Offshore Fund Formation
1-800-589-0947
1-972-200-5107

Interested in forming an offshore hedge fund or mutual fund? We can help. At HFS we have streamlined the process and handle all of the steps from choosing the appropriate jurisdiction, establishing the legal entity, obtaining the appropriate license and opening international bank and investment accounts for the fund.

HFS was founded with the intent of making the process of “going offshore” simple, affordable and understandable. Our aim has always been to provide a complete, start-to-finish service so that our clients can establish offshore structures and accounts without so much as leaving their desks. We have applied this same approach to establishing offshore licensed hedge funds and mutual funds. From choosing a jurisdiction for the fund to setting up a trading account and everything in between, we make the process of establishing an offshore fund straightforward, understandable and affordable. What’s more, we inform our clients of exactly what the set up and annual renewal costs will be. There are no surprises, hidden fees or unexpected expenses. The complete, start-to-finish service of establishing an offshore licensed fund is what we provide.


The Premier Jurisdictions for Offshore Funds: The British Virgin Islands and The Cayman Islands.

Currently there are about a dozen countries around the planet that license offshore investment funds. These countries range from the Isle of Man and Cyprus in Europe to St. Vincent & The Grenadines and The Bahamas in the Caribbean. While these jurisdictions might have some niche benefit for random occasions (for example establishing a fund that is only open to residents of The Ukraine) the vast majority of the world’s offshore licensed investment funds are established in one of two offshore financial centers: The British Virgin Islands and The Cayman Islands.


The British Virgin Islands



The BVI is the 2nd most popular jurisdiction for establishing offshore funds, accounting for approximately 25% of the world’s offshore hedge funds and mutual funds. The BVI is a popular locale for establishing offshore investment funds for the following reasons:

  • There are no restrictions on investment strategies or the type of investments or geographic location of investments.
  • There are no restrictions on use of leverage or margin.
  • Neither BVI funds nor their investors pay any taxes in the BVI.
  • The BVI is a stable political and economic jurisdiction with an excellent global reputation.
  • The BVI offers fund types that are suitable for the whole spectrum of fund categories - from startup funds that can be set up in a matter of days with minimal regulatory requirements to private hedge funds and retail mutual funds for existing managers with billions in assets.
  • BVI funds are not required to have local “functionaries” – directors, investment managers, administrators, custodians or auditors.
  • BVI funds are priced to be ultra-competitive, especially for smaller and startup fund

The BVI splits funds into 2 categories based primarily on the total capital controlled (under management) by the fund.

1. “Registered” funds are for designed as “starter” funds for managers who want to set up a new fund, test a new investment strategy or for small investment groups (family offices, a tight-knit group of investors, etc.). As such, Registered funds are much faster and easier to establish and operate under a greatly simplified regulatory regime. But Registered funds are limited in terms of how many investors may participate and the total amount of capital/assets that can be managed. However, if these limits are exceeded the fund can be upgraded to the appropriate type of fund as needed. There are two types of Registered funds, Incubator funds and Approved funds.

Incubator Fund: The Incubator fund is the ideal vehicle for starting a new hedge fund with minimal assets, a small number of investors, to establish a track record or to test a new investment strategy. An Incubator fund may operate for a specific period of time (2-3 years) to allow the manager to establish a track record and/or accept additional investments and then upgrade to a permanent fund type. The specific requirements and restrictions of an Incubator fund are as follows:

  • Maximum of 20 investors.
  • Each investor must invest at least $20,000.
  • Total capital under management cannot exceed $20M.
  • Investors must be presented with a written description of the investment strategy including an outline of the risks.
  • The fund can be set up in a matter of days and does not require an offering memorandum or licensed functionaries (licensed fund managers, administrators, auditors, etc.).
  • Minimal set up and annual renewal costs.
  • The fund is licensed to operate for 2 years (with a possible 1-year extension).
  • The fund may be upgraded to any of the fund types listed below (more detailed information about these fund types follows) prior to the end of the 2-year period if the fund manager wants to increase funds under management or take on additional investors.
  • Once the 2-year mark is reached the fund may be upgraded to one of the following fund types that may operate into perpetuity:

    • Approved fund – A maximum of 20 investors, no minimum investment requirement and maximum capital of $100M.
    • Professional fund - Only for sophisticated investors who are either employees of the fund or who have a net worth of $1M and invest at least $100,000. No maximum capital.
    • Private fund – A maximum of 50 investors, no maximum capital.

Approved Fund: The Approved fund is the ideal offshore investment vehicle for a family office or a small group of investors such as an investment club. It is similar to an Incubator fund but allows for significantly more capital. Here are the particulars of the Approved fund:

  • Maximum of 20 investors.
  • No minimum investment amount for investors.
  • Total capital under management cannot exceed $100M.
  • The fund can be set up in a matter of days and does not require an offering memorandum or licensed functionaries (licensed fund managers, auditors, etc.).
  • Minimal set up and annual renewal costs.
  • Must have a Fund Administrator. But the Fund Administrator does not have to be licensed or located in the BVI and may simply be the client.
  • May be upgraded to any of the “Recognized” funds listed below if the manager wants to increase funds under management or take on additional investors.

2. “Recognized” funds have no restrictions on the total capital the fund can manage and therefore are subject to greater regulatory scrutiny. There are three types of Recognized funds.

Professional Fund: This fund is designed for sophisticated investors. Investors must either be “professional” investors with a net worth of $1 million and must invest a minimum of $100,000. Or an investor must be an “Exempt” investor, meaning a fund employee, manager, administrator, promoter or underwriter. For “Exempt” investors, who are assumed to be knowledgeable and sophisticated concerning investments, there is no net worth or minimum investment requirement.

