Outsourcing: What fund managers & investors need to know and why AI will test the limits - Cayman RoundtableSign up here for our free Roundtable Scripts - get this unique intelligence by email as Opalesque publishes them: Many of the most successful businesses in the world operate on a highly outsourced model. After some initial skepticism, outsourcing has now also fully arrived in active fund management, with core management, IT and compliance functions outsourced to knowledgeable service providers. Hedge funds were early adopters of outsourcing (which can be charged back to investors) which is becoming more prevalent in private equity as well. While right now we may still hear conversations like, "As now you are at XXX million, so you should have your full-time CFO or your full-time IT or compliance people in place," over time those thresholds will further shift from where they used to be to a situation where outsourced people in certain roles will become the norm. Artificial Intelligence to test the limits of outsourcing When it comes to artificial intelligence, the questions around outsourcing are reaching a new dimension and tend to confound every current practice and legal considerations. We know that some managers have invested enormously in this technology. From a legal perspective, are those managers now outsourcing responsibility to a robot? A robot has no legal personality itself and therefore cannot be sued (as well as presumably not having assets). Presumably any claim or investigation would be against the manager, perhaps on the basis of negligence. And where two robots interact with each other on each side of a transaction there will be other interesting questions (page 25). "Cayman Model" still hugely successful despite increase in regulation, CIMA now empowered to fine In 2018 the number of Cayman registered funds grew from 10,559 to 10,992, and also in 2019 there are further increases in new registrations. CIMA has also to date registered around 80 mutual funds whose strategies include investing in cryptocurrency, blockchain technology, Fintech, outperforming or replicating the performance of cryptocurrencies and indices related to crypto assets. This 4% uptick in Cayman funds is very positive in light of other surveys which revealed that the number of total funds is declining globally with the maturity of the industry and continued consolidation. Industry players also say that CIMA's empowerment to impose a range of administrative fines is to be welcomed, in that it allows CIMA to apply a more nuanced and proportionate approach than had previously been the case. Stakeholders in other jurisdictions have long since taken regulators' ability to fine for granted as a basic element of the regulatory toolbox. Find out in this Roundtable how and when CIMA expects to impose fines.
The Opalesque 2019 Cayman Islands Roundtable took place in George Town with:
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