CAYMAN ISLANDS Trends and Developments Contributed by: Dan Beckett, Iain Anderson, Joni Ebanks, Christina Gordon and Alex Howard, Maples Group
While the fundraising environment continued to be challenging throughout 2024, private equity capital - ised on the recovery of the financial markets following the prolonged period of market volatility, high inter - est rates and inflationary pressures, with a significant rebound in deal activity and notable increases in deal value and the number of large private equity deals. Such confidence in the financial markets continued into the first quarter of 2025, with a strong start to the year’s activity levels and private equity firms eager to deploy the near-record levels of dry powder that had accumulated. Ultimately, however, a challeng - ing geopolitical environment and global trade policy pressures during the first half of 2025 have led to a dip in deal activity levels, with fundraising looking set to remain challenging for the second half of the year. However, in a show of resilience and adaptability, pri - vate equity firms are increasingly leveraging advance - ments in artificial intelligence (AI) and digital infrastruc - ture in a drive for growth and efficiency, while also considering alternative liquidity structures (such as evergreen funds, continuation funds and secondar - ies) to manage the current deal environment and meet current investor demands. During this period of uncertainty, sponsors have con - tinued to look to the Cayman Islands when structur - ing and offering private equity products that provide strategies tailored to the current market environment, including technology, infrastructure, credit opportuni - ties, market dislocation, special situations opportuni - ties, secondaries and evergreen funds and products with regional or focused investment mandates. The Cayman Islands continues to be well-positioned to respond to the volatile and challenging global environment, and to retain its pre-eminent offshore position, due to its legislative and regulatory frame - work, tax-neutral status, flexible structuring options, respected legal system developed from English com - mon law and experienced and responsive service providers coupled with broad market familiarity with
has been the introduction and implementation of the Private Funds Act, which provided for the registration of closed-end collective investment vehicles with the Cayman Islands Monetary Authority (CIMA). More than 17,600 investment funds are now registered under the Private Funds Act. Cayman Islands regulation is gen - erally fund-level focused, and there is no requirement for a non-Cayman Islands manager of a private fund domiciled in the Cayman Islands to be regulated in the Cayman Islands. Most managers of private funds are not domiciled in the Cayman Islands and are regulated by various onshore regulators, such as the US Secu - rities and Exchange Commission, the UK’s Financial Conduct Authority, the Hong Kong Securities and Futures Commission, the Monetary Authority of Sin - gapore or the Japanese Financial Services Agency. A Cayman Islands-registered manager would be subject to oversight by CIMA and required to have sufficient substance in the Cayman Islands with reference to its business activities. Within this regulatory framework, sponsors, alloca - tors and investors are able to legislate their own con - tractual arrangements, which is particularly helpful as strategic investors seek alternatives to traditional co- mingled fund structures and vehicle types. Alternative Structures and the Cayman Islands The Cayman Islands’ offering is well-positioned for alternative structures, ranging from separate accounts and funds-of-one through to “permanent capital” or evergreen structures and other strategic transaction structures, such as end-of-life liquidity options, con - tinuation vehicles and general partner minority equity stake deals. While the Cayman Islands is most commonly associ - ated with the establishment of private equity funds, whether main, feeder/blocker, parallel, alternative investment or co-investment vehicles, there continues to be a strong demand for Cayman Islands structures in transactional contexts, particularly buy-out and secondary transactions, including as management holding vehicles. The nature, scope and volume of work being under - taken in the Cayman Islands gives rise to a number of trends and developments that reflect the advance -
Cayman Islands structures. Regulatory Developments
The most notable investment fund-related regulatory development in the Cayman Islands in recent years
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