There may be some interesting times ahead, according to Gus Pope, managing partner of Maples and Calder, the leading offshore legal firm. Based, as he is, in the Caymans, where the white, sandy beaches and turquoise waters of the Caribbean are only a stroll away, and bearing in mind his lifetime’s experience working as an offshore lawyer, this statement does make one sit up and take notice.
It could be that he has seen it all, in the 20 years he has been working for Maples and Calder, serving the burgeoning offshore finance industry that has become the lynchpin of so many of the Caribbean islands’ economies. Initially a small practice, it was a question of “all hands on deck” when dealing with new business. This encouraged a generalist’s approach, something of which Pope approves. He may even have preferred this system, had not the volume of work increased so much that the partners perforce became specialists.
This is not surprising. The shape of a law firm is driven by clients’ needs, and by the need to provide, as the jargon has it, a seamless service. The firm has developed into a company with more than 500 lawyers and staff worldwide.
The client base is geographically diverse and includes leading international law firms, top Wall Street financial institutions and high net worth clients. Its specialisations include banking, capital markets, structured debt, securitisation, asset and project financing, corporate, captive insurance, insolvency and corporate restructuring, international equity offerings and listings, mutual and hedge funds, venture capital, commercial and private trust and commercial and trust litigation.
More items are being added to the seamless service menu all the time, a testament to the firm’s determination to stay ahead of the times. Maples and Calder was the first offshore firm to obtain authorisation from the Dubai government to open an office there to serve its Middle East clients. The potential for doing business in the Middle East has grown dramatically in the last few years. Dubai is of particular interest to a firm like Maples and Calder because its ambitious government is aiming to become the Hong Kong of the Middle East, a clearing house situated conveniently half-way between the time zones of London and Hong Kong – where Maples and Calder has another office with 24 lawyers.
As Pope says, face-to-face contact with clients in the Middle East is crucially important. The Dubai office has grown from one partner to three lawyers in its first six months and, given the continuing growth in workload, additional hires are anticipated shortly. Clients are either companies wanting to move to Dubai, private equity fund managers or local investors wanting to move money out to the traditional offshore jurisdictions of Jersey, Guernsey, BVI and the Caymans. Critical to doing business in Dubai, especially in financial services, is the ability to handle the question of Sharia law compliance. Pope says it is early days yet for hedge funds in Dubai for this reason, which partly explains the preference of investors for private equity and property so far.
Another item on the menu is Irish law. Dublin’s International Financial Services Centre has carved out its own niche in the international financial services arena, in particular with hedge fund administration and custody, listings on the Irish Stock Exchange and increasingly also Irish-domiciled hedge funds.
To tap into this market, Maples and Calder merged with a Dublin firm, Binchy’s, earlier this year and has since staffed the office with lawyers with offshore experience to develop that side of its domestic and corporate business.
Again, to be ahead of the game, the Caymans was one of the few Caribbean jurisdictions to engage with the European Commission on its proposed savings directive. Whereas Bermuda and the Bahamas were loud in their rejection of any idea of negotiating with the EU on such sensitive issues as opening their books to the European tax inspectors, Pope says the Cayman Islands Government was able to negotiate a ‘level playing field’ for certain types of fund in the Caymans. He doesn’t claim that this political decision has brought them an avalanche of business from other jurisdictions, but does say that it has brought a ‘definite net inflow’.
Looking to the future, a number of issues are raising the bar for hedge funds businesses. Likewise there are issues raised by the convergence of the hedge fund and private equity spheres. The pursuit of improved returns has encouraged hedge fund managers to consider private equity-type management, including the use of ‘side pockets’, which lock up investors’ money for longer periods.
But one issue that is promising to liven up life in the Caymans and the rest of the hedge fund community is the tough attitude adopted by the Financial Services Authority in London over side letters, or the preferential treatment that side letters give some investors over others, raising questions of disclosure and fair treatment of all investors. The FSA is scrutinising a number of other areas of concern, such as asset valuation and conflicts, and how managers’ remuneration is determined by performance.
Pope is expecting a lot of enquiries from concerned managers and lawyers, asking about the possible implications and about possible options. In many respects, the risks posed by hedge funds are little different from other types of funds. However, one thing is certain: regulatory attention from the SEC, the FSA and the EU can only increase. Also certain is that Maples and Calder will be at the heart of the debate and the negotiations, and acting as the mediator between the two sides.
