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.
"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.
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.
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.
