Using Cayman SPCs to Launch Funds on an Emerging Manager Platform, an Umbrella Fund Structure and Segregated Debt Issuance Vehicles A Cayman Islands Segregated Portfolio Company (SPC) structure provides flexibility, cost-effectiveness and quick launch time for new funds. Fund managers can set up an SPC to easily add new investment strategies, investors, or share classes over time. Emerging managers can join an existing SPC platform to launch their first fund within weeks, taking advantage of existing legal and operational infrastructure. Each portfolio within the SPC has full segregation of assets and liabilities. SPCs can also be used to issue segregated debt by having each portfolio act

1. Using Cayman SPCs to Launch Funds on an
Emerging Manager Platform, an Umbrella
Fund Structure and Segregated Debt
Issuance Vehicles
Flexibility, cost-effectiveness and speed to market are just some of the advantages when
creating a Cayman Islands Segregated Portfolio Company (SPC).
Hedge fund, real estate or private equity fund managers may choose to set up an SPC
structure of their own, allowing them to add new segregated portfolios when they wish to offer
separate investment strategies, separate investors or distinct and separate share classes.
"We are seeing a lot of fund managers setting up their first Cayman Island fund structure as an
SPC so, if in the future, they identify a separate investment strategy, they can establish an
additional portfolio quickly and inexpensively. We have also seen a number of firms use SPC’s
to issue secured debt that is ring-fenced within each segregated portfolio for each investor,
says David Lloyd, Managing Director of Bell Rock Group.
SPC fund platforms are offered as a turnkey solution. They are often referred to as ‘Emerging
Hedge Fund Manager Platforms’, or ‘Hosted Fund Solutions’. "Their popularity is
understandable, given the increasing regulatory burden and other barriers to entry that new
managers face, not to mention the time pressure that some face from prospective investors,"
explains Lloyd.

2. Establishing a standalone Cayman Islands fund can be a time-consuming process for an
emerging manager, managers who join an existing SPC fund platform can typically get their
fund up and running in a few weeks, as the operational and legal structuring has effectively
been done by the platform manager.
A key benefit is that the launch time is quick; the structure is already in place and the SPC is
typically registered with the Cayman Islands Monetary Authority (CIMA) as a regulated mutual
fund pursuant to the Mutual Funds Law. Therefore, the creation of a new portfolio (“sub-fund”)
is a very straightforward process. Some platform structures include a management company
that is regulated in a jurisdiction where setting up and licensing a new manager may be
prohibitively expensive and time consuming so managers can effectively begin raising capital,
trading and building a track record in a matter of weeks. Often the platform manager will
provide additional, usually optional, services to assist fund managers as they launch their fund
such and may compliment their fund offering such as capital introduction and distribution
firms, local or cross-border regulatory advisors, prime brokers, local counsel, marketing, risk
management and compliance.
Operationally, an SPC is quite straightforward. Each segregated portfolio (or `sub-fund') on a
platform has its own set of fund documents, brokerage trading account and fund bank
account, an existing board of directors, fund administrator, legal counsel and auditor.
There is full segregation of assets and liabilities between each of the portfolios in an SPC fund
structure. In particular, where leverage is to be used by a fund manager in respect of one
strategy and not another, this ring-fencing feature is important to prevent cross
contamination between portfolios.
Given that SPC platforms have service agreements in place with multiple counterparties to
support a wide range of sub-funds, this can create economies of scale which reduce the
operating costs for a new manager.
The process for joining a SPC platform is typically as follows:
• The manager enters into an agreement with the SPC platform provider.
• The manager selects audit, fund administration and other service providers, which are
typically available at competitive rates.
• The directors of the SPC resolve to create a new segregated portfolio.
• A supplemental offering memorandum for the new segregated portfolio is prepared
that is specific to the manager’s fund terms i.e. strategy, fees etc along with ancillary
legal documents such as the investment management agreement, subscription
document etc.
• Many platforms provide the flexibility for managers to spin off into a stand-alone fund
in the future.

3. In a world of increasing regulation, utilizing a ready-made and regulated fund platform can be
very advantageous and provide many benefits. “At Bell Rock Group, our Evolution Offshore
Fund Manager Platform is designed so that managers do not compromise on the quality of
service providers. This provides confidence that launching a fund or suite of funds on Evolution
is indistinguishable from launching a stand-alone fund but with significantly less up-front cost
and time. As a leading fiduciary & governance services firm, we built Evolution to enable
managers to enhance their fund offering on a platform supported by best-in-class service
providers who are regulated and independent. This provides comfort to managers, investors
and regulators. We do not mention the term “emerging” as part of Evolution as we often work
with existing managers also who are simply looking to launch an offshore range as well as new
managers with experience managing client capital”, noted Lloyd.
SPC Debt Issuance & Securitized Issuance Vehicles
The SPC structure can also be used in an efficient manner for firms looking to issue bonds,
notes or certificates (“debt instruments”) to investors or secured lending. In these structures
each segregated portfolio is used as a separate issuance vehicle and the security for the debt
securities can take many forms but investors only have recourse to the assets within the
portfolio. “We have seen this on a number of transactions involving underlying physical assets
with clients looking to issue segregated debt to investors but provide investors with a
segregated line of security where investors are insulated from any claims of the creditors of
other segregated portfolios and of the general creditors of the SPC. Companies incorporated
to hold significant assets (for example, aircraft, ships, real-estate, agriculture) may also find it
beneficial to have each asset attributed to a separate portfolio,” notes Lloyd.
For further information please feel free to contact Bell Rock Group:
info@bellrockgroup.com
www.bellrockgroup.com