Back-to-back Redemptions in Cayman Islands Master/Feeder Investment Fund Structures

A recent judgment of the Grand Court of the Cayman Islands (Grand Court) has raised a number of important issues for the processing of redemptions in master-feeder structures. In Ardon Maroon, the Grand Court held that “industry practice” is not a relevant consideration in determining whether a back-to-back redemption by a feeder fund has been validly effected - rather, the Grand Court found that master and feeder funds must strictly follow the redemption mechanics set out in their constitutional and operational documents in order to ensure that back-to-back (or automatic) redemptions are ultimately effective as a matter of law.

This decision serves as a timely judicial reminder that the practice which is ultimately adopted by managers, administrators and transfer agents must accurately reflect the actual redemption procedure set out in the constitutional and operational documents of master-feeder structures (or vice versa).

 

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