The Abu Dhabi Global Market (ADGM) categorizes its investment funds into three primary types based on the target investor base, disclosure obligations, and the degree of regulatory oversight they are subject to. The first category, Public Funds, is designed for retail investors and the general public. Due to their broad accessibility, Public Funds are subject to extensive regulatory requirements, including high levels of disclosure, governance, and investor protection standards. These funds are offered through public placements and have no restrictions on the number of investors, allowing them to attract a diverse and large investor base.
The second category is Exempt Funds, which are aimed solely at professional clients. Exempt Funds are limited to a maximum of 100 investors, each required to make a minimum subscription of USD 50,000. Given the sophistication of their target audience, these funds operate under lighter regulatory requirements compared to Public Funds, making them an appealing option for fund managers seeking smaller-scale investment operations while still maintaining regulatory compliance.
The third category, Qualified Investor Funds (QIF), is also restricted to professional clients but has a significantly higher minimum subscription amount of USD 500,000 per investor. Unlike Exempt Funds, QIFs do not have a cap on the number of investors, making them suitable for high-net-worth individuals and institutional clients. QIFs benefit from a fast-track setup process and reduced disclosure obligations, which streamline their establishment and ongoing management, making them a preferred choice for sophisticated investors and large-scale funds looking for efficient entry into the ADGM market.
The British Virgin Islands (BVI) is a popular jurisdiction for establishing investment funds, offering a variety of fund structures to accommodate diverse investor needs. The primary types of open-ended BVI funds include professional funds, private funds, public funds, incubator funds, and approved funds.
Professional funds make up the majority of registered funds in the BVI, accounting for over 70% of all registered entities. These funds are exclusively available to “professional investors” who must have a net worth exceeding $1,000,000 or be actively engaged in acquiring or disposing of similar properties. An initial investment of at least $100,000 is required for such investors.
Private funds, on the other hand, are restricted to a maximum of fifty investors and can only issue invitations to subscribe on a private basis. This typically involves targeting individuals with a pre-existing relationship, making it a more exclusive investment option compared to professional funds.
Public funds are designed for broader access and do not have specific investor eligibility criteria, making them suitable for a wider audience. However, due to their inclusivity, they are subject to a higher level of regulatory oversight to ensure investor protection.
For managers seeking a low-cost entry point into fund management, incubator funds are an ideal option. These funds allow new managers to establish an investment track record over a limited period. They are restricted to 20 sophisticated private investors, each contributing a minimum investment of $20,000. The total assets for incubator funds cannot exceed $20 million. Incubator funds can operate for up to two years, after which they must either convert into a professional, private, or approved fund or be dissolved. If needed, a one-year extension can be requested.
Approved funds share similarities with incubator funds but can accommodate a larger net asset value of up to $100 million. Like incubator funds, the total number of investors is capped at 20, making them ideal for small, lightly regulated fund structures that do not plan to transition into a more regulated professional or private fund.
The Cayman Islands offers a diverse range of investment fund structures, each tailored to meet different investor requirements and regulatory needs. These structures include registered mutual funds, licensed mutual funds, administered mutual funds, non-Cayman Islands funds, master funds, limited investor funds, and private funds.
Registered mutual funds are the most common type of open-ended fund in the Cayman Islands. These funds either require a minimum initial investment of US$100,000 per investor or must have their equity interests listed on a recognized stock exchange. Their registration process is streamlined, involving submission of the required forms, offering documents, and consent letters to the Cayman Islands Monetary Authority (CIMA). Funds that do not qualify as registered mutual funds may either apply for a mutual fund license or choose to be regulated as an administered mutual fund.
Licensed mutual funds are designed for larger retail-focused funds that have a reputable promoter and do not plan to appoint a Cayman-based administrator. To secure a license, these funds must demonstrate the soundness of their promoters and the expertise of their administrators, while also ensuring that the directors are fit and proper persons. CIMA oversees their compliance with the Mutual Funds Act.
Administered mutual funds are required to appoint a licensed Cayman Islands mutual fund administrator to serve as their principal office in the jurisdiction. Unlike licensed mutual funds, most of the supervisory functions are handled by the appointed administrator, though CIMA retains general oversight and enforcement responsibilities.
Non-Cayman Islands funds, which are incorporated outside the Cayman Islands but have management or administration services provided locally, may also need to register with CIMA. Such funds must first register as a foreign company under the Companies Act before being licensed or registered as a mutual fund under the Mutual Funds Act.
Master funds, which serve as the primary vehicle for regulated feeder funds, must be registered if they issue redeemable equity interests at the option of the feeder fund. These structures are often used in larger investment schemes to facilitate efficient pooling and deployment of capital.
Limited investor funds are a specific type of open-ended fund that cater to a maximum of 15 investors, who hold the power to appoint or remove the operator of the fund. Such funds are subject to registration under the Mutual Funds Act to ensure basic regulatory compliance.
Private funds, governed by the Private Funds Act, are closed-ended funds that are also required to register with CIMA. They include not only traditional private investment vehicles but also more specialized structures like alternative investment vehicles and restricted scope private funds. Restricted scope private funds are exempted limited partnerships managed by licensed or registered entities and exclusively target high-net-worth or sophisticated investors, excluding retail participants.
This wide array of fund types in the Cayman Islands offers fund managers and promoters a high degree of flexibility in structuring their investment vehicles while ensuring compliance with varying degrees of regulatory oversight. This diversity, combined with the jurisdiction’s robust legal framework and global reputation, makes the Cayman Islands a preferred choice for establishing complex fund structures.
