CIMA's Financial Stability Report 2024-2025: What the First Mutual Fund Stress Test and the 2025 Inspection Findings Mean for Cayman Funds

CIMA published its Financial Stability Report 2024-2025 on 14 October 2026. Two parts of it matter directly to Cayman fund boards and investment managers. The first is the Authority's first liquidity stress test of regulated mutual funds: across approximately 14,087 mutual funds and sub-funds, more than 90% could absorb hypothetical redemption shocks of 5% to 20% of opening assets once liquid assets were counted, while cash alone was often not enough. The second is CIMA's account of its 2025 inspections, in which operational risk produced about 60% of all observations, and outsourcing accounted for about 46% of those operational findings. The report creates no new rule. It does show where supervisory attention is going: liquidity data, service-provider oversight and the evidence that boards actually oversee what they delegate.

The stress test result is reassuring, but the more useful signal is in the inspection data. When almost half of operational findings concern outsourcing, CIMA is telling the industry that delegating a function is not the same as overseeing it. For a fund, that oversight sits with the board, and it has to be visible in the board's own records, not only in the service provider's.

David Lloyd, Chief Executive Officer at CV5 Capital

Key Takeaways

• CIMA's first mutual fund stress test used 2024 Fund Annual Return data. More than 90% of funds withstood 5%, 10% and 20% redemption shocks when liquid assets were included; cash balances alone were insufficient for many funds under severe assumptions.
• Private funds were excluded because the current reporting framework does not capture sufficiently granular liquidity information, and because private funds are primarily closed-ended. CIMA says it will continue to assess stronger liquidity reporting, particularly for private funds.
• Operational risk made up about 60% of 2025 inspection observations across regulated entities. Within that, about 46% concerned outsourcing and about 13% information technology and cybersecurity.
• For Registered Persons under the Securities Investment Business Act, CIMA restates inspection deficiencies in customer due diligence, ongoing monitoring, governance, training, record keeping, oversight of outsourced compliance and independent AML/CFT audits.
• The report is a supervisory assessment, not a regulatory measure. It is, however, consistent with CIMA's 2026 AML Rule, its January 2026 outsourcing review and the proposed SIB amendments.

What the Report Is, and What It Is Not

The Financial Stability Report is CIMA's macroprudential assessment of the Cayman Islands financial system. This edition covers data to the end of 2025, with investment fund data drawn from the 2024 reporting period, the latest available. It rates four areas of financial stability risk: household credit exposure as low, and interconnectedness, climate-related risk and cyber and operational resilience risk as medium.

Nothing in the report imposes an obligation on a fund or a manager, and none of its findings relate to an identified entity. Its value to boards is evidential. It shows the data CIMA now analyses, the conclusions it draws from inspections, and the areas it says it will monitor. Those are reasonable inputs to a board's annual review of liquidity, service providers and compliance arrangements.

The First Mutual Fund Liquidity Stress Test

CIMA describes the exercise as its first-ever stress test of regulated mutual funds and an addition to its risk-based supervision framework. It used information reported in the 2024 Fund Annual Returns to test whether funds held sufficient cash, liquid assets, or the two combined, to meet redemptions under several scenarios: historical redemption activity, net redemption pressure, net asset movements, and hypothetical shocks equal to 5%, 10% and 20% of opening assets.

Two points of context help when reading these figures. First, 14,087 is CIMA's count of regulated mutual funds and sub-funds drawn from 2024 returns, so it is not directly comparable with the 12,876 mutual funds the report records at 31 December 2025. Second, the report also notes that the sector's average liquidity index was approximately 0.69 in 2024, and that about 4.1% of mutual funds (526 funds) implemented redemption gates while about 4.5% (585 funds) temporarily suspended their equity interests. Liquidity management tools were used, not merely written into documents.

CIMA links the exercise to the international emphasis, including by IOSCO, on liquidity risk management and stress testing for open-ended funds. Managers who want the methodology behind a fund-level test, as opposed to CIMA's sector view, will find it in our guide to hedge fund liquidity stress testing frameworks.

Why Private Funds Were Left Out

The report gives two reasons. The current private fund reporting framework does not yet capture liquidity information granular enough for meaningful stress testing, and private funds are primarily closed-ended, so redemption risk is not the main channel. The exercise is described as an initial assessment intended to develop CIMA's liquidity monitoring framework, and CIMA states that it will continue to assess opportunities to strengthen liquidity-related reporting, particularly for private funds.

That is a statement of intent, not a proposal. No amended private fund return has been published. The report does, however, identify private credit as a vulnerability, present in approximately 60% of private funds, and says enhanced data collection is being explored. Managers of open-ended private credit or hybrid vehicles should expect their liquidity reporting to attract more attention over time, and our analysis of the liquidity mismatch problem in hedge funds sets out the structural questions such a vehicle should already be answering.

2025 Inspection Findings: Operational Risk Dominates

CIMA reports that operational risk accounted for approximately 60% of all observations identified during its 2025 inspections across regulated entities. Within the operational risk findings, approximately 46% related to outsourcing arrangements and around 13% to information technology and cybersecurity. Expressed as a share of all observations, that is roughly 28% and 8% respectively, our calculation from CIMA's figures. The report does not give the number of inspections or a breakdown by sector, other than to say that cybersecurity findings arose in the investments, fiduciary, banking, insurance and securities sectors.

