Cayman Funds Live To Fight Another Day

by Amanda Banks, Tax-News.com, London

10 June 2010

The Cayman Islands Monetary Authority (CIMA) has released the findings of an investigation into the effects of the global financial crisis on the island's funds industry. The report is based on statistics from over 7,000 funds regulated in the islands from 2008 - when the crisis first hit.

Among the funds from which statistics were drawn, most of the key indicators reflect notably weaker performance in 2008 than was reported in 2007. These include an 18% fall in subscriptions, a 42% increase in redemptions, an almost threefold dip in net income, and a 25% decline in net assets.

The data shows some shifts which could be attributed to the crisis, CIMA noted in its analysis: "For instance, the proportion of funds with assets totalling USD50m or less rose to 52% in 2008, up from 43% in 2007. Although the largest proportion of assets continued to be allocated to master funds, the dollar value of assets allocated to that structure decreased by 24%. The instruments that saw the largest falls in asset allocation were: short bonds, which fell by 75%; long equities, which fell by 56%, and long bonds, which fell by 53%."

"Following on from trends seen in both 2007 and 2006, two investment strategies, Multi-Strategy (39%) and Long/Short Equity (22%), remained dominant in attracting the majority of assets, garnering USD1,034bn of the aggregate net assets."

"The dominant operating structure remained the master/feeder, whilst under the legal structure the Exempted Company continues to be the structure of preference."

While the funds industry was detrimentally affected by the crisis - with several of the island's funds tested like never before - CIMA announced that just 7% of funds suspended trading in 2008, up just marginally on that recorded in 2007 (5%), a testament, it noted to the fund industry's resilience in the Cayman Islands.

The performance of 7,325 funds - approximately 82% of regulated funds in the Cayman Islands - were aggregated in CIMA's report.

“The Cayman Islands Monetary Authority continues to collate and publish aggregate statistical information on the funds industry in order to enhance transparency and extend global awareness of the structure and performance of the industry,” said Cindy Scotland, CIMA’s Managing Director.

“These are very valuable facts and figures. With the Cayman Islands estimated to have a major portion of the world’s hedge funds domiciled here, the information in the report provides a good gauge of what was happening in the global funds industry at the peak of the financial crisis.”

Yolanda McCoy, Head of the CIMA division that undertook the report, commented: "The 2008 edition of the report shows the turbulent year that funds dealt with globally. It also shows that, in spite of this turbulence, the industry remained robust. We saw that the top jurisdictions and regions were able to maintain their relative positions. Cayman remained the top jurisdiction from which fund administration services were provided for Cayman-regulated funds, with Ireland maintaining its second place. New York and London remained the top investment manager locations, North America and Europe remained the top investment manager regions.”

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