Private Fund: This fund is designed for a small to medium size number of private investors. There is no limit on the total capital the fund can manage, which is true of all “Recognized” funds. But the fund is limited to either a total of 50 investors or to bringing on new investors only through private means (i.e. no public advertising).

Public Fund: This fund is designed primarily for established fund managers who wish to create an offshore fund through which they may publically solicit an unlimited number of investors and capital. A Public fund may advertise publicly and has no capital or investor restrictions or minimums.


To begin the process of setting up a BVI Fund please Contact Us. We would be happy to discuss the options, make a recommendation and then for a Recognized fund (Professional, Private or Public) provide a customized quote including setting up the BVI entity, applying for the fund license and assistance with establishing bank and investment accounts for the fund. To establish a Registered fund (Incubator or Approved), we offer a complete package that is a start-to-finish service including establishment of the fund as well as bank and investment accounts.


BVI Complete Fund Package – Incubator & Approved Funds


BVI Complete Fund Package (to establish an Incubator or Approved Fund):
Includes offshore incorporation, license application, Registered Agent and all government filings and fees as well as the establishment of a bank and investment account for the fund.


$10,000

Annual Fee (starting 1 year after fund approval):
Includes the renewal of the offshore corporation, official government-issued Certificate of Good Standing, license renewal, all government and Registered Agent’s fees, filing of annual resolutions and documents with the BVI government on behalf of the fund and any other renewal requirements.

  $8,000



The Cayman Islands



The Cayman Islands is the leading jurisdiction for establishing offshore hedge funds and offshore mutual funds. It is estimated that over 70% of the world’s offshore funds are located in the Caymans. The Caymans have many strategic advantages that have made it the preferred choice for offshore fund formation. Some of the advantages include:

  • Flexible and straightforward regulatory framework.
  • There are no restrictions on investment strategies or the type of investments or geographic location of investments.
  • There are no restrictions on use of leverage or margin.
  • Numerous licensed fund service providers operate in the Caymans including agents, administrators, auditors, banks and brokerages – many of whom are local branches of multinational corporations. Accordingly, all needed services can be handled locally by competent and experienced offshore fund professionals.
  • Neither Cayman funds nor their investors pay taxes in the Caymans.
  • The Caymans are a stable political and economic jurisdiction.
  • The Caymans are on the OECD “White List” of jurisdictions that have signed tax exchange agreements with nearly two dozen other countries.
  • Competitive global fee structure which keeps set up and ongoing operating costs low.
  • Fund options are designed to be specifically attractive for the formation of hedge funds, mutual funds and private equity funds.

Cayman Unregistered (Exempt) and Registered Funds

The Caymans has essentially two categories of funds, Registered and Unregistered (also referred to as Exempt), as well as the distinction of a fund being either “open-ended” or “close-ended”. An openended fund is one in which investors may redeem (sell) their investment at any time – this is how most mutual funds operate. A close-ended Cayman fund is one in which investors cannot redeem their investment until a specific point in time or until an investment within the fund has sold or been liquidated. As such closed-ended funds are most suitable for funds that invest in real estate, infrastructure or private equity and have medium to long term time horizons.

Cayman Unregistered (Exempt) Funds

A fund that has less than 15 investors does not need to register with the local Cayman regulator, the Cayman Islands Monetary Authority, or “CIMA”. Thus, it is an “Unregistered” fund and is not regulated and does not need to appoint an investment administrator or auditor. Because such funds are exempt from registration and regulation by CIMA, they are also referred to “Exempt” funds.

A fund that is close-ended (a fund in which investors don’t have the right to redeem or sell their investment at any time but must wait for a specific condition – for example the sale of real estate held by the fund or the completion of an infrastructure project) regardless of how many investors it has, likewise does not need to register with CIMA and is therefore an Unregistered/Exempt fund

Cayman Registered Fund

Simply put, if a Cayman fund is expected to have more than 15 investors AND it will be open-ended (investors have the right to redeem/sell their investment in the fund at any time) then it will need to be registered and regulated by CIMA and it is therefor a “Registered” fund.


To begin the process of setting up a Cayman Fund, please Contact Us. We would be happy to discuss the options and make a recommendation. We offer complete start-to-finish packages for establishing Cayman funds that include everything from setting up the legal entity and drafting the private placement memorandum to opening bank and investment accounts.



Cayman Complete Fund Packages


Cayman Complete Unregistered (Exempt) Fund Package:
Includes preparation of the private placement memorandum, investment management agreement, subscription document, launch resolutions, disbursements, set up of the offshore Cayman corporation, Registered Agent and all government filings and fees, license application, appointment of CIMA licensed Anti-Money Laundering (AML) officer as well as the establishment of a bank and investment account for the fund.


$45,000

Annual Fee (starting 1 year after fund approval):
Price includes renewal of the offshore Cayman corporation, Registered Agent and all government fees, official government issued Certificate of Good Standing, license renewal, renewal of CIMA licensed AML officer, filing of annual resolutions and documents with the Caymans government on behalf of the fund and any other renewal requirements.

$35,000


Cayman Complete Registered Fund Package:
Includes preparation of the private placement memorandum, investment management agreement, subscription document, launch resolutions, disbursements, set up of the offshore Cayman corporation, Registered Agent and all government fees, license application, appointment of CIMA licensed Anti-Money Laundering (AML) officer, 2 CIMA registered fund directors as well as the establishment of a bank and investment account for the fund.


$70,000

Annual Fee (starting 1 year after fund approval):
Price includes renewal of the offshore Cayman corporation, Registered Agent and all government fees, official government issued Certificate of Good Standing, license renewal, renewal of CIMA licensed AML officer, renewal of two CIMA licensed directors, filing of annual resolutions and documents with the Cayman government on behalf of the fund and any other renewal requirements.

$60,000