International investors turn to Cayman for fast, tax‑neutral access to US private markets — spanning private equity, private credit, and hedge funds — in a structure they know and trust. North America accounts for the majority of global private capital assets under management (AUM), and when hedge funds are included, its share of total alternatives climbs even higher. Cayman’s scale and legal certainty, along with the speed of setup it offers, make it the preferred cross‑border gateway for hedge and private-market funds.
Why international investors target US alternatives
North America dominates global alternative investments, with private capital AUM reaching $8.34 trillion as of June 2024 – nearly 60% of the global total.1 Include hedge funds, and North America’s share of alternative investments rises to approximately 63%2. These dynamics reflect the concentration of the world’s largest managers and resilient investor demand across strategies.
There are several key reasons global investors allocate, including stronger returns with built‑in diversification across sectors and strategies; tailored opportunities through bespoke private credit deals and hands‑on value creation in private equity; and flexibility and resilience via hedge funds – liquidity plus downside protection.
Cayman: The preferred cross‑border gateway
Cayman offers tax neutrality, legal certainty rooted in English common law, pragmatic regulation by the Cayman Islands Monetary Authority (CIMA), and a deep bench of service providers. Formations are fast, structuring is flexible, and investor familiarity reduces friction during fundraising.
Highlights include a tax‑neutral platform that eliminates double taxation for international investments; a well‑tested legal regime and creditor‑friendly courts (with ultimate recourse to the UK Privy Council); and a wide range of vehicles which closely mirror onshore vehicles (such as Delaware LPs and LLCs) and have many characteristics that are familiar to US investors and their advisors.
Cayman and hedge funds: Scale, structures and investor access
Cayman is the leading offshore jurisdiction for hedge funds. At the end of 2024, 12,858 open‑ended funds (predominantly hedge funds) and 17,292 closed‑ended funds were registered with CIMA. US SEC private‑fund statistics indicate that Cayman‑domiciled funds account for roughly one‑third of all private‑fund net assets and more than half of all qualifying hedge‑fund net assets reported.
Hedge fund managers typically use Cayman for the offshore feeder (and often the master fund) in a master‑feeder structure, allowing US taxable investors and non‑US/US tax‑exempt investors to invest efficiently in the same strategy while consolidating trading at the master level.
Typical hedge fund architecture involves:
- An offshore master fund (often a Cayman exempted company) that executes all portfolio trades.
- A Cayman feeder for non‑U.S. investors and U.S. tax‑exempt entities.
- An onshore feeder (typically a Delaware LP/LLC) for U.S. taxable investors.
- Optional check‑the‑box election for pass‑through tax treatment.
Regulatory framework
Hedge funds – including most master funds which meet the statutory definition – are typically regulated as “mutual funds” under the Mutual Funds Act (Revised) and must register with, or be licensed by, CIMA. They must comply with various operating requirements, including those related to valuations, audits and asset segregation.
Private equity and private credit funds are typically regulated as “private funds” under the Private Funds Act (Revised) and must also register with CIMA. They must also comply with various operating requirements for valuations, asset custody, audits, cash monitoring and securities identification.
Offering materials for mutual funds and private funds must comply with CIMA’s requirements with respect to their contents.
CIMA’s rules and guidance on corporate governance and internal controls apply to regulated mutual and private funds. They are implemented proportionately based on a fund’s size and complexity, requiring specific operator composition and documented oversight of service providers, risk management, valuations and conflicts of interest.
All Cayman funds fall within the jurisdiction’s AML regime, which requires a risk-based framework, record-keeping, sanctions screening, reporting of suspicious activities and the appointment of AML officers.
Most Cayman funds are Reporting Cayman Financial Institutions for FATCA/CRS purposes and must register with the IRS and Cayman’s Tax Information Authority and identify and report on reportable accounts.
A Cayman fund will usually be able to comply with the jurisdiction’s beneficial ownership regime by appointing a contact person to act as the liaison between the fund and the relevant ministry. The contact person must be a licensed fund administrator based in Cayman or another person based in Cayman who is registered with, or licensed by, CIMA (such as a corporate services or registered office provider).
Delaware vs. Cayman: Choosing the right path
Delaware wins for US‑focused investors. Cayman shines for global reach, offering tax neutrality and an internationally trusted platform — particularly for master‑feeder hedge funds and cross‑border private funds.
1 Prequin, Alternatives in North America 2025
2 HFR Global Hedge Fund Industry Report (2024 – 2025)
Nathaniel Luker is a partner at Ocorian Law (Cayman) Limited.
