It will be a busy summer for private investment funds that are domiciled in the Cayman Islands, as a number of new regulations are enacted due to Cayman Islands Private Funds Law 2020.
According to INDOS Financial, the new rules go into effect on August 7 and stipulate that closed-ended investment funds domiciled in the Cayman Islands register with the Cayman Islands Monetary Authority (CIMA) and comply with a number of new operating requirements.
“These new requirements are based on similar rules within the European AIFMD (Alternative Investment Fund Managers Directive) where they are required to be performed by a fund depositary,” said Bill Prew, CEO of INDOS Financial.
The new requirements include: implementation of appropriate and consistent valuation procedures; arranging custody of custodial assets; verification of ownership and title of all other assets; and the monitoring cash flows including the checking of cash accounts and receive of investor contributions.
The new law permits managers to carry out all these functions, but they should be carried out independently of the investment management process and conflicts of interest need to be properly identified, managed, monitored and disclosed to investors, according to Prew.
“We expect many managers will choose to outsource these obligations to third parties that have a track record in this area,” Prew said, adding that managers of Cayman funds marketed in Europe will be familiar with the new requirements.
INDOS already provides the services detailed in the 2020 law for more than 100 funds domiciled in the Caymans that are offered by European, U.S. and Asian managers.
Earlier this month, INDOS Financial announced that its assets under depositary in closed-ended private equity, real estate, infrastructure and debt funds now exceed $10 billion. This new total is spread across 30 clients and splits out to $5.4 billion in private equity, $3.2 billion in real estate and $1.4 billion in infrastructure/debt. Overall, the firm’s assets exceed $35 billion across 75 clients representing some 145 funds.