3 ms·

>Why should it be the employees getting taxed and not the corporation? I think you are confusing the fund with the mangement company. An asset manager is a co

by ddeck 9y ago

>Why should it be the employees getting taxed and not the corporation? I think you are confusing the fund with the mangement company. An asset manager is a company that manages assets for investors and charges fees. They have employees and offices and profits and pay taxes. Fidelity's parent for example is a US based LLC. An asset manger like this runs many funds on behalf of investors. For each investment fund, they setup a fund to legally ring fence the assets for that particular fund, which they manage on behalf of the fund's investors. This protects the investors and maintains separations of the assets. If the management company went bankrupt, the funds themselves are unaffected (aside from needing a new manager). The fund itself has no employees, it's just a method of legally separating out those assets. I would also point out that this particular case has nothing to do with the US. The manager in question is not a US citizen or resident and I would be extremely surprised if the management company was being setup there.

adamnemecek 9y ago
I'm not confusing it. You didn't answer the main question, why is it establishes in Cayman Islands? To avoid taxes. That's the end of it.
- icebraining 9y ago
  Avoiding taxes is not unethical in itself, or do you also denounce people who claim any tax deductions? The question is: why is the US entitled to these taxes, such that avoiding them becomes unethical?
  - adamnemecek 9y ago
    > Avoiding taxes is not unethical in itself, or do you also denounce people who claim any tax deductions? False equivalence. You can deduce anything that's used to generate the profit. This makes sense. > The question is: why is the US entitled to these taxes, such that avoiding them becomes unethical? The answer to this question is the same as the answer to the question "why is the US entitled to taxes".
    - charlesdm 9y ago
      You can generally also deduct charity payments to your own "land conservation" charity, which can then go ahead and buy 50 acres of land around your recently built mansion. Pretty sure you wouldn't consider that one one that makes sense. Plenty of deductions exist for a reason, and generating profits isn't always one of them.
- breatheoften 9y ago
  There are other reasons to do so (unethical but who is to say it's not part of the thinking ...). Foreign assets are also significantly harder to apply many kinds of financial regulations to from other countries. If this fund is a Ponzi scheme for example, then the foreign transaction boundaries can prevent (or severely complicate) federal jurisdictions from clawing back profits (for the early investors who might have net profit). Normally - any investor with profitable returns from a Ponzi scheme will have their gains clawed back to pay restitution for the losses of investors who got scammed.
- anomaly_ 9y ago
  You are being deliberately obtuse though. As others have explained, the fund entity is setup in the Caymans to provide tax neutral position on the funds under management (and legal separation from the management entity). The management entity will pay tax in the jurisdiction its a tax resident, as will investors in the fund when any dividends are distributed/capital gain is realised.
- charlesdm 9y ago
  "That's the end of it" isn't really a solid argument. Various reasons: 1) to segregate assets, 2) because certain regulators will apply restrictions on certain security actions (one example: it seems the Belgian regulator has barred investors from borrowing against their stock holdings for most purposes, but this is possible with a US broker, even for Belgians, without restriction), 3) to stop double taxation which would be bad for global investment (e.g. some pension funds are tax exempt under local law), and 4) because investor A living in country B doesn't want to pay taxes in country C, he wants to pay taxes in country B under the laws he knows and understands. Imagine living in Greece, and then having to figure out the entire tax system of Spain. In a foreign language. It would probably be too complex to bother (and thus you wouldn't invest) or it would be an expensive undertaking (lawyers etc) eating into your returns. Investing in a CaymanCo is generally easy -- you don't pay tax at the entity level, you pay tax in your personal entity. Clean, easy, and you can ride off on your boat into the sunset.

by ddeck 9y ago

adamnemecek 9y ago

I'm not confusing it. You didn't answer the main question, why is it establishes in Cayman Islands? To avoid taxes. That's the end of it.

icebraining 9y ago
Avoiding taxes is not unethical in itself, or do you also denounce people who claim any tax deductions? The question is: why is the US entitled to these taxes, such that avoiding them becomes unethical?
- adamnemecek 9y ago
  > Avoiding taxes is not unethical in itself, or do you also denounce people who claim any tax deductions? False equivalence. You can deduce anything that's used to generate the profit. This makes sense. > The question is: why is the US entitled to these taxes, such that avoiding them becomes unethical? The answer to this question is the same as the answer to the question "why is the US entitled to taxes".
  - charlesdm 9y ago
    You can generally also deduct charity payments to your own "land conservation" charity, which can then go ahead and buy 50 acres of land around your recently built mansion. Pretty sure you wouldn't consider that one one that makes sense. Plenty of deductions exist for a reason, and generating profits isn't always one of them.
breatheoften 9y ago
There are other reasons to do so (unethical but who is to say it's not part of the thinking ...). Foreign assets are also significantly harder to apply many kinds of financial regulations to from other countries. If this fund is a Ponzi scheme for example, then the foreign transaction boundaries can prevent (or severely complicate) federal jurisdictions from clawing back profits (for the early investors who might have net profit). Normally - any investor with profitable returns from a Ponzi scheme will have their gains clawed back to pay restitution for the losses of investors who got scammed.
anomaly_ 9y ago
You are being deliberately obtuse though. As others have explained, the fund entity is setup in the Caymans to provide tax neutral position on the funds under management (and legal separation from the management entity). The management entity will pay tax in the jurisdiction its a tax resident, as will investors in the fund when any dividends are distributed/capital gain is realised.
charlesdm 9y ago
"That's the end of it" isn't really a solid argument. Various reasons: 1) to segregate assets, 2) because certain regulators will apply restrictions on certain security actions (one example: it seems the Belgian regulator has barred investors from borrowing against their stock holdings for most purposes, but this is possible with a US broker, even for Belgians, without restriction), 3) to stop double taxation which would be bad for global investment (e.g. some pension funds are tax exempt under local law), and 4) because investor A living in country B doesn't want to pay taxes in country C, he wants to pay taxes in country B under the laws he knows and understands. Imagine living in Greece, and then having to figure out the entire tax system of Spain. In a foreign language. It would probably be too complex to bother (and thus you wouldn't invest) or it would be an expensive undertaking (lawyers etc) eating into your returns. Investing in a CaymanCo is generally easy -- you don't pay tax at the entity level, you pay tax in your personal entity. Clean, easy, and you can ride off on your boat into the sunset.