PR Newswire – The Cayman Islands Monetary Authority announced on 5 September that the jurisdiction now has more than 8,000 registered hedge funds, an increase of more than 2,000 funds compared to thebeginning of 2005. More than 1,000 new hedge funds were authorized in the first half of 2006 alone, which is a record for any six-month reporting period in the Cayman Islands. This surge in hedgefunds is the result of a range of factors including non-traditional applications of hedge funds and increased interest in emerging markets, according to a new analysis by Walkers, the global offshorelaw firm of choice for companies, financial organizations, and international law firms.
“Despite an increased focus on regulations by governing bodies such as the Securities and Exchange Commission (SEC) in the U.S. and the Financial Services Authority (FSA) in the UK, the hedge fund market continues to thrive,” Mark Lewis, a Senior Investment Funds Partner for Walkers, said. “Hedge fund managers are finding new ways to apply their skills and strategies. The lines are beginning to blur between hedge funds and private equity funds, with more similar structures and applications being used by both types of managers. In addition, the recent US Pension Protection Act 2006, will reduce the number of investment funds that need to operate in compliance with ERISA regulations and will open up additional investment opportunities for employee benefit plans that were previously precluded from investing in hedge funds.”
According to Hedge Fund Research, Inc. (HFR), the hedge fund industry attracted USD$42.1 billion in new money in the second quarter of 2006 alone, bringing total industry assets under management to USD $1.225 trillion. This influx is the biggest quarterly jump in new funds since HFR started tracking in 2003.
As hedge funds become more common in emerging markets, there is every reason to expect that the global pie will continue to grow. According to a July report by the International Monetary Fund, foreign holdings of Zambian government securities primarily by hedge funds rose from a “negligible amount” to K540bn (USD$150m) during 2005, mostly in the last quarter. By May this year, that figure had risen to K840bn (USD$233m).
