Cayman’s fund industry finished the year 2021 with a record level of 27,398 active mutual and private funds on the Cayman Islands Monetary Authority’s register.
The 12,719 active mutual funds as of 31 Dec. 2021, represented a 6.9% increase from the 11,896 mutual funds registered at the end of 2020.
Private funds, which outnumber mutual funds, expanded even more quickly last year from 12,695 in December 2020 to 14,679 at the end of the fourth quarter 2021 – an increase of 15.6%.
Most of the expansion occurred in the first three quarters of the year. In the final quarter of 2021, when fund terminations are typically highest, the growth of total numbers slowed to just 0.34% for mutual funds and 2.6% for mutual funds.
The number of limited investor funds, a form of mutual fund with 15 or fewer investors, declined in the final quarter from 683 to 672. Like private funds, limited investor funds, were brought under CIMA’s remit through new funds legislation in 2020.
Hedge funds return 10.3% in 2021
The growth of mutual fund registrations was buoyed by the performance of hedge fund managers who in aggregate returned 10.3% last year, down from 11.8% in 2020, according to the HFRI Fund Weighted Composite index.
It was the third-highest return since 2009.
The year was dominated by uncertainty and high volatility as managers navigated rising interest rates and inflation, as well as the impacts of the second year of the global coronavirus pandemic, HFR said.
Equity hedge, event-driven and commodities strategies led the industry as hedge funds concluded 2021 with a strong performance in December.
Cryptocurrencies were the biggest winner last year. HFR’s Cryptocurrency Index jumped 215%, even better than the 193% returns delivered in 2020, HFR said.
HFR’s Macro Index rose 7.52%, its best performance since 2010, in large part led by a 23.57% surge in the Commodity Index.
The size of the industry is now exceeding $4 trillion in capital.
“Since and inclusive of the historic equity market collapse from the outbreak of the global pandemic, equity-focused hedge fund strategies have significantly outperformed US equities (as represented by the [Dow Jones Industrial Average]) by over 200 basis points and have done so with one-third less volatility,” said Kenneth J. Heinz, president of HFR.
However, last year, the average hedge fund trailed the equity markets.
The S&P 500 gained 26.9% for the year. The Dow Jones Industrial Average gained 18.7% in 2021, while the Nasdaq Composite gained 21.4%.
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