It could be that he has seen it all, in the 20 years he has been working for Maples and Calder, serving the burgeoning offshore finance industry that has become the lynchpin of so many of the Caribbean islands’ economies. Initially a small practice, it was a question of “all hands on deck” when dealing with new business. This encouraged a generalist’s approach, something of which Pope approves. He may even have preferred this system, had not the volume of work increased so much that the partners perforce became specialists.
This is not surprising. The shape of a law firm is driven by clients’ needs, and by the need to provide, as the jargon has it, a seamless service. The firm has developed into a company with more than 500 lawyers and staff worldwide.
The client base is geographically diverse and includes leading international law firms, top Wall Street financial institutions and high net worth clients. Its specialisations include banking, capital markets, structured debt, securitisation, asset and project financing, corporate, captive insurance, insolvency and corporate restructuring, international equity offerings and listings, mutual and hedge funds, venture capital, commercial and private trust and commercial and trust litigation.
More items are being added to the seamless service menu all the time, a testament to the firm’s determination to stay ahead of the times. Maples and Calder was the first offshore firm to obtain authorisation from the Dubai government to open an office there to serve its Middle East clients. The potential for doing business in the Middle East has grown dramatically in the last few years. Dubai is of particular interest to a firm like Maples and Calder because its ambitious government is aiming to become the Hong Kong of the Middle East, a clearing house situated conveniently half-way between the time zones of London and Hong Kong – where Maples and Calder has another office with 24 lawyers.
As Pope says, face-to-face contact with clients in the Middle East is crucially important. The Dubai office has grown from one partner to three lawyers in its first six months and, given the continuing growth in workload, additional hires are anticipated shortly. Clients are either companies wanting to move to Dubai, private equity fund managers or local investors wanting to move money out to the traditional offshore jurisdictions of Jersey, Guernsey, BVI and the Caymans. Critical to doing business in Dubai, especially in financial services, is the ability to handle the question of Sharia law compliance. Pope says it is early days yet for hedge funds in Dubai for this reason, which partly explains the preference of investors for private equity and property so far.
Another item on the menu is Irish law. Dublin’s International Financial Services Centre has carved out its own niche in the international financial services arena, in particular with hedge fund administration and custody, listings on the Irish Stock Exchange and increasingly also Irish-domiciled hedge funds.
To tap into this market, Maples and Calder merged with a Dublin firm, Binchy’s, earlier this year and has since staffed the office with lawyers with offshore experience to develop that side of its domestic and corporate business.
Again, to be ahead of the game, the Caymans was one of the few Caribbean jurisdictions to engage with the European Commission on its proposed savings directive. Whereas Bermuda and the Bahamas were loud in their rejection of any idea of negotiating with the EU on such sensitive issues as opening their books to the European tax inspectors, Pope says the Cayman Islands Government was able to negotiate a ‘level playing field’ for certain types of fund in the Caymans. He doesn’t claim that this political decision has brought them an avalanche of business from other jurisdictions, but does say that it has brought a ‘definite net inflow’.
Looking to the future, a number of issues are raising the bar for hedge funds businesses. Likewise there are issues raised by the convergence of the hedge fund and private equity spheres. The pursuit of improved returns has encouraged hedge fund managers to consider private equity-type management, including the use of ‘side pockets’, which lock up investors’ money for longer periods.
But one issue that is promising to liven up life in the Caymans and the rest of the hedge fund community is the tough attitude adopted by the Financial Services Authority in London over side letters, or the preferential treatment that side letters give some investors over others, raising questions of disclosure and fair treatment of all investors. The FSA is scrutinising a number of other areas of concern, such as asset valuation and conflicts, and how managers’ remuneration is determined by performance.
Pope is expecting a lot of enquiries from concerned managers and lawyers, asking about the possible implications and about possible options. In many respects, the risks posed by hedge funds are little different from other types of funds. However, one thing is certain: regulatory attention from the SEC, the FSA and the EU can only increase. Also certain is that Maples and Calder will be at the heart of the debate and the negotiations, and acting as the mediator between the two sides.
