The Role of Cayman Islands Fund Administration Services

Over 11,000 regulated funds are registered in the Cayman Islands, with more than 70 fund administrators licenced to operate and provide services.

The Cayman Islands has a strong position globally in the administration of investment funds thanks to straightforward regulations, a legal system based on English common law, and the good fortune to be in a time zone advantageous to US markets. This, along with no requirement for local directors or managers, makes the territory an attractive and flexible place for hedge funds to be domiciled.

With more than 11,000 regulated funds, the Cayman Islands has a strong funds administration sector. There are over 70 registered fund administrators licensed to operate and provide services. Their expertise, coupled with the sheer number of funds and the economy and efficiency of the regulatory system ensures the Cayman Islands remains the world’s most popular domicile for hedge funds.

Cayman Islands investment funds managers rely heavily on administrators for their specialist knowledge of highly complex legal structures and financial products, as well as a number of critical services, including:

• Independent pricing and valuation

• Risk, transparency, financial and regulatory reporting

• Net Asset Value (NAV) calculations

• General accounting and administration

• Investor relations

International moves to strengthen laws on money laundering, terrorism funding, and data protection have led to a number of legislative changes in the Cayman Islands to ensure compliance with global standards, placing greater responsibility on Cayman Islands fund administrators to ensure that funds meet new obligations as they are introduced and avoid penalties.

An important trend in the Cayman Islands hedge funds administration is the provision of middle-office services such as service provision, data management, trade management, and compliance that are becoming increasingly complicated and expensive, requiring significant capital investment.

Coupled with this, the pressure from institutional investors places greater demands on investment managers to keep costs down, increase transparency, produce more timely data, and a higher degree of risk management.

Fund administration services play an increasingly important role as specialist providers with the necessary expertise to navigate today’s increasingly complex world of funds and their management and administration. Administrators have a critical role to play in providing specialist services that benefit investors, managers, and clients while striking the right balance between the operating and reporting functions.