The Ledger -WILLIAM E. GRAYSON, the president of EGM Capital, a hedge fund firm in San Francisco, has never set foot on the Cayman Islands, but he knows that sun-baked Caribbean haven quite well. That\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s because he set up one of his funds in the Caymans, where lucrative tax breaks and fabled financial secrecy have made this British territory a magnet for hedge fund managers.<\/p>\n
\u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cAll of the offshore jurisdictions are competing against each other to provide the most hospitable regulatory landscape, and the Caymans are really coming on strong,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d Mr. Grayson says. \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cAs a hedge fund manager, you just might be deciding whether you want to golf or scuba-dive more.\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d<\/p>\n
In as little as two weeks, and for about $35,000 in fees, hedge funds can set up shop in the Caymans \u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u20ac\u009d just a fraction of the time and up to one-tenth the price of incorporating a fund in drearier climes like Delaware.<\/p>\n
While speed and bargain prices are big attractions, the real draw, say analysts and Congressional investigators, are perfectly legal Caymans-based corporations and partnerships that allow major investors to avoid taxes of up to 35 percent that the Internal Revenue Service levies on unearned business income. Cayman tax laws also help American fund managers legally defer domestic taxes on their personal profits by channeling them offshore through their funds.<\/p>\n