Cayman Hedge Fund Registrations' Record First Half

by Amanda Banks, Tax-News.com, London

18 August 2005

A record number of new hedge funds was created in the Cayman Islands during the first six months of the year -- despite an overall slowdown in the inflow of capital to hedge funds, according to leading offshore law firm, Walkers.

With a 13 percent increase at the end of the first six months of 2005, as compared to the record-setting second half of 2004, the Cayman Islands continue to dominate the global hedge fund industry as the venue of choice. More than 80 percent of the world's hedge funds are registered with the Cayman Islands Monetary Authority (CIMA), which reported that the first half of 2005 saw the total number of registered funds grow from 5,932 to 6,527.

The strengthening position in the Cayman Islands is in sharp contrast to a report earlier this month from Tremont Capital Management, a hedge fund data analysis and research firm. The report indicated that the second quarter of 2005 saw the smallest net quarterly inflow of assets into hedge funds generally since the fourth quarter of 2001.

"It is clear that fund managers are under pressure to deliver results for their investors, but hedge funds are still an increasingly common part of most investment strategies," Mark Lewis, a partner at Walkers and joint head of the firm's investment funds team, noted.

"As money managers and investors, particularly those in emerging markets such as Asia, continue to have assets to invest and a need for strong returns, it's certain that the growth in Cayman's hedge fund industry will continue. With more than 795 new hedge funds established in Cayman through the end of June, Cayman's position as the leading offshore investment funds jurisdiction is well established," he added.

According to Lewis, at its current rate, the number of new hedge funds established in the Caymans will set another record in 2005. By way of background, 2004 saw an unprecedented 112 percent increase in the number of new hedge funds that were established in the Cayman Islands. Walkers now handles more than 40 percent of all new Cayman hedge funds.

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