What Is a Fund-of-One?

A Fund-of-One is a bespoke investment vehicle created to serve the needs of a single investor or family. It emulates the structure, operation and service architecture of a traditional investment fund, while allowing full customisation in terms of governance models, asset allocation strategies, reporting preferences and service provider choices. For family offices seeking a high level of control, a Fund-of-One enables the deployment of capital with institutional rigour while maintaining complete operational discretion and alignment with the family’s long-term priorities.

This playbook focuses on the different structuring options available specifically in the Cayman Islands, one of the most widely used jurisdictions for establishing Fund-of-One vehicles. Cayman offers a well-developed legal system, tax neutrality and flexible entity options, making it a jurisdiction of choice for families seeking privacy, customisation and a robust regulatory framework.

Why Use a Fund-of-One?

A Fund-of-One allows for tailored governance. The vehicle can be structured to mirror family hierarchies or governance styles, including the use of family committees, individual directors, or professional managers. This ensures that the fund’s operations align closely with the family’s values and internal decision-making processes.

It also supports consolidated oversight. Through a Fund-of-One, families can centralise the management of a wide array of asset types and legal entities (trusts, holding companies, or individual accounts) into a unified structure. This integration improves transparency, simplifies administration and improves overall control.

Estate and succession planning is another critical benefit. A Fund-of-One provides a legal and operational framework aligned with long-term family objectives, enabling structured transitions of wealth and control across generations. It can incorporate tailored rules for inheritance, governance shifts and other intergenerational mechanisms.

The vehicle enhances asset protection and privacy. Cayman’s legal regime allows for structuring that shields assets from external claims and limits public disclosure of sensitive financial information. This is especially valuable for families that prioritise confidentiality.

Finally, a Fund-of-One facilitates tax efficiency. While ultimate tax outcomes depend on the investor’s home jurisdiction, Cayman’s tax-neutral status allows for clean cross-border structuring, reducing layers of taxation and enabling more effective planning.

Structuring a Fund-of-One in the Cayman Islands

Selecting the Legal Structure

The first decision in forming a Fund-of-One is choosing the appropriate legal structure. The Cayman Islands offers several options:

• Exempted Company: Ideal for families looking for a simple, enduring corporate form. It provides legal personality, shareholder liability protection, and the flexibility to issue various share classes for different investment strategies or beneficiaries.
• Exempted Limited Partnership (ELP): Preferred where flow-through tax treatment is advantageous. This structure is contract-based and highly customisable through the Limited Partnership Agreement (LPA), offering nuanced control over capital commitments, distributions, and governance.
• Limited Liability Company (LLC): Blends corporate and partnership features. With internal governance defined by an Operating Agreement, LLCs offer a streamlined, manager-led format suitable for operational simplicity.
• Segregated Portfolio Company (SPC): Valuable when the family wishes to maintain distinct sub-portfolios under one legal umbrella. It is particularly well-suited for families with multiple members or branches who require separate investment tracks or allocations. Each portfolio is legally ring-fenced, allowing for strategic allocation across real estate, private equity, or operating businesses without cross-liability.

Formation Process

Once the structure is selected, legal counsel in Cayman prepares and files the incorporation or registration documents. For ELPs and LLCs, this includes filing with the Registrar and executing the constitutional agreements. For SPCs, additional filings establish the segregated portfolios.

Importantly, a Fund-of-One that does not accept capital from outside investors generally does not fall under the Cayman Islands Monetary Authority (CIMA) regulatory regime. However, legal confirmation is advisable.

Governance Design

Governance should be customised to the family’s preferences. A designated fund operator (for example a family member, advisor, or board) can be appointed. Governance terms should clarify decision-making protocols, investment rights, withdrawal mechanics, and conflict resolution.

Where appropriate, the family may also implement an advisory committee or appoint independent directors to add external perspective and safeguard fiduciary integrity.

Documentation

Unlike a traditional fund, a Fund-of-One does not require a formal offering memorandum. However, it is best practice to prepare a private memorandum or term sheet summarising the fund’s core elements. This includes capital call terms, distribution mechanics, investment scope, valuation policy and participant rights.

A documented investment policy statement is also recommended. This internal document outlines responsibilities, asset allocation parameters and the method for ongoing evaluation.

Appointing Service Providers

While many elements of administration can be kept internal, appointing key service providers improves rigour. These may include:

• Registered Office: Legally required for all Cayman entities.
• Administrator: Often engaged to manage NAV calculation, reporting, and capital accounting.
• Independent Auditor: Commonly retained to validate financial statements and enhance credibility.
• Banking and Custody Providers: Necessary for proper segregation and handling of fund assets.
• Legal and Tax Advisors: Important for guiding fund formation, cross-border compliance, and ongoing regulatory obligations.
• Additional Providers: This may include AML officers, external directors, or technology platforms for investment monitoring and reporting.

Ongoing Operations

After setup, the fund must meet basic ongoing obligations: filing annual returns, maintaining statutory registers, and holding periodic governance reviews. Changes to service providers or structural adjustments should be documented and, if applicable, disclosed.

The fund should also be prepared for eventual transitions, whether through winding up, restructuring, or succession-driven reallocation. Flexibility in the original documentation makes these transitions easier.

When Alternatives Make Sense

Some families may consider other structures if their goals differ. For example, if multiple family branches or outside investors are involved, CIMA registration and enhanced compliance become relevant.

Publicly tradable exposure might be better delivered via a regulated fund or securitised note. Families with uniquely complex succession goals might opt for a Cayman Foundation Company or a STAR Trust to better encapsulate fiduciary and governance needs.

Conclusion

A Fund-of-One enables families to deploy capital professionally and privately, within a legal framework that supports long-term control and strategic flexibility. The Cayman Islands offers a versatile toolkit for building such structures, with minimal regulatory overhead for purely private arrangements.

FundFront supports families and advisors with full lifecycle support, from design and formation to operation and reporting. For tailored guidance on setting up a Fund-of-One, contact us via our contact form, or book an appointment here.

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• Top 25 Service Providers in the Cayman Islands for Fund Managers
• Cayman SPC: When and Why to Use Segregated Portfolio Companies

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.