The Cayman Islands is undoubtedly the leading offshore centre for the establishment of hedge funds and private equity funds.
There are over 10,000 mutual funds that are either licensed, registered or administered with the Cayman Islands Monetary Authority (“CIMA”).
Following the enactment of the Private Funds Law in 2020, there are over 12,000 private funds registered with CIMA. The vast majority of investment funds are aimed at institutional or sophisticated/high net worth investors which is reflected in the types of funds that are regulated in the jurisdiction and their assets under management. Investment funds, like other entities established in the Cayman Islands, must have a registered office provided by a licensed corporate services provider, which maintains, among other things, the corporate records of the entity. Funds will typically appoint a suite of service providers both within and outside of the Cayman Islands and in certain circumstances, must appoint Cayman Islands providers. Thus, funds will engage Cayman Islands legal counsel, approved Cayman Islands based auditors, administrators (who may need to be locally licensed in certain circumstances) as well as directors and/or advisory boards, licensed Cayman Islands trustees and (if listing) an approved listing agent. In keeping with international standards, each fund is required to appoint anti-money laundering (“AML”) officers and AML compliance officers and there are several qualified professional organisations who can provide this service. Asset managers may be based in the Cayman Islands or overseas. While the overwhelming majority of managers are located outside of the jurisdiction, in recent years there has been increased interest by managers in establishing a business with a physical presence in the Cayman Islands. With the amendment of the Securities Investment Business Law in 2019, there is an enhanced regulatory and supervisory framework for securities investment business in the jurisdiction.
The success of the investment funds industry in the Cayman Islands is due to a combination of factors, including its market-leading reputation, freedom of investment decisions for asset managers, tax-neutral status, a highly regarded legal system and the availability of world-class professional service providers. The industry is an important pillar of the Cayman Islands financial services sector, responsible for the direct employment of hundreds of professionals. These advantages will ensure that Cayman will continue to lead the way as the jurisdiction of choice for investment 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 September 2020 CIMA had 11,157 Regulated Funds which comprised of 7,855 Registered Funds, 282 Administered Funds, 61 Licensed Funds and 2,959 Master Funds. In addition there are 76 Administrators currently licenced in the Cayman Islands. CIMA lists all registered fund administrators in the Cayman Islands including Carne, Conyers, Estera, International Management Services (IMS), Maples, MUFG, Ogier and Walkers.