CAYMAN ISLANDS Trends and Developments Contributed by: Dan Beckett, Iain Anderson, Joni Ebanks, Christina Gordon and Alex Howard, Maples Group
Fundraising Following the soft North American fundraising market of 2024 resulting from the difficult economic and polit - ical environment, the continued challenging geopoliti - cal environment and global trade pressures in the first half of 2025 have resulted in a slowdown in deal and exit activity, which in turn has led to increased caution by investors and a continued softening of the fundrais - ing environment. These conditions have increasingly led to investors looking to cautiously allocate to the largest and most experienced funds, while managers look beyond the traditional closed-ended vehicles to raise capital in alternative liquidity structures such as evergreen funds, continuation and secondaries funds and GP-led stake deals. In light of this, there contin - ues to be consistent demand for the establishment of Cayman Islands structures, with a range of vehicles including continuation funds, evergreen funds, small bespoke sidecar funds, mega-funds and downstream structuring vehicles. The broad flexibility of the Cay - man Islands’ offering ensures there is wide appeal among managers, as well as allocators and investors, in establishing Cayman Islands vehicles intended to fulfil a wide range of purposes. The European private equity market has been impact - ed in recent years by global market uncertainty, infla - tion, the conflict in Ukraine and, latterly, the Israel- Gaza war. Fundraising in Europe held up relatively well amongst the larger buyout firms, and there have been some significant deals in Europe this year, taking advantage of the perceived valuation gap between US and European equities. The Cayman Islands continues to be a popular juris - diction for UK managers looking to establish offshore private equity funds, especially where there is a trans - atlantic nexus. There is also significant demand for separately managed account structures, particularly among Nordic investors. Increased fund oversight and investor protection through the implementation of the Private Funds Act and the strengthening of CIMA’s regulatory powers have, together with certain other recent legal and regulatory developments, in particu - lar with regard to corporate governance and internal controls rules, served to more closely align Cayman Islands private funds with the regulated framework that European private equity fund managers and
considerations, such as those pertaining to the costs that will be allocated to the fund as fund expenses as opposed to the costs incurred by the manager. These are dynamic and ongoing obligations, the nature of which is reflected in fund documents and Cayman Islands notification and reporting obligations There is also an emphasis on fair disclosure. During a fund’s life cycle, as in key onshore jurisdictions, spon - sors engage in ongoing dialogue with investors and advisory boards to ensure that key matters, notably conflicts, are fairly disclosed, including in the context of fees (which has been an area subject to well-publi - cised onshore regulatory enforcement actions). The scope for conflicts can be particularly acute at the end of a fund’s life, for example where liquidity is sought, or value optimised, by way of a continuation fund, a general partner-led secondary transaction or a term extension. In those instances, a sponsor may receive new material information in the midst of an all-partner consent process, or prior to a deal being consummated, which the sponsor (and/or general partner) must disclose so that investors are able to make an informed decision with reference to those revised particulars. of the nature described above. Fair disclosure and compliance Given that the regulatory framework is evolving quick - ly and becoming more complex and multilayered, an increasing number of sponsors look to outsource compliance functions, such as AML/KYC verification and tax transparency reporting obligations, to third- party specialists. This allows management companies to dedicate more resources to their core investment- focused activities, and to more clearly delineate between fund and house expenses. Geographic Factors Impacting Cayman Islands Private Equity Trends The Cayman Islands product has broad global appeal, although several trends are dictated by geographic factors.
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