Cayman funds battling on despite troubles

(CNS): According to an online article more than one hundred and twenty regulated funds in the Cayman Islands had, at the end of January, suspended redemptions. Of the 123 that had, 90 suspended net-asset-value calculations and two suspended subscriptions. Cindy Scotland Managing Director of CIMA is reported as saying that a few Cayman banks have also suffered as a result of the Madoff scandal with "some indirect exposure," and 34 funds being "directly impacted by the fraud." However, it also reports that the fund business in Cayman is still doing well all things considered.

The CIMA boss told the online financial blog TheStreet.com that information regarding the Madoff scandal is still coming and “the numbers are growing." However, the article paints a fairly robust picture of Cayman’s hedge fund industry given the international economic turmoil. It reports on the push for a legislative crackdown to bolster investor confidence in the post-Madoff era and suggests that because of the local tax advantages Cayman will still remain a hedge fund haven.

Speaking at a recent Ernst & Young hedge fund symposium Scotland said that CIMA is proposing tighter standards for liquidity, risk management, transparency, capital adequacy, directorships and failures. "Anyone who thinks for one minute that increased regulation is not going to happen hasn’t been paying attention," Scotland said. "Not only will it happen, but I am confident that if we are to stay in this game we will have to adopt all of the regulations."

According to Walkers despite the Madoff situation Cayman is a centre of choice for hedge funds for several investor-friendly reasons. Not least because there are no direct corporate, capital gains, income, profit or withholding taxes. Hedge Fund Research also reports that even amid the financial chaos, the Cayman Islands led all other domiciles for new fund registrations during the fourth quarter of 2008, at 40%, up from 34% a year earlier and 24% five years earlier, according to Hedge Fund Research.

Ted Bravakis from the Portfolio of Finance and Economics is reported as saying that that 30% to 40% of the territory’s GDP is derived from the Hedge fund business.

The article also reports that while the overall number of new fund registrations last year – hedge and  mutual — dropped 18% , there were still 457 more funds in the Caymans at the end of 2008 than the previous year.