The report places these findings alongside CIMA's 2023 cybersecurity Rule and guidance, its 2023 thematic cybersecurity review and its Thematic Review on Outsourcing, conducted across sixteen entities in 2025 and issued in January 2026. The theme of that review is stated plainly: outsourcing does not diminish regulatory responsibility, and governing bodies remain accountable for outsourced material functions.

Precision matters on scope. CIMA's cybersecurity Rule and its outsourcing guidance expressly except regulated mutual funds and private funds; they apply to regulated service providers, including licensed fund administrators and SIBA-regulated managers. We set out what applies to whom in our article on CIMA cybersecurity and outsourcing requirements for funds and managers. The fund is still exposed. Its administrator, manager and other providers are the entities being inspected, the board remains responsible for overseeing the functions it delegates, and the 2026 AML Rule applies outsourcing requirements for compliance functions directly to funds.

Administrator Concentration

The report makes a point about fund administrators that boards should note. Mutual fund administrators perform NAV calculation, investor recordkeeping and transaction processing, and CIMA observes that the number of licensed administrators has declined through consolidation. That may bring efficiencies, but it increases reliance on a smaller group, so a disruption at a significant administrator could affect many funds at once, particularly when valuation or dealing is delayed during market stress.

For a board, the practical response is not to change administrator. It is to know the administrator's continuity arrangements, the fallback for a missed NAV, and how investors would be informed. Our checklist for administrator due diligence before launch covers the questions to put at appointment and at each annual review.

Registered Persons: The AML/CFT Deficiencies CIMA Restates

In its securities investment business section, the report summarises findings from CIMA's onsite inspections of Registered Persons. The deficiencies listed are in AML/CFT policies and procedures, customer due diligence and ongoing monitoring, governance arrangements, employee training and record keeping, together with weaknesses in applying risk-based approaches, oversight of outsourced compliance functions and the implementation of independent AML/CFT audits. In several cases CIMA linked these to inadequate documentation of risk assessments and limited evidence of effective ongoing monitoring.

The report cites CIMA's May 2025 circular on onsite inspections of Registered Persons, which covered inspections from 1 January 2022 to 31 March 2024. These are therefore restated findings, not new 2025 results, and that circular itself recorded improvement since 2022. Their inclusion in a financial stability report is still significant: CIMA now treats AML/CFT weaknesses at Registered Persons as a channel through which risk can reach the funds sector.

Two developments reinforce that direction. CIMA introduced a Prudential Information Survey for Registered Persons, first completed for the 2025 calendar year between 1 January and 31 March 2026, alongside the existing Annual Declaration. And in May 2026 the Ministry of Financial Services and Commerce consulted on the draft Securities Investment Business (Amendment) Bill, 2026, following an earlier consultation in September 2025. The report describes the proposals for Registered Persons as covering capital adequacy, liquidity management, business conduct, internal controls and the safeguarding of client assets. These are proposals, not enacted law. Managers considering a Cayman management entity should read our guide to SIBA registration for fund managers with that direction in mind.

What Boards and Managers Should Do Now

Our article on the fund board's role in hedge fund risk oversight covers how these items fit into a board calendar, and our explainer on gates, side pockets and suspensions covers the tools a board can use when redemptions exceed liquid resources.

The CV5 Capital Perspective

On CV5 SPC and CV5 Digital SPC, each fund is a segregated portfolio of a Cayman segregated portfolio company registered with CIMA. The board of the platform company governs each portfolio and appoints its service providers; the investment manager is a third party appointed to run the strategy. That allocation is the reason the report's findings read as an operating checklist for a platform rather than a commentary. Oversight of the administrator, custodians, brokers and exchanges, compliance functions and technology providers has to be demonstrable at board level, portfolio by portfolio.

For managers, the benefit is that the oversight framework is established before launch rather than built under supervisory pressure afterwards. The manager remains responsible for the strategy and for its own regulatory status; the platform provides the governance, service-provider architecture and operational due diligence readiness that CIMA's findings point towards. Managers comparing routes can review the CV5 hedge fund platform, the CV5 digital asset fund platform and our complete guide to Cayman segregated portfolio companies. Managers who need a Cayman management entity of their own can start with the Offshore Fund Manager Questionnaire.

Frequently Asked Questions

When did CIMA publish the Financial Stability Report 2024-2025?

CIMA announced the report on 14 October 2026. It assesses the Cayman Islands financial system using data to the end of 2025, with investment fund data from the 2024 reporting period.

What did CIMA's first mutual fund stress test find?

Across approximately 14,087 regulated mutual funds and sub-funds, more than 90% could withstand hypothetical redemption shocks of 5% to 20% of opening assets when liquid assets were considered, and more than 92% remained resilient under the most severe scenario using cash and liquid assets combined. Cash balances alone were often insufficient under severe assumptions.

Why were private funds excluded from the stress test?

CIMA states that the current private fund reporting framework does not yet capture sufficiently granular liquidity information, and that private funds are primarily closed-ended. It intends to continue assessing stronger liquidity reporting, particularly for private funds.

Does the report create new obligations for Cayman funds?

No. It is a supervisory and macroprudential assessment, not a rule, statement of guidance or policy. Its findings indicate CIMA's supervisory focus, which is consistent with measures already in force, including the 2026 AML Rule.

What share of CIMA's 2025 inspection findings related to outsourcing?

Operational risk accounted for about 60% of all observations, and about 46% of the operational risk findings related to outsourcing arrangements, roughly 28% of all observations on our calculation. About 13% of operational findings concerned IT and cybersecurity.