Nordic funds shun Cayman after blacklisting

Pedro Gonçalves
Nordic funds shun Cayman after blacklisting

Nordic pension funds and institutional investors have stopped new investments in Cayman-based entities following the decision last week by the European Union to add the Cayman Islands  to its list of non-cooperative jurisdictions in tax matters.

Pension funds in Denmark, Norway and Sweden, said they would no longer invest in the jurisdiction but may not necessarily be able to unwind existing investments, Investment & Pensions Europe reported.

In Denmark, the €117.6bn pension fund ATP has said it is not investing in the Cayman Islands after the recent update of the EU blacklist.

With Cayman Islands on the list we will not invest in the jurisdiction going forward"

Lars Toft, tax director at ATP, said: "With Cayman Islands on the list we will not invest in the jurisdiction going forward."

He added: "That does not mean that we are able to change the investments that have been made in the past and it is important to underline that we haven't engaged in any aggressive tax planning via our investments on Cayman Islands."

Sweden's largest pension fund Alecta told IPE that it is taking the same stance and will not make any new investments until Cayman is removed from the list.

Danish fund Sampension said it was a matter of policy not to invest in listed countries, while Danica Pension responded to questions by the industry publication that it would rethink its position in light of the tax listing but had no plans to invest in Cayman at this stage.

Norway's pension funds KLP and DNB Liv are reconsidering how to deal with blacklisted jurisdictions.

In Norway, municipal pensions heavyweight KLP said it was now considering together with other market players how to address the issue of the blacklisting.

"We have very limited exposure through the Cayman Islands, but so far we will not continue investing through this jurisdiction until we have decided how to deal with the blacklisting," said Sissel Bjaanæs, KLP's director of information.

Norwegian pension provider DNB Liv said that in the wake of the EU announcement, it was currently working on an assessment of how this would affect current and future investments in Cayman-domiciled funds.

"Our current DD [due diligence] process for all domiciles include AML assessments and that the fund has all necessary information on all investors in the fund in this regard," a spokesperson said.

Finnish pension and insurance company Varma is equally monitoring the situation and said it typically requires the jurisdictions it invests in to comply with tax information exchange rules and that funds pay taxes where they are due, IPE reported.

Cayman-registered funds are typically set up by fund managers in the US, who often use Cayman vehicles to attract international investors.

Data from the International Monetary Fund on portfolio holdings shows that investors from European countries had invested about US$250 billion in Cayman, about 10.6% of all portfolio holdings, at the end of 2018.

The EU said the Cayman Islands, which has no income tax, capital gains tax or corporation tax, does not have "appropriate measures" in place to prevent tax abuse, allowing firms to register there despite having minimal presence in the territory.

The jurisdiction was previously on a ''grey list'' that gave it time to introduce new laws to tackle tax deficiencies. But it did not implement the "economic substance" reforms by the deadline as promised, the EU said.

Cayman Islands' premier, Alden McLaughlin, said the government has approved many reforms sought by the EU and has already contacted the EU about the process of being removed from the blacklist.



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