Irish law firm Dillon Eustace was one of several law firms that opened an office in the Cayman Islands in 2012. Funds partner Matt Mulry explains the motivation for coming to Cayman and the firm’s outlook for 2013.
Dillon Eustace’s decision to establish in Cayman was in part client driven, says Mulry, but also a natural progression for the expanding investment funds and litigation practice of Dillon Eustace in Ireland.
A move to the leading jurisdiction for hedge funds globally was thus very organic and has been well received by the firm’s global client base, he adds.
“As we expand within the jurisdiction we will be marketing our Cayman legal and corporate service offering to the wider investment funds market. Our plan is for steady sustainable growth within Cayman.”
Mulry expects that the firm’s philosophy of recruiting young talent and providing a structured and well rewarded career path will be reflected in the growth of the Cayman office and that over time the Cayman Islands office of Dillon Eustace will grow to rival the size of the headquarters in Dublin.
Mulry says the firm has a significant level of expertise and a large client following in the structured finance, banking and insurance service lines provided from its Dublin office. These areas have a strong basis in Cayman legal practice and the expansion of the Cayman business into these areas will continue to be monitored throughout the year.
Dillon Eustace has also seen a renewed interest in start-up funds in Cayman. Many of the firm’s clients take the approach that investors should be provided with a wide range of investment vehicles and the addition of Cayman hedge and private equity funds to their range of European domiciled structures has proved to be a significant value-add to their business, Mulry says.
While Ireland has become a global hub for the fund administration business with impressive growth and the mood within the Irish financial services sector is very positive, he says, Cayman has been at the forefront of the sophisticated institutional investment funds business and is still seen by many as the default choice for these structures.
Dillon Eustace’s Cayman office will focus on expanding the client relationships in the US, Europe and Asia and its Cayman legal offering in these regions. Mulry expects the firm’s growth to be in hedge funds and private equity funds and commercial litigation services lines.
Growth in Cayman over the next few years is also expected to be driven by the firm’s large general corporate practice based in Dublin with expertise across industry sectors such as infrastructure, public projects and healthcare.
Mulry says Dillon Eustace faces the same challenges as any business, including maintaining an awareness of client needs, keeping pace with developing technology, finding and retaining the right staff and competition both locally and internationally.
“The Cayman Islands has its own particular challenges in these areas,” he notes, “but generally we have found that opening our office here has been welcomed by other law firms and corporate services businesses as a clear indicator that there is faith in Cayman’s ability to continue to grow. Cayman is also very technology friendly with reliable services available on the Island and a very high level of local talent in the information technology industry.”
The political upheaval in Cayman domestically has not resulted in a great deal of concern from clients, Mulry says. “Those who use Cayman’s financial services industry recognise that, whilst the politics within the Island can have a significant impact on the industry, the Cayman Islands government recognises the enormous benefit, which the industry provides to Cayman as a whole.”
Much more of concern to Dillon Eustace’s clients were the later abandoned government plans to introduce a tax in 2012. The announcements “without any analysis or explanation of the detailed proposals, posed a risk that the foundations of the funds industry in Cayman would be destroyed”, Mulry states.
Costs and fees are another area where he has seen negative reaction from clients and a very real consideration of Cayman’s competitor jurisdictions as an alternative for their business.
“Cayman has benefited from a highly developed financial services regulator and infrastructure and this has kept the industry buoyant. However it’s clear to everyone in the industry that the businesses that have helped to promote Cayman’s financial services sector see a risk that Cayman will not be able to retain its status and it’s rare now to see a Cayman financial services business that does not have an international presence in Cayman’s leading offshore competitor jurisdictions,” he says.
“We need to be keenly aware that we are closely watched by these competitor jurisdictions and that Cayman’s status as the jurisdiction of choice for institutional funds business needs our protection if the Islands are to continue to benefit from it.”
At the same time the increasing retail fund focus in Europe and the more cautious regulatory approach for institutional funds in European “offshore countries” is going to offer opportunities for Cayman’s fund industry.
“The emerging clarity behind the AIFMD will only benefit the fund’s industry in Europe and bring benefits to Cayman through the rising trend of successful European fund managers offering a wider range of investment options to their clients,” he says.