Over 10,000 investment funds are now registered in the Cayman Islands, according to second quarter figures released by the Cayman Islands Monetary Authority (CIMA).
At the end of June 2008, there were 10,037 funds on the CIMA's register compared with 9,681 at the end of the first quarter and 8,972 at the same period in 2007.
CIMA says the annual growth rate is 12% in net new hedge funds. This takes cancellations into account. Given the deterioration in global markets, this is a particularly strong performance. Strategies such as distressed debt and special opportunities continue to feature strongly.
"There have been some forced closures, but in the cases where funds are struggling, the managers we work with are being proactive by placing hard-to-value securities in side pockets, suspending redemptions and imposing gates. Such measures may enable a fund in distress to ride out the storm or to wind down its affairs in an orderly manner," said Walkers investment funds partner Nick Rogers.
"In the Cayman Islands, the key drivers behind the actions being taken are the need to treat all investors equitably and to act in the best interests of the fund, and this provides a firm foundation for protecting market participants and preserving value," he said.
According to Mark Lewis, a senior funds manager Walkers, hedge funds have provided the market with much needed liquidity. This has been especially beneficial amid the current tight lending conditions.
Reasons for the continued attractiveness of the Cayman Islands as a domicile for hedge funds include the stable economic and political climate, the close relationship between the public and private sector and the presence of the leading professional services. The regulatory regime in the Cayman Island has been recognised by the International Monetary Fund and the Caribbean Financial Action Task Force for its high standards.
In the area of transparency and ‘know-your-client’ regulations, Cayman Islands standards surpass many of the world's top international financial centres.