Australian investment funds series: Cayman Islands as a funds jurisdiction

In the first article in our Australian investment funds series, we explore why Australian fund managers are increasingly using Cayman Islands vehicles, highlighting the jurisdiction’s legal certainty, tax neutrality, structuring flexibility and suitability for accessing international capital.

Introduction

The Cayman Islands is one of the world’s leading jurisdictions for the establishment of investment funds. As at the end of Q2 2026, there were 13,013 open-ended investment funds registered with the Cayman Islands Monetary Authority under the Mutual Funds Act (as amended). There were also 18,132 private equity and other closed-ended funds registered in the Cayman Islands under the Private Funds Act (as amended).¹

In recent years, Australian fund managers have increasingly turned to the Cayman Islands as a preferred jurisdiction for establishing investment vehicles. This trend is driven by a combination of regulatory, structural, and investor-related factors that make the Cayman Islands an attractive option for global fund distribution.

Key advantages of using Cayman Islands vehicles

Robust legal and regulatory framework

The laws of the Cayman Islands are based on English common law, supplemented by local legislation, providing investors and managers with familiarity, certainty and enforceability. The Cayman Islands provide a flexible investment fund regime within a clear and effective regulatory environment which is overseen by the Cayman Islands Monetary Authority.

Professional infrastructure

The Cayman Islands have a mature financial services industry with quality and experienced legal, administrative and accounting service providers. There is no requirement to have Cayman-based directors or officers, managers, administrators or custodians.

Tax neutrality

The Cayman Islands have no direct taxation of any kind. There are no income, corporation, capital gains or withholding taxes at the fund level, which makes them attractive for international investment and efficient for cross-border capital transactions. Investors are generally only subject to taxes in their home jurisdictions, while Australian managers remain subject to relevant Australian tax and financial services laws and regulations.

Flexible structuring options

The Cayman Islands offer a diverse range of fund structures which are widely recognised and accepted by international investors. Fund managers are able to tailor vehicles to meet specific investor needs, regulatory requirements and tax considerations, and incorporate bespoke fee arrangements.

Anti-money laundering

The Cayman Islands have a strong anti-money laundering regime and have long committed to implementing best international practices in line with the requirements of the Organisation of Economic Co-operation and Development and the Financial Action Task Force. A comprehensive legislative framework has been enacted in relation to anti-money laundering, countering the financing of terrorism and countering proliferation financing.

Speed and cost of entity formation

Cayman Islands entities can be formed on the day of filing and there is no lengthy regulation or filing procedures. The cost of forming and maintaining Cayman Islands entities is competitive.

Why are Australian fund managers using Cayman Islands vehicles? 

Accessing international capital

Many global institutional investors prefer investing through Cayman Islands vehicles. For Australian managers looking to attract international investors, establishing a Cayman Islands fund can make participation simpler and more familiar.

Regulatory clarity and flexibility

While Australia’s domestic structures, such as unit trusts or managed investment schemes, are well-regulated, they can be less flexible and more administratively burdensome when dealing with international investors. Cayman Islands entities allow for customisable governance, profit distribution and investor rights.

Efficient fund-of-funds and co-investment models

The Cayman Islands investment funds regime supports complex multi-tiered arrangements, such as fund-of-funds or co-investment vehicles, which are increasingly popular among Australian managers with international strategies.

Growth of Australian superannuation funds

The funds under management of Australian superannuation funds have grown substantially since legislation was introduced in 1992 and Australian superannuation funds now manage over A$4.7 trillion in assets². As the Australian market has limited available domestic investment opportunities many super funds are looking to non-Australian markets for assets to complement and diversify their portfolios. International private market assets such as real estate, private equity and infrastructure offer higher returns and improved portfolio diversification which has led to an increase in international investment through offshore structures by the super funds.

Ease of parallel structures

Managers often establish a Cayman Islands vehicle for international investors and an Australian vehicle for domestic wholesale investors, allowing them to pool capital while addressing differing regulatory and tax considerations.

Conclusion 

The growing use of Cayman Islands fund vehicles in Australia reflects the country’s integration into global capital markets. The Cayman Islands flexible legal regime, tax neutrality and international credibility make it a natural choice for Australian managers seeking to attract international investors and compete on a global level.

Given the scale of the Cayman Islands fund industry and the commercial incentives for Australian managers to access international capital and standard investor terms, we believe that the trend towards the use of Cayman Islands fund vehicles is likely to continue.

Up next in our Australia investment funds series

In the next article in our Australia investment funds series, we will explore the key features of Cayman Islands mutual funds and private funds, including their respective regulatory regimes, registration requirements and practical considerations for Australian fund managers.

Contacts

Our Asia team, based across Australia, Singapore and Hong Kong, delivers responsive Cayman Islands and British Virgin Islands legal advice, providing real-time support to clients across Australia and the Asia-Pacific region.