Fireside Chat with Wendy Au
Chat with Wendy Au, Senior Legal Counsel in Loeb Smith’s Investment Funds Group in the firm’s Hong Kong office and advising on formation, launch and ongoing regulatory and compliance matters regarding British Virgin Islands (“BVI”) and Cayman Islands Investment Funds and Fund Managers, on her background and insight on recent market developments and trends in the legal market in Asia
Wendy Au, a Senior Legal Counsel in the firm’s Investment Funds Group in Hong Kong advising on the formation, launch and ongoing regulatory and compliance matters regarding BVI and Cayman Islands Investment Funds and Fund Managers, has hit the ground running after joining the Firm in January 2023, advising a number of Fund Managers on their Cayman and BVI Fund launches, restructuring, and ongoing regulatory and compliance issues. By way of broader introduction to the firm’s clients we have invited her to provide some background to herself, her practice, and her insight on recent market developments and trends in the legal market in Asia for Cayman and BVI Funds and Fund Managers.
Loeb Smith (“LS”): Wendy, could you provide a brief overview of your current practice?
WA: I advise on the formation, launch and ongoing regulatory compliance matters of Cayman and BVI Fund and Fund Managers. I am based in our Hong Kong office, and I act for a wide range of Asia-based financial institutions and asset managers.
LS: Can you share more about your background?
WA: I was born and raised in Hong Kong, and I speak fluent Cantonese, Mandarin and English. I trained as an investment fund attorney at Deacons in Hong Kong, prior to working as an in-house counsel for two large Chinese financial institutions advising on a broad range of investment funds and compliance matters. My focus has always been on Cayman and BVI Funds and related matters.
LS: You have been very successful to date in your ability to earn the confidence of high-profile clients. What do you attribute that to?
WA: My previous experience working in-house for managers have given me a unique position in the market – my first-hand experience working inside institutional asset managers gives me a detailed understanding and appreciation of the issues, concerns, outlook, and goals of Fund Managers, especially those with a presence in China and other Asia markets. I speak the language of my clients, in this literal and wider sense. I am passionate about building trusted and lasting relationships with clients. Providing commercially focused and cost-efficient advice is my top priority, and our firm’s commitment is to always exceed client expectations.
LS: From those which you can disclose, what do you think are the most interesting or challenging client matters that you have worked on?
WA: One of the most exciting deals that come to mind is the privatization of a listed company using fund structures with several sizable fund vehicles, each with multiple share classes of different characteristics. The rush turnaround time with stakeholders in different time zones made it extra challenging but the hard work paid off when all of us celebrated after the successful launch of the funds!
LS: What types of Funds, in terms of asset class focus, have you recently been asked to advise on?
WA: These include listed shares, fixed income instruments, currency-related instruments as well as commodities (e.g., gold, silver and oil). We are also seeing an increasing number of new inquiries with digital assets (tokens, web3.0 focused venture capital) investments and also debt and short term loans as Funds’ asset classes in recent months and we are expecting to see more.
LS: From our U.S. clients and our clients in Europe, we have seen a growing number of Funds focused on investing in Web3.0 infrastructure and also in the artificial intelligence (AI) sector, is that a trend you are also seeing in Asia?
WA: This is a trend that I am also seeing in Asia. In particular, I can see that developers of Web3.0 infrastructure in Asia (with its different sectors, such as (i) Decentralised Finance or DeFi, (ii) NFTs, and (iii) Decentralized autonomous organizations (DAOs)) are increasingly using BVI entities to own and manage their creations as BVI companies are relatively economical to establish and their annual maintenance costs compare well against other offshore jurisdictions like Cayman and Bermuda, and mid-shore jurisdictions like Luxembourg, Hong Kong and Singapore.
LS: The mid-shore jurisdictions such as Hong Kong and Singapore appear to be making a concerted attempt to compete well against genuinely offshore jurisdictions such as Cayman and the BVI for the domicile of investment funds, what factors do you think Cayman and the BVI have that continue to make them attractive for Fund Managers in Asia?
WA: The combination of favorable regulations, a robust infrastructure, global recognition and political stability continues to make Cayman and the BVI attractive domiciles for Fund Managers in Asia. Both Cayman and BVI have a long history of supporting the financial services sector, and as a result, have developed a robust infrastructure and a well-established pool of expertise in this area. Cayman and the BVI’s well-recognized reputation and stability also enhances the credibility in the eyes of investors. The investment fund market in Asia is expanding and so the Hong Kong and Singapore options are a part of that expansion. They provide different benefits to Fund Managers and in some cases complete the Cayman and the BVI Fund structures.
LS: What are the Fund developments and/or trends in the Hong Kong legal market that you see over the next 6 months?
WA: In the past few years, Hong Kong was seriously affected by the COVID-19 pandemic and the city’s economic and investment activities were significantly affected. With the recent loosening of the COVID-19 restrictions in Hong Kong, we are expecting strong recovery of investment activities and have already received a number of requests from clients on the setting up new Funds since the beginning of the year. In the digital assets space, it will be interesting to see how the collapse of FTX and Luna last year will affect the crypto fund space this year in terms of investor confidence. The interest of investment in web3.0 infrastructure seems unrelenting and I expect to see more of this over the course of this year.
LS: What do you see as the key Cayman and BVI law developments that will impact on offshore funds this year?
WA: Cayman and the BVI are committed to ensuring that their financial services industry is aligned with international best prac¬tices and compliant with the standards imposed by the Financial Action Task Force (FATF). Substantially all of the FATF requirements have been implemented by them. This has meant that there is increased regulatory scrutiny in Cayman and the BVI and interestingly, this has made each jurisdiction even more attractive to onshore institutional managers. This is because those managers are regulated and also have to comply with regulatory requirements in their jurisdiction of domicile whether that is in Hong Kong, mainland China, Singapore, Republic of Korea or elsewhere. This focus on continued regulatory compliance from Fund Managers will feature this year. By sending annual regulatory checklists to our clients from time to time, we hope we can raise their awareness in these matters.
LS: Thanks for your time, Wendy
This publication is not intended to be a substitute for specific legal advice or a legal opinion. For specific advice on Investment Funds in Cayman Islands and BVI please contact your usual Loeb Smith attorney or any of the following:
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