CIMA reveals crisis effects on funds
The findings of an investigation into the effects of the global financial crisis on Cayman’s funds industry have been released by the Cayman Islands Monetary Authority (CIMA).
This report is based on statistics from more than 7 000 funds that were regulated in the Cayman Islands from 2008, which is when the crisis started.
Among the funds used for the statistics, most of the key indicators show notably weaker performance in 2008 than was reported in 2007. There was an 18% fall in subscriptions, a 42% increase in redemptions, an almost 3-fold dip in net income, and a 25% decrease in net assets.
According to the data revealed by the CIMA, some shifts could be attributed to the crisis. CIMA stated: “The proportion of funds with assets totalling USD 50 million or less rose to 52% in 2008, up from 43% in 2007. Although the largest proportion of assets continued to be allocated to master funds, the dollar value of assets allocated to that structure decreased by 24%. The instruments that saw the largest falls in asset allocation were: short bonds, which fell by 75%; long equities, which fell by 56%, and long bonds, which fell by 53%.” CIMA noted that “following on from trends seen in both 2007 and 2006, 2 investment strategies, Multi-Strategy (39%) and Long/Short Equity (22%), remained dominant in attracting the majority of assets, garnering USD 1 034 billion of the aggregate net assets.”
The funds industry was severely affected by the crisis, however, just 7% of funds suspended trading in 2008, which is up just marginally on that recorded in 2007 (5%), which the authority explained by the fund industry’s resilience in the jurisdiction.
Cindy Scotland, CIMA’s Managing Director, said that the authority goes on to publish statistical information on the funds industry with a view to improve transparency and extend global awareness of the structure and performance of the industry.
She said: “These are very valuable facts and figures. With the Cayman Islands estimated to have a major portion of the world’s hedge funds domiciled here, the information in the report provides a good gauge of what was happening in the global funds industry at the peak of the financial crisis.”
The performance of 7 325 funds, which is about 82% of regulated funds in Cayman, were aggregated in the report.