.

Many of the world’s hedge funds are established in Cayman. Of the 88 hedge funds established in 2008 that are covered by weekly newsletter Hedge Fund Alert, which tracks developments in the industry, 55 were domiciled in Cayman. The leading hedge fund practices within London’s law firms, such as Simmons & Simmons, regularly refer work to the leading players in Cayman. Firms such as Walkers, Mourant, and Maples and Calder are also well placed to capture work from the other side of the Atlantic, much of which emanates from New York and Connecticut, which many view as the hedge fund capital of the world.

Increasing numbers of these funds are falling victim to the financial crisis, and the leading law firms’ litigators are in a great position to take advantage of the upside. ‘The future of hedge funds doesn’t look that bright at the moment,’ one leading London litigator says. ‘They are going to continue to collapse. The consensus is that many hedge funds will have to liquidate their positions, and the litigation will flow from there. The local law firms in the Caribbean have reached the level of maturity where they can handle it themselves.’

It is fair to say that these jurisdictions have come a long way since the first lawyers arrived in Cayman nearly 50 years ago. There were no commercial law firms and no business community to speak of until the late 1960s and early 1970s, when the firms that still dominate the market, such as Maples and Calder, and Walkers were first established. (See timeline ‘Cayman: The birth and exponential growth of “offshore”’.) Now, some of the most sophisticated financial instruments have important Cayman components.

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