Caymans are a hedge fund paradise

Date: Monday, September 18, 2006
Author: Aaron Siegel, InvestmentNews.com

he Cayman Islands Monetary Authority of George Town, Grand Cayman, last week said that it has increased its hedge fund jurisdiction by 2,000 funds, or 33%, since the beginning of 2005, including more than 1,000 new ones in the first half of this year.

The jump is a result of several factors, including non-traditional applications of hedge funds and increased interest in emerging markets, according to an analysis by Walkers SPV Ltd., a trust company based%A0;in George Town, Grand Cayman.

"Certainly, [the number of hedge funds in the Cayman Islands] will increase [in the years ahead], but it will not be what it has been," said Mark Lewis, senior investment partner at Walkers. "It is driven by pension funds looking for better ways to invest."

In addition, the Cayman Islands provide hedge funds with a no-tax jurisdiction.

The monetary authority's announcement came three months after the Securities and Exchange Commission overturned a rule that required hedge funds with 14%A0;investors and $25 million or more in assets to register as advisers.

Mr. Lewis noted that many U.S. hedge fund managers are looking for capital in the Far East, while investors from the Far East and Middle East are looking for American capital, and these two sides often come together in the Cayman Islands.

Mr. Lewis projected that the number of hedge funds that will fall under the jurisdiction of the Cayman Islands will hit 9,000 by the end of next year.