CAYMAN ISLANDS Law and Practice Contributed by: Simon Thomas, Richard Spencer, Alexandra Clynes and Sayak Bhattacharya, Campbells
2.3 Fund Regulation A venture capital fund that is established in the Cayman Islands will usually be regulated as a Cayman Islands private fund in accordance with the Private Funds Act (as revised). A private fund is any company, unit trust or partnership (wherever established) that offers or issues or has issued investment interests, the purpose or effect of which is the pooling of investor funds with the aim of enabling investors to receive profits or gains from such entity’s acquisition, holding, management or disposal of invest - ments, where: • the holders of investment interests do not have day-to-day control over the acquisi - tion, holding, management or disposal of the investments; and • the investments are managed as a whole by or on behalf of the operator of the private fund, directly or indirectly, but this does not include certain licensed or registered persons or any non-fund arrangements. The general partner of the fund will typically be a Cayman Islands-exempted company. If the fund is managed by a fund manager, the fund man - ager may be registered in the Cayman Islands under the Securities Investment Business Act (as revised) or (as is usually the case) can be established elsewhere. No Cayman Islands laws or regulations will apply to a fund manager based in a jurisdiction other than the Cayman Islands. The SIBA regulates “securities investment busi- ness” , which includes managing securities, dealing in securities, arranging deals in secu - rities and advising on deals in securities. The SIBA defines the term “securities” widely and includes a list of instruments that are common in today’s financial markets (shares in the capital of a company, interests in a limited partnership,
units of participation in a unit trust, debt instru - ments, warrants, certificates, options, futures and contracts for differences). The SIBA designates certain persons as “Regis- tered Persons” to whom the full licensing provi - sions of the SIBA do not apply. Entities that are eligible to become Registered Persons include, in summary, persons providing securities invest - ment business on an intra-group basis, persons providing securities investment business to defined “high net worth” and “sophisticated” clients and persons regulated by a recognised overseas regulator in an overseas jurisdiction in which such securities investment business is being conducted. 2.4 Particularities The Cayman Islands’ venture capital landscape has evolved significantly over the past year, driv - en by regulatory innovation, market trends, and investor demand. Below are critical observations across impact funds, fund-of-funds activity, con - tinuation funds, and broader sector dynamics. Fund-of-Funds Activity • Growth in Multi-Strategy Funds: Fund-of- funds structures focusing on digital assets, private debt, and equities have proliferated, with Cayman-registered funds increasingly pooling capital for diversified exposure. This aligns with global asset allocation trends favouring alternative investments Continuation Funds • GP-Led Secondary Market Growth: Con - tinuation funds are increasingly deployed to extend holding periods for illiquid assets (eg, infrastructure, real estate). These structures allow existing investors to roll over interests or exit, while new capital is raised for follow- on investments.
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