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After The Gold Rush
News of the gold flakes discovered by James Marshall in the American River at the base of the Sierra Nevada Mountains caused such an influx of prospectors that the non-native population of California rose from 1,000 to over 100,000 in less than 5 years. Surprisingly (or perhaps not), there are limited accounts of where successful gold miners went, and what they did, after the Gold Rush.
ne might surmise that those who left California with any significant wealth, headed for places which allowed them privacy, freedom to multiply their fortunes without interference and a good pipeline of opportunities to do so. Almost 200 years later, entrepreneurial families who have mined gold in its various forms - physical, paper or virtual – continue to seek the same characteristics when choosing a jurisdiction from which to base their future investment activities.
This article examines why the Cayman Islands is one of the most attractive locations for UHNW individuals and families and ideal for satellite family offices and stand-alone single family offices.
Why are UHNW individuals and Family Offices Moving?
Left-wing political movements embody the post-Covid zeitgeist and raise the anxiety levels of families concerned about the generational longevity of the wealth they have created. The local Chilean press saw last month's election of 35 year-old Gabriel Boric as a reflection of growing discontent that the economy was too "investor-friendly". Such discontent augurs well neither for the local economy nor for the family offices operating in such jurisdictions or the families they serve. Chile is only the latest example.
In other regions, the entrepreneurial classes have been more concerned by the opportunity the pandemic has handed to the state to expand, whether out of benign paternalistic concern or for more menacing purposes. If ever there was a good time to consider strategic diversification and de-risking, that time is now, and the Cayman Islands, among other 'grade A' jurisdictions, is a beneficiary of this.
The future of aviation is strictly tied to several factors
Why the Cayman Islands for family offices?
Cayman's appeal for family offices is a natural evolution from the financial services activities for which the jurisdiction is very well known. Many of the businesses that service investment funds and corporate structures require experienced professionals, technical expertise and infrastructure, all of which has been in place in Cayman for decades and is readily transferable into a family office environment. Outside the major onshore financial centres, few locations can field what Cayman offers.
Moreover, with some family offices having balance sheets well in excess of mid-level hedge funds or private investment funds, it is no surprise that family structures, even though largely exempt from regulation, are adopting the oversight, governance and reporting regimes applicable to investment funds as well as other practices from that industry. Cayman's serious, though proportionate, regulatory environment and its institutional pedigree, informs family structures and enhances their credibility.
As the Cayman family office community expands so increase the consolidation of best practice and the opportunities for collaboration and co-investment, all of which is much easier to achieve in a place where distances are lesser and degrees of separation fewer.
What does Cayman offer the individual?
For the individual, Cayman's traditional selling points of tax neutrality and sunshine are now only part of the story.
One interesting trend we have noted among clients is that the youngest professional generation in the family is often given the task of assessing the viability of a Cayman solution and managing implementation. To the young parent, that due diligence visit reveals a cosmopolitan community (over 135 nationalities are currently represented), infrastructure of first world quality, excellent communications and flight connections, good housing inventory and quality primary/secondary education. Importantly, Cayman enjoys a low crime rate and good social integration and has no problem with the wealthy and successful enjoying the fruits of their efforts. Cayman is ideal for raising a family, hence its appeal to the latest wave of UHNW arrivals: a youngish crowd of fintech entrepreneurs and those active in crypto and virtual assets. All these newcomers are finding Cayman to be comfortable, safe and globally-connected, a perfect platform from which to run their domestic and business affairs.
What residency in Cayman means
Cayman has several routes through which foreigners may gain rights to reside and work locally. In contrast to the citizenship-by-investment programmes operated by other jurisdictions, Cayman's offering is not a passport (i.e. an ability to move) but a right to reside (i.e. a right to stay put). Different options will make sense for different circumstances but, in the end, Cayman is efficient about welcoming the right people to its shores. This fundamental choice of offering residency over citizenship is one that will only drive further growth within the jurisdiction.
That said, Cayman does not abound in wealth managers, private bankers and some other specialists these clients need. That means Cayman functions as it has always done: collaborating closely with others. While Cayman may be gaining in substance, our connections with the global professional network will remain key to our effective servicing of UHNW individuals, families and family offices.
190 Elgin Avenue
George Town, Grand Cayman KY1-9001
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