Eighty percent of world’s hedge funds in the Cayman Islands

Iain McMurdo,
a partner at Walkers

Wednesday, June 15, 2005

The number of hedge funds registered with the Cayman Islands Monetary Authority (CIMA) has increased by approximately 23 per cent over those registered in the first quarter of 2004.

More than 80 per cent of the world’s 8,000-plus hedge funds are registered with CIMA and 2004 also saw a sizeable increase in investments by institutional and high-net-worth investors in US markets carried out through Cayman-based investment funds.

According to Iain McMurdo, a partner at Walkers and a member of the firm’s investment funds group, the rate of hedge fund formation continues in Cayman at a rapid rate, owing largely to an array of advantages that the Islands offer to investors.

“The statistics speak for themselves. It is not just Walkers that are busy dealing with hedge funds; this is the case across the Cayman Islands. As the country becomes the preferred jurisdiction for hedge funds, we are going from strength to strength, “said Mr McMurdo.

Cayman provides hedge funds with a no-tax jurisdiction, a sophisticated financial infrastructure that includes major banks and accounting firms, and therefore the ability to achieve measurable savings, which are then passed along to investors. As a result, Cayman has quickly developed as the pre-eminent jurisdiction for the offshore alternative investment industry.

The rate of hedge fund formation continues in the Cayman Islands at a rapid rate as industry experts suggest there is an array of advantages that the jurisdiction offers to investors. The regulatory and legal framework mandates transparency and disclosure - a critical need for institutional investors and high-net-worth individuals - over and above even what the US currently requires.

The US Securities and Exchange Commission (SEC) recently published new rules, which will require advisers of hedge funds and certain other private investment pools to register with the SEC. Advisers not resident in the US may also be required to register under the new rules.

According to Mr McMurdo, “The introduction of international regulation and compliance rather than hinder has indeed helped in the success of the Cayman Islands. It has been a positive benefit as far as the industry is concerned.”

The good news is not limited to hedge fund registration alone. Mr McMurdo goes on to say that it is not just one area that is seeing an increase. “More good news is that the financial services sector as a whole is enjoying growth in everything from captive markets to funds,” he added.

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