Synergy Capital Markets

Cayman Island Funds

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The Cayman Islands is the largest hedge fund domicile in the world, with 75% of the world’s hedge funds incorporated in the jurisdiction. Recognized worldwide as a leading center for investment funds, the islands also offer the 'one stop shop' of local legal advisors who are also listing agents, saving funds both time and money. Funds domiciled in approved overseas jurisdictions are free to appoint directors and service providers in their local jurisdiction where it helps the fund operate efficiently.

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International recognition and memberships

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The exchange is one of the world’s leading listing venues for investment funds. It has status as a ‘recognized stock exchange’ by the UK’s HMRC, so interest on its listed securities can be paid without deduction of UK tax, and as 'qualifying investments', they can be held by Personal Equity Plans (PEPs) and Individual Savings Accounts (ISAs).

 

It is the only offshore exchange to be a member of the USA’s Intermarket Surveillance Group (ISG), whose members share information with other members on surveillance, investigation and enforcement. It is an affiliate member of the international standard setter for securities markets, the International Organization of Securities Commissions (IOSCO), whose members regulate more than 90% of the world's securities markets.

 

It is also an affiliate member of the World Federation of Exchanges ("WFE"), the leading international body for Exchanges and Clearing Houses, and a full member of the Cayman Islands Alternative Investment Management Association (AIMA) Charter.

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Benefits of listing: Mutual funds

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As well as providing a greater level of transparency and third party oversight, listing on the CSX offers funds a marketing advantage and gives the fund access to a wider investor base. Listing can also benefit investors in closed–ended funds who are unable to redeem their investment, as it gives them a secondary market with a trading platform.

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Tailor made rules for sophisticated investors

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The CSX has listing rules which have been specifically tailored to meet the needs of debt issuers, and to accommodate the latest sophisticated structures and products. These include specialist debt securities, ‘plain vanilla’ eurobonds, convertible debt securities, securities issued by supranational bodies and securities guaranteed by a company or a government, as well as derivative warrants and both sponsored and unsponsored depositary receipts. The exchange is also suitable for Equity, Mortgage, or Hybrid Real Estate Investment Trusts (REITs). These trusts invest directly in property, and benefit from special tax considerations, and by being listed, offer a liquid method of investing in real estate.

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Other benefits

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• Information on a CSX listed fund’s net asset value (NAV) is available on the Bloomberg Financial Markets Information Service, and the CSX dedicated website has both current and historic NAVs and news announcements.

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• The CSX is committed to providing initial comments on a listing application within just a few business days, and processing the documentation three days thereafter. In the right circumstances, it can take as little as between 3-6 weeks to list a fund.

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• Shares are traded on the CSX’s new XETRA-based trading platform.

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• Listing costs are competitive, and the CSX offers discounts for umbrella funds and fund families.

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• There are no minimum subscription levels (although funds with a minimum subscription per investor of less than $100,000 USD may be subject to additional requirements).

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• There are no investment policy restrictions, nor on redemption provisions (provided  the redemption provisions are clearly disclosed in the listing document and shareholders are treated fairly and equally).

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Applying for listing: Appoint a listing agent

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Unless applying for a secondary listing, the first step for every fund applicant is to appoint a CSX registered listing agent (unless the application relates to a secondary listing). Synergy Capital Markets is associated with a CSX Listing Sponsor.  The agent deals with the application and makes sure the applicant is suitable to be listed.

 

The basic requirements for the listing agent to check are that a fund:

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• Is domiciled in an approved jurisdiction;

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• Has appointed a suitable custodian, who may be an associate of the fund, but must be a separate legal entity from the fund, its directors, the investment manager or administrator;

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• Has appointed an independent auditor;

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• Will calculate net asset value at least quarterly;

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• Has directors which must collectively, have adequate experience and expertise in the management of funds and individually, take responsibility for the content of the listing document;

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• Is able to show that its investment manager has the appropriate expertise and experience, (which the CSX will decide on a case by case basis).

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• Has made sure that all its service providers and directors have disclosed any conflicts of interest that might occur when the fund is operating, and given a clear statement of any cross-class liabilities.

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• Has securities which are capable of being traded on an equal basis and freely transferable (although restrictions on transfer can be approved by the CSX).

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• If it is a feeder fund, it must restrict investment to qualified investors, and prove to the CSX that its investors will have access to sufficient information on the master fund. It must then invest in either a listed master fund or one which is suitable for listing.

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If it is a closed-ended fund, it must have 25% of listed securities in the hands of the public at all times. Its constitution must require prior shareholder approval of material changes to: the constitution or class rights; the creation of additional classes of securities; material changes to investment policies, objectives, investment or borrowing restrictions; extension or termination of the fund, and any intention to compulsorily redeem all securities.

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It has prepared its financial information in an acceptable format. Generally, accounts prepared in accordance with UK or U.S. GAAP or International Accounting Standards will comply with CSX Financial information requirements. New funds which have not started investing do not need to produce Financial statements, but if a fund has been in existence for less than twelve months, it will need to provide the CSX with an audited statement of the NAV of the fund and its portfolio.

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Listing documents

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The listing agent must then submit a listing document on behalf of the fund, for the CSX to review and provide feedback. The listing agent will generally use the fund’s prospectus, but the document must contain all information necessary for an investor in the fund to be able to make an informed investment decision. As well as general information on the fund, the document will need to include details of the securities to be listed, the redemption and valuation provisions of the fund, its investment policy, details of its directors and service providers, risks and conflicts of interest, fees and expenses, and about the fund's assets and financial position (including any audited financial statements).

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The fund must make its constitutional documents, key service provider agreements and any financial statements available for public inspection. In addition, umbrella funds, feeder funds and funds of funds must also disclose details of the underlying funds and any special risk factors or conflicts of interest. Property funds must include a portfolio valuation prepared to appropriate international standards by a qualified independent valuer, and closed-ended funds must disclose details of any substantial shareholders.

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Approval

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Once the Listing Department is satisfied with an application, they will submit it to the Listing Committee for approval. If approved, before the fund is admitted to listing, the listing agent needs to file the supporting documentation and the initial listing fee. If the fund is being launched, then listing approval will be granted subject to the successful launch and the closing of the initial offering.

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Listing

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When the fund is admitted to listing, its details will appear on the Bloomberg system and the CSX's website. Once listed, a fund must continue to comply with its on-going obligations, as specified in the listing rules.

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Conclusion

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The CSX has positioned itself to be an efficient and cost effective choice for the listing of securities, and the combination of existing in a no tax jurisdiction whilst having HMRC “recognised stock exchange” status makes CSX particularly attractive for UK based debt issuers and REIT structures.

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Synergy Capital Markets is associated with a recognized Listing Agent for the CSX, and this agent is authorized to sponsor all suitable listing applications.

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