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1. What Fund Structure Should You Use?
While an open-ended fund permits periodic redemptions by the investors and is a good choice for funds with liquid investment strategies (such as hedge funds), a closed-ended structure is suitable for those that require more time for their investments to mature.
In a closed-ended fund, an investor cannot redeem or exit from the fund until it is wound up. A closed-ended fund also only accepts investors for a set period, such that the number of investors is fixed at the closing of the subscription deadline. Because investors want to know how long their capital will be tied up, a closed-ended fund usually has a finite lifespan.
2. The Limited Partnerships
The most popular vehicle for Asian private equity funds is an exempted limited partnership. In the Cayman Islands, the Exempted Limited Partnership Law (“ELPL”) governs the formation of these kinds of partnerships. To be registered under the ELPL, such partnerships must have a general partner and at least one limited partner. An exempted limited partnership does not have a separate legal personality and the general partner is responsible for the management of the partnership business. Contracts and other documents with third parties will therefore be entered into by the general partner on behalf of the partnership.
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Guide to Establishing Private Equity Funds in the Cayman Islands