Video: Private Funds in the Cayman Islands

The Cayman Islands has been the leading offshore jurisdiction for the establishment of mutual funds and private funds for several decades.

This competitive position has been maintained by the use of innovative legislation and the absence of taxation and exchange controls. This, together with the presence of sophisticated and world class professional and responsive service providers has resulted in the jurisdiction’s reputation for responsible supervision and regulation of funds.

Watch our video on Private Funds and their regulatory requirements in the Cayman Islands here:

Private Funds

The Private Funds Act applies to all closed-ended funds (funds in which the investors do not have the right to redeem their interests at their option). The PFA mandates that private funds which register with CIMA, submit any material changes to the offering from time to time, have annual audited accounts, comply with certain governance and operating standards for management, accountability, valuation, safekeeping of assets, cash monitoring, and securities identification and maintain AML, data protection and operational procedures.

Types of Registered Private Funds

Closed-ended private funds which fall under the definition of “private fund” pursuant to the PFA are required to register with CIMA. The PFA also provides for ‘alternative investment vehicles’ and ‘restricted scope private funds’.

A restricted scope private fund is a private fund that is an exempted limited partnership that is managed or advised by a person who is licensed or registered by CIMA or authorised or registered by a recognised overseas regulatory authority and in which all of the investors are non-retail in nature, being either high net worth persons or sophisticated persons.

Requirements for Regulated Private Funds

The Private Funds Act mandates that registered private funds comply with the following:

• CIMA Registration: Funds must provide detailed information about their structure, operators, and investment strategy, along with paying an annual fee;
• Audited Financials: Audited accounts must be prepared by a Cayman-based auditor and filed within six months of the fund’s fiscal year-end;
• Operating Standards: These include requirements for valuation, safekeeping of assets, cash monitoring, and securities identification;
• Governance: At least two natural persons must serve as fund operators, ensuring accountability and robust management; and
• Compliance Policies: Written policies addressing AML, data protection, and operational procedures are mandatory.

These requirements emphasise the Cayman Islands’ commitment to high standards for private fund transparency and investor protection.

Relevant Services:

For more information see our other Videos and Podcasts in the series.