A number of bills and regulations have recently been proposed for consideration by the Cayman Islands government which are relevant to the operation of Cayman Islands mutual funds. Most pertinent of these is the Mutual Funds (Amendment) Bill, 2012 which was gazetted on 28 November 2012, writes Walkers Partner Michael Padarin.
The Cayman Islands hedge funds industry is facing an ambivalent future according to panelists at the Campbells Cayman Fund Focus.
The changing nature of its investor base to pension funds and other large investors is transforming the hedge fund industry. Institutionalisation creates new barriers of entry and puts a strain on the vast majority of managers that are small. Large hedge funds meanwhile struggle to maintain their entrepreneurial nature that is often the source of alpha. The Cayman Alternative Investment Summit discussed how the industry can maintain its X factor.
Institutional investors are causing hedge funds to invest in operational infrastructure and increased transparency – a change that puts pressure on smaller funds and leads to a segmentation of the industry, a report by KPMG and AIMA shows.
When the financial crisis hit in 2008, many hedge funds, faced with liquidity problems, limited the ability of investors to redeem their investment. The resulting problem for investors transformed the secondary market for hedge fund shares. Three to four years post-crisis the market remains undeveloped but there is considerable unmet demand both for hedge fund shares and the underlying assets in a fund, says Ben Keefe, director at advisory firm Gamma Finance.
The market for catastrophe bonds, bonds designed to protect insurers from the risk of paying out on natural disasters, is poised to grow this year by as much as 30 per cent, according to European insurer Axa. However, to fulfil the growth prospects, cat bonds, most of which are domiciled in Cayman, still have to overcome certain obstacles delegates heard at the Insurance Linked Summit in February.
In a time when hedge funds as a group continue to underperform equity market indices for the second year in a row, it could be expected to find books criticising the performance of the industry.
In June 2011, Premier McKeeva Bush announced a proposal to require new and existing master funds in open-ended master/feeder structures to register with the Cayman Islands Monetary Authority. Following a consultation period with industry and CIMA which lasted several months, the Mutual Funds (Amendment) Law 2011 came into effect on 22 December 2011.
With the United States presidential elections coming up in less than a year, much of the news media is focusing on who will be the next president of the US for a good reason.
A hedge fund seminar hosted by offshore law firm Walkers in New York in November brought together industry leaders to discuss key issues for investment funds in 2012.