Cayman's Popularity As Hedge Fund Domicile Continues To Grow

by Carla Johnson, Investors Offshore.com

16 June 2005

The Cayman Islands, already the domicile of choice for around eight out of ten of the world's hedge funds, is set to see another surge in hedge fund registrations this year, following a substantial increase in 2004.

Reports indicate that the number of hedge funds that registered with the Cayman Islands Monetary Authority in the first quarter of 2005 was 23% higher than in the same period of 2004.

Attracted by an absence of taxation, a sophisticated financial infrastructure that includes major banks and accounting firms, and the ability of funds to pass on measurable cost savings to investors, the Cayman Islands has become the domicile of around 80% of the world's estimated 8,000 hedge funds.

A high percentage of this new business is reportedly being generated by Asian investors, and this contributed to a 100% increase in the number of hedge funds registered in the Cayman Islands during 2004, as more than 1,100 new funds were established in the jurisdiction that year.

Increasingly, hedge funds based in the Cayman Islands are being used as a conduit for Asian institutional investors to invest in the US debt and equity markets.

This has been particularly true of Japan, from where investments destined for the Caymans have recorded year on year growth of 150%. In turn, this has helped investment inflows to the United States grow at an estimated rate of 50% per year.

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