Barry McQuain and Kobi Dorenbush on offshore services | Caledonian Group | Video

Transcript

Headquartered in the Cayman Islands, with locations around the Americas, Caledonian Group offers a breadth of financial services to both high-net-worth individuals and institutional clients. Barry McQuain and Kobi Dorenbush, joint CEOs of Caledonian Group, discuss the services they offer, the benefits and challenges of operating in the Cayman Islands, and the outlook for offshore financial service centres.

World Finance: Kobi, introduce us to Caledonian Group and the services you offer to your clients.

Kobi Dorenbush: Caledonian was founded in 1970, and over the years it’s grown substantially. Today we’re over 120 employees in four countries around the world. If you look at all the assets that we work with, based on deposit custody, trust and administration, we’re working with about $30bn in assets today.

About two years ago, our partnership group acquired Caledonian Group from its founding family, and since that time we’ve been refocusing the business to four key areas.

The first is fiduciary services, which include incorporations both in the British Virgin Islands and the Cayman Islands, trust services and directorship services. We also provide securities brokerage and custody. We provide welath management services ot our high net-worth clients around the world. But our core business is banking. Caledonian Bank is the only privately-owned Class A bank in the Cayman Islands, that focuses exclusively on high-net-worth individuals, international business and institutional clients.

“The Cayman Islands is the same as any other global financial centre. It’s just our weather is a little bit better”

World Finance: You’re based in the Cayman Islands, so what challenges does this present?

Berry McQuain: Well, I think many jurisdictions have challenges, particularly after the crisis in 2008. All financial centres. Actually, Cayman has quite a few strengths. We’re in the eastern timezone, close to quite a bit of wealth, and quite a bit of business in the US. Geographically we’re an easy plane flight from about 12 other cities on a daily basis. In terms of assets, the Cayman Islands is the fifth-largest financial centre in the world. And that is due primarily to the expertise and the experience that has developed in the Cayman Islands over the last 40 years.

I think perception is one of the challenges that we face, in that, in the Cayman Islands we’re all out with our feet in the sand, doing business in-between surfing and good waves and diving. Which – is true sometimes. But the reality is, we run a global, conservative business. Banking, accounting, financial needs. The same as any other global financial centre. It’s just our weather is a little bit better.

World Finance: Kobi, but there are benefits you’re able to take advantage of as well.

Kobi Dorenbush: Sure, I mean, first of all, it’s very easy to get clients to come and visit us in the Cayman Islands around December, January, February. But really, the Cayman Islands has a number of advantages that we look to. Cayman is well known for its tax neutrality of course, but there’s also the advantage of being regulatory neutral.

What I mean by that is that, the Cayman Islands does not impose any personal or corporate income tax. There’s no capital gains tax, there’s no inheritance tax, there’s no property tax. Also, the Cayman Islands doesn’t impose any significant regulatory hurdles on doing business, both within the Cayman Islands and from the Cayman Islands.

What that means for our clients is that they can come to the Cayman Islands, set up their businesses, and then go forth throughout the rest of the world and engage in international commerce without being hampered or restricted by the regulations or taxes from the Cayman Islands.

“Lawyers, bankers, dealmakers, investment managers, all choose the Cayman Islands because the experience and the expertise is there”

World Finance: And Barry, the Cayman Islands is known as a domicile for hedge funds; tell us about this.

Berry McQuain: That’s right. There are over 10,000 hedge funds which are domiciled in the Cayman Islands, making the Cayman Islands larger than all other jurisdictions combined. The primary reason for this is the availability of a professional body of expertise. These are the lawyers, the bankers, the dealmakers, and the hedge fund investment managers, who have all chosen the Cayman Islands because the experience and the expertise is there.

World Finance: And the captive insurance industry has been particularly successful, why do you think this is?

Berry McQuain: The growth is great. In the past year, the growth is probably in the range of almost 30 percent year over year. The Cayman Islands is the second-largest globally, but the largest in terms of healthcare captives. Last year’s premiums were about $12bn on $88bn of assets, so it’s a sizeable business.

The primary reason for choosing an offshore jurisdiction such as the Cayman Islands has to do with the experts that are available, and the regulatory framework which allows flexibility when guiding and managing a captive.

World Finance: And finally, Kobi, there are questions over the sustainability of offshore financial services centres, so what’s the outlook as you see it?

Kobi Dorenbush: The question of sustainability really comes up largely due to what I think is the popular media presenting a very stylised impression of the Cayman Islands to sell a novel, or to sell tickets to a movie. The truth about the Cayman Islands is that doing business there is very much like doing business anywhere else, with the exception of the good weather and the beach.

In reality, the sustainability of the Cayman Islands is very positive. We’re very bullish on the future of the industry, and the offshore markets generally. We’ve seen a significant increase in business over the last few years. I think that’s largely due to the major economies around the world slowly coming out of recession. And I think that what you can see, or what we expect to see, is that as the onshore markets tend to put more restrictions on doing business, and put up more barriers to doing business, capital will find its way to that place that is more neutral, that place that is more willing to accept investment and they will… more business will find its way to the offshore centres.

World Finance: Kobi, Barry, thank you

Barry McQuain: Thank you.

Kobi Dorenbush: Thank you.