NEW YORK, June 20 (Reuters) - Some 665 hedge funds established a presence in the Cayman Islands in the first five months of 2006, a pace that could put the offshore banking center on track for another record year in registrations in 2006, Cayman officials said Tuesday.
As of the end of 2005, there were 7,106 hedge funds registered in the Cayman Islands, far outstripping other offshore tax havens, including the British Virgin Islands at 2,372 funds and Bermuda at 1,182, according to the Cayman Islands Monetary Authority (CIMA).
Hedge fund managers routinely set up offshore funds in the Caymans and elsewhere to attract international investors who want to avoid being taxed in both their home country and the country into which they invest.
Increasingly, U.S. pension funds and other institutions invest in U.S. hedge fund managers through their offshore shell structures to legally avoid U.S. taxes, experts say.
"While Cayman has always been a destination of interest, the enacting of hedge fund registration rules by the SEC in the U.S. has caused many funds to look offshore for attractive domiciles," said Gus Pope, co-head of the Cayman investment funds practice at Maples and Calder, the largest Cayman Islands law firm, in a statement.
Cayman officials attribute industry growth there to an extensive infrastructure of legal and financial service providers, along with stringent government oversight.
The figures for the first five months don't take into account the number of funds terminated by CIMA.
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