CIMA - Investments Statistical Digest

Posted 10/06/2008 • Under Press Releases

As many of you will recall the Cayman Islands Mutual Funds Law was amended in late 2006 and one of the key amendments was the introduction of a requirement for each hedge fund registered with the Cayman Islands Monetary Authority (“CIMA”) to submit an annual report. The annual reporting requirement was introduced with effect from 2007 which meant that all hedge funds that were required to submit to CIMA audited accounts for the financial year ending December 31, 2006 were also required to submit an annual report for the same period. CIMA has used the information gathered from the annual returns to generate what they have called the Investments Statistical Digest (the “Digest”) a copy of which appears on the CIMA website here.

The Digest makes very interesting reading and the excellent presentation is both informative and concise. Given this, it is not our intention to summarize the contents of the Digest, but rather point out certain noteworthy aspects.

One of the most important things to note is that the Digest is based on the annual returns of 81% of the hedge funds that were due to submit annual returns. In other words 19% of registered hedge funds did not submit annual average returns and therefore one must bear in mind that the statistics generated are not absolute but merely indicative. It is thought that a significant percentage of the hedge funds that did not submit an annual return, failed to do so as they are in the process of winding down their operations. Accordingly any annual return submitted by such hedge funds would not have had a significant effect on the statistics produced.

Of primary interest is the size, growth and performance of the industry. The combined net asset value of the hedge funds that filed annual returns was US$1,38 trillion and the gross asset value was US$2,316 trillion, showing a leverage ratio of 67% and an annual return on investment of 10%. Previous estimates of the size of the industry have varied significantly and while it is undoubtedly useful to now have a more reliable figure it must be remembered that not all hedge funds are required to be registered with CIMA and accordingly the actual figure is likely to be significantly higher. From the perspective of measuring the rate of growth of the hedge fund industry in Cayman, the net subscriptions figure for 2006 was a very healthy US$277 billion.

On the asset allocation side an interesting statistic was that 11% of the assets were invested into other hedge funds, showing the development of the fund of funds industry. This is a figure that we would expect to continue to grow. Not surprisingly the two top investment strategies were Multi-Strategy and Long/Short Equity, with Fixed Income being a somewhat distant third.

Should you like any further information relating to the Digest, CIMA or the Mutual Funds Law, please do not hesitate to contact us.