The prominence of hedge funds (or ‘mutual funds’ as defined in the Mutual Funds Law) in the Cayman Islands and the growing investment interest in them by institutional and sophisticated and/or high net worth investors has steadily increased in recent years
Since the enactment of the Mutual Funds Law in 1993, the Cayman Islands funds industry has grown from small beginnings, to become the jurisdiction of choice for new fund authorisations by investment managers, representing over US$1.8 trillion in net assets. Even in these uncertain times, the Cayman Islands funds industry remains robust, not only in terms of new fund formations, but also in net assets held by those funds. In the second quarter of 2019, there were 10,959 either licensed, registered or administered with CIMA.
In June 2019 the Securities Investment Business (Amendment) Law, 2019 was passed. This recent amendment enhances the regulatory and supervisory framework for securities investment business in the jurisdiction. Persons currently registered as Excluded Persons will be required to re-register and be subject to regulation and supervision by CIMA. The Law now distinguishes between a registered person and that of a non-registrable person.
Additionally, the Cayman Islands have taken steps designed to facilitate the extension of the AIFMD third country passport to the Cayman Islands. In 2015, there were the approval of new AIFMD Regulations along with amendments to the SIBL and the Mutual Funds laws. Obtaining the passport would allow Cayman-based funds to be marketed across the EU and eliminate reliance on private placement in each EU member state individually, through the National Private Placement Regime.
The success of the Cayman Islands is not due to one factor alone, but to a number, including its reputation, freedom of investment decisions for hedge fund managers, tax-neutral status, a highly regarded legal system and the availability of professional service providers. The mutual fund industry is an important part of the Cayman Island’s economy, employing hundreds of people directly. These advantages will ensure that Cayman will continue to lead the way as the jurisdiction of choice for hedge funds.
The Cayman Islands is the leading offshore domicile for hedge funds, and as regulators and investors have placed more stringent requirements on good governance and oversight, so independent directors have taken up the mantel of supporting the asset management industry. The majority of all new hedge funds have at least a majority of independent directors on their boards.
The Cayman Islands remains the premier jurisdiction for the domiciliation of hedge funds. As of March 2019 CIMA had 10,916 Regulated Funds which comprised of 7,601 Registered Fundes, 310 Administered Fundes, 75 Licensed Funds and 2.930 Master Funds. In addition there are 85 Administrators currently licenced in the Cayman Islands.