The number of mutual funds registered in the Cayman Islands climbed by 226, or 1.8%, to 12,451 in the second quarter of 2021, while private numbers also increased by 601, or 4.5%, to 13,820 during the period.
Since the registration of closed-ended funds was made mandatory in August 2020, the number of private funds in the islands has grown by 23.5%.
Closed-ended funds issue only a fixed number of shares, which, unlike open-ended funds, are not redeemable and can instead trade like a stock in the secondary market.
Government introduced the Private Funds Act in January 2020 in response to international regulatory pressure, in particular the European Union tax blacklist.
The act extended the Cayman Islands Monetary Authority’s enforcement powers over private funds, like private equity funds, and requires them to be audited annually and to have appropriate asset-valuation and cash-management processes.
Similar changes to the Mutual Funds Act made limited investor funds, a form of mutual fund with 15 or fewer investors, subject to registration. The number of limited investor funds has grown by 27.2%, to 679, since that requirement came into force in the third quarter of 2020.
In the second quarter of this year, fund numbers increased across the board as registered, administered and master funds all saw slight rises.
At the end of June, the Cayman Islands Monetary Authority was responsible for the supervision of 26,271 funds.
Even the number of Cayman-based fund administrators, which has been in perpetual decline for more than a decade, has grown by one, to 77.
Stellar year for hedge funds despite losing month
The continued demand for Cayman-registered funds coincides with a successful period for the hedge fund industry.
Although a nine-month streak of positive monthly returns for hedge funds overall was snapped in July (-0.4%), global hedge funds are up about 8% for the year to date, data provider Eurekahedge reported.
This is the highest return through July since 2009.
Approximately 78.1% of the funds in the Eurekahedge Hedge Fund Index generated positive returns in 2021.
In July, the global spread of the Delta variant of COVID-19 and a crackdown by Chinese regulators on the country’s largest tech and education companies somewhat unsettled investors and prompted a steep fall in Chinese equities.
In other parts of the world, last month hedge fund performance trailed equity markets.
Hedge Fund Research’s main industry-wide benchmark, the HFR Fund Weighted Composite Index lost 0.60% in July.
But the 1,400 hedge funds covering all strategy types in the index have returned 9.45% since the beginning of this year.
HFR president Kenneth Heinz said, “Hedge funds navigated a volatile market environment in July with mixed performance across sub-strategies and narrow declines across broad-based indices as, despite strong corporate earnings, investors focused on increased uncertainty surrounding renewed focus on the spread of virus variants.”