[ISL] "The Tiny Cayman Island Holding $265 Billion in Treasuries"

[rfmcdonald]

News stories like Andrea Wong and Alexandra Scaggs' Bloomberg article leave me wondering about how long island jurisdictions can continue to be major financial players on this scale. If transparency is the watchword of the future, what future do these have?

A Caribbean financial center favored by hedge funds is now the third-biggest foreign owner of U.S. government debt.

The Cayman Islands, where more hedge funds are domiciled than anywhere else in the world, held $265 billion of Treasuries as of March, up 31 percent from a year earlier, according to data the U.S. Treasury Department released Monday. It was the first time that the U.S. released details of bond holdings among OPEC and Caribbean countries, and it came in response to a Freedom-of-Information Act request submitted by Bloomberg News.

The stockpile makes the British territory, an offshore tax haven with about 60,000 residents, the largest holder after China and Japan. Those nations, the world’s second- and third-biggest economies, each own more than $1 trillion of Treasuries.

The surge in ownership of U.S. debt for the Caribbean getaway shows that hedge funds are joining more traditional mutual fund managers in buying Treasuries amid lackluster returns in other assets, with many global stock indexes posting losses in 2016. Negative bond yields in Europe and Japan are also pushing asset managers into the $13.4 trillion Treasuries market, which is on pace to gain for a third consecutive year.

“Most hedge funds are using Treasuries as a way to park assets without taking a lot of risk,” said Donald Steinbrugge, managing partner of hedge-fund consulting firm Agecroft Partners in Richmond, Virginia.