A Hamptons for Hedge Funds
By LYNNLEY BROWNING
Published: July 1, 2007
WILLIAM E. GRAYSON, the president of EGM Capital, a hedge fund firm in San Francisco, has never set foot on the Cayman Islands, but he knows that sun-baked Caribbean haven quite well. That’s because he set up one of his funds in the Caymans, where lucrative tax breaks and fabled financial secrecy have made this British territory a magnet for hedge fund managers.
The Caymans has paid Robert Livingston’s company at least $1.5 million in lobbying fees.
“All of the offshore jurisdictions are competing against each other to provide the most hospitable regulatory landscape, and the Caymans are really coming on strong,” Mr. Grayson says. “As a hedge fund manager, you just might be deciding whether you want to golf or scuba-dive more.”
In as little as two weeks, and for about $35,000 in fees, hedge funds can set up shop in the Caymans — just a fraction of the time and up to one-tenth the price of incorporating a fund in drearier climes like Delaware.
While speed and bargain prices are big attractions, the real draw, say analysts and Congressional investigators, are perfectly legal Caymans-based corporations and partnerships that allow major investors to avoid taxes of up to 35 percent that the Internal Revenue Service levies on unearned business income. Cayman tax laws also help American fund managers legally defer domestic taxes on their personal profits by channeling them offshore through their funds.
The biggest of the three islands that make up the Caymans, Grand Cayman, is only 22 miles long and, at its widest, 8 miles across. But the territory’s tax advantages have turned it into one of the linchpins of the estimated $1.5 trillion global hedge fund business.
Whole article
http://www.nytimes.com/2007/07/01/business/yourmoney/01cay.html
