4.2 COMMON CONSIDERATIONS

Generally, hedge fund managers going offshore have already been in business onshore for some time. They might decide to become the promoter of an offshore fund either because their US fund has reached its limit, because some of his/her clients want to invest their retirement accounts, or because foreign investors have become a target group in their marketing efforts. Usually, like US citizens, foreign investors are citizens of countries with capital gains, income- and other taxes. If these investors choose to invest into a US hedge fund, they would either be double taxed or they would have to investigate whether a tax treaty between their home countries and the US exists. Understandably, there is a preference among foreign investors to select a jurisdiction without taxes as the domicile for their investment purposes. This fact puts offshore centers without taxes onto the map of the investment world and when it comes to hedge funds, the Cayman Islands in particular.