Unlocking U.S. Alternatives: Why Cayman Is the Gateway for International Investors – Hedge Funds, Private Equity, and Private Credit
International investors turn to Cayman for fast, tax‑neutral access to U.S. 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 that it offers, make it the preferred cross‑border gateway for hedge and private market funds.
Why International Investors Target U.S. Alternatives
North America dominates global alternative investments, with private capital AUM hitting $8.34 trillion as of June 2024 — nearly 60% of the worldwide 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.
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 minimizes leakage for international investments.
A well‑tested legal regime and creditor‑friendly courts (with ultimate recourse to the UK Privy Council).
A wide range of vehicles which closely mirror onshore vehicles (such as Delaware LPs and LLCs) and have many characteristics which are familiar to U.S. 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. U.S. 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 U.S. taxable investors and non‑U.S./U.S. 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 requirements in relation to valuations, audits and segregation of assets.
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, including requirements in relation to valuations, custody of assets, audits, cash monitoring and the identification of securities.
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 the purposes of FATCA/CRS and need to 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 U.S.‑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.
Navigating Cayman: Risks and Choosing the Right Partner
Misunderstanding Cayman’s regulatory and legal framework can lead to costly mistakes — from compliance breaches and tax reporting errors to delays in fund launches and reputational damage. Cayman’s rules on FATCA/CRS, AML, and economic substance require precision and experience.
The right partner ensures seamless structuring, robust compliance, and proactive governance. They help you navigate complex regulations, avoid operational inefficiencies, and maintain investor confidence.
When selecting a partner, look for proven expertise in Cayman fund formations, deep knowledge of regulatory requirements, and a track record of supporting hedge funds, private market funds. Ensure they offer independent governance, AML oversight, and integrated legal and compliance services to safeguard your fund and reputation.
Partner with Ocorian: Your Cayman Gateway
At Ocorian, we support hedge funds, private equity funds, and private credit vehicles with a fully integrated Cayman solution. Our capabilities include:
Independent directors and AML officers
Board support and governance oversight
FATCA/CRS, economic substance, and beneficial ownership compliance
Cayman legal and structuring expertise for formations, launches, closings, and ongoing regulatory matters.
In addition, we offer our CFO Solutions and Regulatory & Compliance services for both hedge funds and private market vehicles, delivering tailored financial oversight and robust compliance frameworks to meet evolving investor and regulatory expectations.
Find out how Ocorian can support your Cayman structuring and governance needs – contact us today.
1 Prequin, Alternatives in North America 2025
2 HFR Global Hedge Fund Industry Report (2024 – 2025)
Related Items
View all
