Cayman Islands AIFMD-compliant reform due November

The British Overseas Territory has overhauled its alternative investment laws to bring them in line with those of Europe.

Reform to financial policy in the Cayman Islands, which should facilitate its application for an alternative investment fund managers directive passport, is expected to be completed by the end of November, a government spokesperson told pfm.

The territory has reviewed aspects of both its mutual funds and securities investment business laws in order to bring them in line with European rules surrounding investment in alternative assets. This will allow funds based in the Cayman Islands to be marketed to professional investors across the EU via the AIFMD passporting scheme.

The European regulator ESMA said in September that aspects of the territory’s current regime were “significantly different” from the AIFMD, especially regarding the depositary and the remuneration requirements, so it could not advise as to whether a passport should be extended.

But it added drafts of the reforms “seemed to show the new AIFMD-like regime would be broadly similar to the AIFMD framework.”

The final decision on whether to grant the territory a passport will be taken by the European legislature, which includes the commission, council and parliament. This must be done within three months of receiving advice on the matter from ESMA.

ESMA declined to comment on when it would review its advice on the Cayman Islands following its financial reform.

Europe represents a significant market for Cayman-domiciled funds. At of the end of December 2014 there were 1,384 regulated Cayman funds with a fund manager located in the EU (1,070 in the UK) and 170 regulated Cayman managers located in the EU, according to data from the country’s regulator, CIMA.

Approximately 14% of the 11,010 regulated Cayman funds (registered, administered and licensed) have managers located in the EU. The total NAV of these 1,384 funds reported for the 2014 financial year was $365 billion, approximately 10% of the overall NAV relating to all fund managers (no matter their location), the data show.