How Family Offices Can Use a Cayman Fund Structure to Achieve Greater Investment Flexibility

A Cayman fund structure offers family offices a way to manage capital with control, confidentiality and efficiency. Cayman provides a neutral tax environment, a predictable legal system based on English common law and fast, low-cost entity formation. These features make it well suited for managing multiple investment strategies or onboarding co-investors without regulatory overhead.

Using the Exempted Company Structure

The most commonly used vehicle is the Cayman exempted company. It allows broad structuring flexibility, supports multiple share classes and accommodates different rights for investors. For family offices, it provides corporate governance without onerous domestic regulatory requirements. The company can remain unregulated if there is only one investor or if capital is not pooled from third parties. Where external capital or multiple family branches are involved, light-touch regulation under the Private Funds Act may apply. Registration is straightforward and does not restrict day-to-day operations.

Segregated Portfolio Companies (SPCs)

Segregated Portfolio Companies (SPCs) are a specific form of exempted company that allow internal ring-fencing of assets and liabilities. Each portfolio within the SPC is contractually and statutorily segregated from the others. This enables family offices to run distinct strategies or investment sleeves within a single legal entity. Each segregated portfolio can have separate assets, accounts, service providers and terms. It avoids the need to incorporate multiple companies and significantly reduces governance and operational burden.

SPCs are commonly used where a family office manages different investment strategies such as private credit, venture capital and real estate. Each portfolio can follow its own investment mandate while being administered centrally. Alternatively, they can be used to allocate specific portfolios to different family branches or to accommodate co-investment by affiliates or external partners. The SPC allows for customised capital commitment terms, performance fee structures and distribution waterfalls for each portfolio without affecting others.

How It Works in Practice

Imagine a family office that incorporates a Cayman SPC and designates a segregated portfolio for each strategy. For example, a portfolio might be set up to invest in private credit, with others for public equities or venture capital. Each portfolio opens its own bank and brokerage accounts, selects its service providers and maintains distinct legal and operational records.

Family members or related parties can subscribe directly into specific portfolios. They receive shares in that portfolio alone, with no exposure to other portfolios. Net asset value is calculated at the portfolio level by the administrator and consolidated reports can be generated across the SPC for performance tracking. The administrator provides capital account statements, manages subscriptions and redemptions and calculates carried interest or performance fees according to the terms agreed per portfolio.

Regulatory Considerations

From a compliance perspective, SPCs are subject to the same regulatory treatment as standard exempted companies. If only one investor is involved, the structure falls outside the scope of Cayman fund regulation. If there are multiple investors, registration with the Cayman Islands Monetary Authority (CIMA) under the Private Funds Act is required. Registration is triggered after receiving capital commitments but must be completed before making portfolio investments. CIMA registration involves basic disclosures and does not constrain investment decisions or impose operational restrictions.

Legal Recognition and Tax Treatment

SPCs are recognised under Cayman law as distinct legal structures. Each portfolio is protected from cross-liability, and the SPC itself is treated as a single legal entity for corporate filings and compliance. This provides legal clarity while streamlining administration.

Tax treatment remains neutral. SPCs pay no Cayman income, capital gains, or withholding tax. Investors are taxed in their home jurisdictions and the structure can be supported by tax exemption undertakings from the Cayman government for up to 20 years.

Disclaimer: FundFront does not provide tax advice, and clients should consult qualified tax professionals regarding their specific obligations.

Operational Management and Compliance

Family offices using SPCs typically appoint professional service providers to maintain fund administration, valuation, and compliance. Title verification, cash flow monitoring and anti-money laundering obligations can be handled by a fund administrator or outsourced compliance firm. This allows family offices to focus on investment activity while maintaining regulatory standards.

Conclusion

The SPC structure offers a scalable, compliant, and efficient way to manage complex family wealth strategies. It supports internal governance, segregated asset management, and optional co-investment under one legal structure. It is particularly effective for family offices that require structural separation between strategies, wish to allocate capital between members selectively, or seek to future-proof their operations for intergenerational succession.

FundFront assists family offices in designing and launching Cayman SPCs tailored to their investment goals. Contact us for support with structuring, service provider coordination, and ongoing maintenance. Email hello@fundfront.com or complete the contact form on our website.

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Disclaimer

FundFront provides operational and technological solutions for fund structuring, securitisation and management. We do not provide legal, tax or financial advice. We recommend that you consult with professional legal or financial advisors to ensure compliance and appropriateness for your specific situation.

Written by:

Arman Salavitabar

Founding Partner, FundFront

Arman Salavitabar, CFA