Key Takeaways
- • Cayman Islands closed-ended funds are now subject to a registration regime under the new Private Funds Law, requiring registration information to be filed with the Cayman Islands Monetary Authority (CIMA) for the first time.
- • Closed-ended fund formation continued through 2020 despite the pandemic, with managers negotiating side letters and launching funds largely in a virtual setting, per Walkers' 2020 Fundamentals White Paper.
- • SPAC formation hit a record number in 2020, with Oaktree, Apollo and Cerberus among established managers bringing SPACs to market.
- • Established managers raising successor funds grew fund sizes, with particular growth in the $500 million to $3 billion range, while hard caps remain unusual.
- • Investors continue to expect manager commitments of typically around 2%, ranging from 1% to 5%, with smaller funds the main exception.
Summary
Walkers' 2020 Fundamentals White Paper, Private Equity Part 1, reviews trends across private equity and hedge funds the firm helped clients launch over the prior twelve months. The paper notes that 2020 tested managers across all aspects of their businesses, with the pandemic forcing much of the work into remote settings, though closed-ended fund formation activity continued at pace. Managers and their advisers negotiated side letters, launched funds and carried out downstream activity during the year.
The most significant regulatory development cited is the enactment of the Cayman Islands Private Funds Law. Under the regime, existing and newly launched Cayman closed-ended funds must provide registration information to CIMA. The law also imposes ongoing obligations covering audit, safekeeping of assets, valuations and cash monitoring. Walkers states these largely codify existing best practices among managers domiciling funds in the Cayman Islands, and that the framework reinforces Cayman's position as the offshore financial centre of choice for global fund managers, in line with its wider adoption of global standards on anti-money laundering and economic substance.
SPAC activity was a notable feature of 2020. Special purpose acquisition companies, which go public without commercial operations with the intention of acquiring a target within a set period, usually 24 months, were launched in record numbers. Established managers including Oaktree, Apollo and Cerberus brought SPACs to market, which the paper says provides a further fundraising tool and signals investor confidence in managers' deal sourcing. SPACs are typically formed as Cayman Islands exempted companies or Delaware corporations, and the paper says Cayman's fiduciary duty framework, treatment of corporate opportunity and merger regime have kept it a preferred jurisdiction.
On fund structures and terms, Cayman Islands exempted limited partnerships remain the dominant vehicle for closed-ended funds. Exempted companies remain the most common general partner vehicle, while Asian start-up managers use Cayman exempted companies almost exclusively. Established managers raising successor funds traded on track records to raise larger vehicles, particularly in the $500 million to $3 billion range. Hard caps remain uncommon. Manager commitments remain expected from investors outside the smallest funds, typically around 2% and ranging from 1% to 5%. Twelve months remains the most common fundraising period, though credit funds often move faster.
On strategy and geography, credit remains very active, technology and venture funds have stabilised, and real estate and infrastructure funds have recovered, driven by logistics and warehousing demand linked to online retail growth. The pandemic prompted a wave of broad-mandate dislocation funds. North America and Asia remain the main target regions for geographically focused funds, while Europe-focused Cayman funds have been quiet.
The most significant regulatory development cited is the enactment of the Cayman Islands Private Funds Law. Under the regime, existing and newly launched Cayman closed-ended funds must provide registration information to CIMA. The law also imposes ongoing obligations covering audit, safekeeping of assets, valuations and cash monitoring. Walkers states these largely codify existing best practices among managers domiciling funds in the Cayman Islands, and that the framework reinforces Cayman's position as the offshore financial centre of choice for global fund managers, in line with its wider adoption of global standards on anti-money laundering and economic substance.
SPAC activity was a notable feature of 2020. Special purpose acquisition companies, which go public without commercial operations with the intention of acquiring a target within a set period, usually 24 months, were launched in record numbers. Established managers including Oaktree, Apollo and Cerberus brought SPACs to market, which the paper says provides a further fundraising tool and signals investor confidence in managers' deal sourcing. SPACs are typically formed as Cayman Islands exempted companies or Delaware corporations, and the paper says Cayman's fiduciary duty framework, treatment of corporate opportunity and merger regime have kept it a preferred jurisdiction.
On fund structures and terms, Cayman Islands exempted limited partnerships remain the dominant vehicle for closed-ended funds. Exempted companies remain the most common general partner vehicle, while Asian start-up managers use Cayman exempted companies almost exclusively. Established managers raising successor funds traded on track records to raise larger vehicles, particularly in the $500 million to $3 billion range. Hard caps remain uncommon. Manager commitments remain expected from investors outside the smallest funds, typically around 2% and ranging from 1% to 5%. Twelve months remains the most common fundraising period, though credit funds often move faster.
On strategy and geography, credit remains very active, technology and venture funds have stabilised, and real estate and infrastructure funds have recovered, driven by logistics and warehousing demand linked to online retail growth. The pandemic prompted a wave of broad-mandate dislocation funds. North America and Asia remain the main target regions for geographically focused funds, while Europe-focused Cayman funds have been quiet.
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