While distinct in their offerings, the Cayman Islands and BVI share several foundational features that make them attractive to first-time fund managers. These jurisdictions provide a stable, tax-neutral environment, which is crucial for pooling capital from diverse international sources without adding layers of tax complexity. This, combined with their regulatory efficiency, creates a powerful value proposition:

• Global recognition and investor confidence – Both are leading international finance centres recognised by institutional investors, regulators, and counterparties worldwide. This global standing enhances a new fund's credibility and significantly simplifies the investor onboarding and due diligence process.
• Strong legal foundations – Based on English common law, both jurisdictions offer clear, predictable, and commercially-minded legal frameworks. This provides certainty on matters such as shareholder rights, director duties, and creditor protections, which is highly valued by sophisticated investors.
• Political and economic stability – As British Overseas Territories, they benefit from long-term constitutional stability and a reliable court system, with an ultimate right of appeal to the Privy Council in London. This insulates fund structures from local political and economic volatility.
• Cost efficiency – For emerging managers, budget is paramount. Startup fees, annual government fees, and professional service costs in these jurisdictions are often substantially lower than in major onshore financial centres, making them ideal for lean, entrepreneurial teams.
• Speed to market – Both jurisdictions feature streamlined and efficient regulatory registration or approval processes. This allows managers to launch their funds quickly and predictably, enabling them to capitalise on fundraising opportunities without being delayed by bureaucratic hurdles.

The Cayman Islands is the world's leading offshore fund domicile, with tens of thousands of funds registered with the Cayman Islands Monetary Authority (CIMA). This depth of experience has created a sophisticated ecosystem of world-class service providers. The jurisdiction offers two primary fund structures relevant to emerging managers:

• Mutual Funds – Ideal for open-ended strategies with liquid assets (eg hedge funds) where investors can subscribe and redeem on an ongoing basis. These funds are regulated by CIMA and must appoint a Cayman-based auditor and a licensed fund administrator, ensuring robust governance and independent oversight.
• Private Funds – Designed for closed-ended strategies with illiquid assets (eg private equity, venture capital, real estate) where investors commit capital for the life of the fund. While still required to register with CIMA and appoint appropriate service providers for cash monitoring, valuation, and safekeeping of assets, the overall regime is more flexible than for mutual funds.

Cayman remains the default choice for many institutional investors due to its regulatory maturity and deep investor familiarity. However, the mandatory appointment of full-service administrators and auditors, while a mark of quality, can drive up setup and maintenance costs, sometimes making it less practical for truly first-time or budget-constrained managers launching smaller funds.

The BVI has carved out a niche by championing regulatory proportionality and innovation, offering simpler, faster, and more cost-effective solutions while maintaining international credibility. This approach is ideal for start-up managers or those testing new strategies with smaller funds. Three standout options for emerging managers include:

• Incubator Funds – Designed for new managers testing a proof-of-concept strategy. It allows for up to 20 sophisticated investors and a maximum AUM of US$20 million. Crucially, it does not require an appointed manager, administrator, or auditor. It operates under a light-touch regulatory regime for an initial period of two years (with an option to extend for a third), giving managers a grace period to build a track record before converting to a more robust structure like an Approved or Private Fund.
• Approved Funds – A popular choice for slightly larger or more established friends-and-family funds. It permits up to 20 investors at any one time and a higher AUM cap of US$100 million. It requires the appointment of a fund administrator but does not mandate an audit, striking a balance between cost-efficiency and third-party oversight. Its launch process is exceptionally fast, and it can easily be scaled or converted to a professional or private fund as AUM grows.
• Single Asset Funds – Another advantage of the BVI funds framework is its suitability for single-asset vehicles. When structured to hold only one underlying investment, these entities are typically not considered Private Investment Funds under BVI law and are therefore exempt from registration. This offers a highly streamlined and cost-effective solution for specific strategies.

All three of these funds can typically be established and launched within one to two months. Their lower setup and ongoing compliance costs present a significant advantage over comparable structures in Cayman or major onshore jurisdictions, allowing managers to allocate more capital toward their investment strategy.

Alongside fund formation, managers must consider how the investment strategy will be implemented. While some BVI funds can be self-managed by their directors, most new managers opt to establish a standalone investment management entity to provide advisory or discretionary management services to the fund. This creates a cleaner corporate structure and is often expected by investors. The BVI's Approved Manager Regime is a simple, cost-effective, and highly efficient licensing pathway for this purpose, offering:

• A fast-track registration process
• A simplified regulatory burden (including simplified economic substance obligations), with no requirement for a local BVI office or staff
• Significantly lower ongoing compliance costs compared to a full investment business license, making it ideal for managers with AUM under US$400 million (for open-ended funds) or committed capital under US$1 billion (for closed-ended funds)

It’s often established concurrently with the fund, allowing for a seamless setup.

Selecting the right jurisdiction and fund structure is a foundational decision that directly impacts a fund's operational efficiency, cost base, and ability to attract capital. For emerging managers in the Middle East looking to tap into a global investor pool, both the Cayman Islands and BVI offer efficient, respected, and scalable offshore solutions. The optimal choice depends on a careful evaluation of several key factors, including:

• Target investor base
• Strategy type (open vs closed-ended)
• Budget and compliance appetite

Engaging offshore legal counsel early ensures the right jurisdiction, structure, and manager licensing are selected—saving both time and cost down the line.

At Harneys, we help emerging managers build flexible, cost-effective fund platforms that grow with them.

If you’re considering your first fund launch—or your first offshore structure—we’d be happy to guide you through your options.