The Cayman Islands are battling attempts by Singapore and Hong Kong to lure wealthy Asians

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The Cayman Islands has launched a backlash against attempts by Singapore and Hong Kong to compete with it as the preferred destination for Asian hedge funds and the super-rich to park assets.

Cayman Islands Financial Services Minister André Ebanks visited Singapore and Hong Kong this month to push ahead with plans to open an office in either Asian city. It would be the Cayman Islands’ first base in Asia and its officials would help investors set up and manage funds based in the Caribbean territory.

The move comes after Singapore and Hong Kong approved new fund structures that offer international investors a way to protect cash in lightly taxed vehicles, with government subsidies to cover some setup costs.

Use of SingaporeNew “corporations with variable capital” have exploded since they were introduced in 2020, with 889 set up so far – a pace that investors say has caught even regulators by surprise as Chinese money pours into the city-state.

Absorption of Hong Kong“Open-end fund companies” have been slower, but 64 were established in 2022, up from 40 a year earlier.

There are far more such vehicles in the Cayman Islands, but officials in the British Overseas Territory “think there is a threat to their position,” said a Hong Kong-based fund specialist briefed on the move. “They’ve never had so much competition before.”

The Cayman Islands had been planning to establish an office in Asia for years, but the rapid adoption of vehicles in Singapore and Hong Kong required more urgency, according to two people familiar with the officials’ thoughts.

“Minister Ebanks and I. . . met with a variety of local officials, agencies and law firms [in Hong Kong and Singapore] on matters relating to the establishment and operation of a Cayman Islands government office,” Gene DaCosta, the Cayman Islands representative for Asia, said in response to questions from the Financial Times. “No decision has yet been made on the location.”

The Cayman Islands delegation met with hedge fund executives, fund lawyers and trade bodies for the private equity, hedge fund and venture capital industries, people familiar with the trip said.

A financier whose firm uses Cayman funds said officials were looking to reaffirm their relationship in the face of what was likely to become stiffer competition from Hong Kong and Singapore.

“It was a two-way process, for the [Cayman Islands] government to meet with stakeholders and get feedback on jurisdiction,” said Ann Ng, a Hong Kong-based partner at the Cayman Islands law firm Maples Group who accompanied officials to some of their meetings.

The tone to Asian investors considering the Hong Kong and Singapore vehicles was that “Cayman funds represent the ‘old faithful’ of the investment world – tried, tested and trusted,” said a Singapore-based advisor who held talks with the delegation.

The Cayman Islands “have a particular strength: they are far from the long arm of the government in Beijing,” said another Singapore-based financial adviser who met with the Cayman Islands delegation.

“Hong Kong can’t really support this, and Singapore may also have issues, down the road, with how things are going with mainland inflows,” the consultant said. An influx of capital from wealthy Chinese into Singapore has become a politically sensitive issue in the city-state.

Many of the people said that Hong Kong’s deeper capital markets and long history as a global financial center until recently would make it the obvious choice for the Cayman Islands office. However, in recent years, a large number of companies, funds and family offices have relocated to Singapore.