As the Asian region witnesses a spike in investible assets, with its number of billionaires outstripping all other regions, Singapore and Hong Kong have been keen to hold on to some of the wealth that might have otherwise made its way to offshore jurisdictions.
In 2020, Singapore introduced its Variable Capital Companies (VCC) framework, which has been hailed as a "game changer" by the asset and wealth management industry. Meanwhile, Hong Kong tried to one-up the Lion City with its "open-ended fund companies" regime, which has also been gaining momentum.
Possibly alarmed that Asia's super-rich and hedge funds might not need to look to the Caribbean any more for tax structuring, one of the offshore haven OGs, the Cayman Islands, is accelerating its foray into the region, aiming to establish a presence here.
Officials from the Cayman government and institutional players, led by Financial Services and Commerce Minister Andrew Ebanks, visited both cities in May in a bid to scour a location to anchor the offshore financial centre's Asia offerings.
Gene DaCosta, the Cayman Islands government representative to Asia, tells ALB that the Asia office of the Cayman Islands is intended to collaborate with and support stakeholders in the region.
"The office will also offer additional support, in Asian time zones, to the service providers and their clients in the region who use our financial services products; as well as to provide industry stakeholders with updates and insights on new legislative changes, evolving standards and other relevant developments," says DaCosta, adding that meetings with public sector officials and industry stakeholders in Asia have been "overwhelmingly supportive and positive."
Anthony McKenzie, Singapore managing partner at Carey Olsen, says his firm was amongst the offshore practices engaging with the Cayman government on its Asia trip.
"The opening of a Cayman representative office in either Singapore or Hong Kong will be a positive development for the Cayman Islands as a jurisdiction, and for our firm offering in Asia," says McKenzie, who worked at Carey Olsen's Cayman office for several years and now heads the firm's corporate practice in Asia.
"In addition to supporting stakeholders in the region, the Cayman office will be tasked with broadening and strengthening its links with Asia, raising Cayman's regional profile and helping Asian investment managers and investors better understand the Islands' offering," he adds.
McKenzie feels that despite Hong Kong and Singapore emerging as formidable alternatives to the Cayman Islands as the destinations of choice for wealth stewardship, the two cities are not likely to reduce the popularity and relevance of Cayman's portfolio of investment structures, with evolving laws in that country catering to the needs of both Asian clients and international players.
"Cayman's ability to complement such onshore structures, its proven track record in Asia and its commitment to keeping pace with global standards will mean that it will continue to be a jurisdiction of choice in Asia and have a central role in regional and global deal flows," adds McKenzie.
The Cayman government says the discussions as to where exactly to put its pin are still ongoing. However, there are reports suggesting that the offshore jurisdiction is leaning towards setting its foot on Singapore instead of Hong Kong – a move, if confirmed, exemplary of the shifting geopolitical and economic favour from China's common-law enclave.
A recent report also found that some nine percent of the world's family offices are located in Asia, with 59 percent in Singapore, giving the island nation an upper hand in securing an onshore Cayman presence. More regional, international, and offshore law firms and their clients have been fast expanding their footprint in Singapore, a city increasingly seen as the Switzerland of Asia.
But what's more consequential to the positioning of both cities and thus the offshore advisory work in asset management is likely to be external contagions, says McKenzie.
"Asian fund launches and deals have recently been threatened by geopolitics, interest rate hikes, inflation, supply chain disruption, and slowing growth, especially in China," he notes.
Despite geopolitical uncertainties, however, McKenzie continues to perceive Hong Kong as an essential contributor to a successful play in China, which with its enormous potential for wealth creation, remains quintessential for the offshore legal world.
