6 HFMWEEK . COM
GUERN S E Y 2 0 1 4
Latest fi gures from Guernsey’s fi nancial services
regulator, the Guernsey Financial Services
Commission (GFSC), show that it approved
30 new investment funds during the fourth
quarter of last year, amid a total of 103 additions
However, while asset values have proved sluggish, largely
due to external factors at play during 2013, the GFSC
has been kept busy with new fund applications. Th e 103
new funds launched are investing across a wide range of
asset classes and markets and include two notable listed
renewable energy funds, Bluefi eld Solar Income Fund and
Th e Renewables Infrastructure Group, with city sources
quoting the latt er as the largest IPO of a clean energy fi rm
in London, with an initial raising of £300m in July 2013.
Th ere were also a number of notable infrastructure
funds, for example, John Laing Infrastructure Fund which
raised £242m as well as debt funds, for example NB Global
Floating Rate Income which raised £363m. Indeed one of
the fi nal deals of the year saw the launch of the JP Morgan
Senior Secured Loan Fund. Earlier in the year, in June, JP
Morgan had launched a similar Guernsey off ering called
the JP Morgan Global Convertibles Income Fund which
raised £136m (and has a market capitalisation of £173m at
the time of writing).
Notably in relation to non-Guernsey funds, we see this
as a growth area for the future. Many of the funds are Cayman
incorporated but are opting to have some element of
management or administration (or both) undertaken in
Guernsey. Th is is a testament to the quality infrastructure
available and is increasingly sett ing us apart from other
competitor territories. In fact, the NAV of non-Guernsey
domiciled funds having some element of servicing provided
in Guernsey is in excess of £88bn.
More recent new funds launched from Guernsey include
commercial property investment company Summit
Germany and Nimrod Sea Assets Limited, both of which
have listed on the London Stock Exchange (LSE) in early
Guernsey’s closed-ended funds sector increased in value
by £5.1bn (3.9%) year on year to reach £136.1bn at the
end of December. Th e experience and expertise Guernsey
has in investment funds, particularly in private equity, is
proving att ractive to family offi ces and other private investors
who are seeking not just asset protection but investment
returns for their private wealth. Th ese investors and
their advisers are turning to Guernsey investment structures
to achieve returns and enhance wealth.
We are also seeing greater allocations by fund managers
into insurance-linked securities (ILS). Guernsey has seen
growth in ILS transactions due to the fact that the island
has a strong heritage in providing both investment and
insurance services; fund managers and promoters with
capital to deploy are brought together with transformation
managers who understand insurance risk. For example,
2013 saw the launch of DCG Iris Fund as a feeder fund
into the Low Volatility Plus Fund managed by Credit Suisse
Asset Management’s ILS team. Dexion Capital Guernsey
raised over £60m for the fund which has been listed on
the Main Market of the LSE.
Figures from the LSE show that there are 115 Guernsey-
incorporated entities listed on its markets, which is
more than any other jurisdiction except the UK itself. 17
Guernsey-incorporated entities joined the LSE markets
during 2013, which again is more than any other jurisdiction
globally aside from the UK. Th e fact that Guernsey
entities can be listed on not just the LSE but also a num-
At the time of writing, Guernsey has signed 27 co-operation
agreements with the securities regulators from the following EU/
EEA countries: Austria; Belgium; Bulgaria; Cyprus; Czech Republic;
Denmark; Estonia; France; Finland; Germany; Greece; Hungary;
Iceland; Ireland; Latvia; Liechtenstein; Lithuania; Luxembourg;
Malta; Norway; Poland; Portugal; Romania; Slovak Republic;
Sweden; The Netherlands; and United Kingdom.
THE NAV OF NON-GUERNSEY DOMICILED FUNDS
HAVING SOME ELEMENT OF SERVICING PROVIDED IN
GUERNSEY IS IN EXCESS OF £88BN ”
FIONA LE POIDEVIN OF GUERNSEY FINANCE EXPLAINS WHY GUERNSEY IS A GREAT PLACE FOR FUNDS
IN LIGHT OF THE IMPLEMENTATION OF THE AIFMD
GUERNSEY PROVES AN
ATTRACTIVE OPTION UNDER
Fiona Le Poidevin
is CEO of Guernsey Finance,
where her role includes
and promoting Guernsey’s
finance industry in
European, US and emerging
markets. Previously a senior
tax manager with a Big Four
accountancy firm, she has
over 15 years’ experience
working in financial
services in both the UK and
F I N A N C I A L S E R V I C E S
HFMWEEK . COM 7
ber of exchanges around the world, including Euronext
Amsterdam, Frankfurt, Ireland, Toronto, Johannesburg,
Hong Kong and Australia, as well as the local Channel Islands
Securities Exchange (CISE), means that the island
is viewed as an ideal location for establishing vehicles to
access global capital markets.
Taken together, these developments provide a major
vote of confidence in Guernsey’s approach to the Alternative
Investment Fund Managers Directive (AIFMD).
DUAL REGULATORY REGIME
Guernsey is not in the EU or wider EEA (although it is in
the European time zone) and therefore, is not required to
implement the AIFMD. Although Europe remains one of
our biggest markets, we also have a substantial and increasing
amount of funds business which originates outside of
As such, Guernsey has introduced a dual regulatory regime
so that it is possible to continue to distribute Guernsey
funds into both EU and non-EU countries: the existing
regime remains for those not requiring an AIFMD fund,
including those using national private placement (NPP)
regimes and those marketing to non-EU investors; and
there is an opt-in regime which is fully AIFMD-compliant.
The first thing to note is that this means managers and
funds with no connection to the EU continue to be able to
use the existing regulatory regime which is completely free
from the requirements associated with the AIFMD and as
such, will have significant operational and cost benefits. In
order to obtain authorisation under the AIFMD, a manager
will need to comply with various organisational, operational
and transparency obligations, which may create
significant additional compliance costs, some of which will
likely be passed to investors in the fund.
Second, Guernsey’s position as a third country means
our managers and funds who want to access Europe continue
to be able to use NPP regimes, which are expected
to remain in place until at least 2018. Guernsey’s regulator
has signed bilateral co-operation agreements with 27
regulators from the EU and the EEA, including the UK,
Germany and France (see box). Having these agreements
in place means that Guernsey funds continue to be able to
market to appropriately qualified investors in these European
countries through their NPP regimes.
Third, it is expected that a full passporting regime for
non-EU AIFMs will be implemented from July 2015.
Guernsey intends to ensure that our AIFMs will be ideally
placed to take advantage of being able to market AIFs on
a pan-European basis with a single authorisation, as passporting
is currently envisaged to operate. Indeed, Guernsey
introduced an opt-in AIFMD equivalent regime with
effect from 2 January this year ahead of when, as a third
country, it was required to do so.
The attraction of Guernsey for fund managers wishing to
market into Europe is that it can provide a European platform
but one which is not actually in the EU and therefore
can offer optionality.
For those marketing into Europe, the NPP route will
likely be favoured by many. Indeed, it is expected that fullblown
AIFMD compliance will only be sought if there are
particular commercial reasons to do so.
For example, it makes commercial sense for a fund manager
marketing almost exclusively to Europe to have a fully
AIFMD compliant platform. However, this does not have
TOTAL NAV OF GUERNSEY FUNDS BUSINESS
Growth 5yr: +33%
Total NAV of Guernsey funds business reached £266bn at end
of December 2013.
Total NAV of Guernsey funds
business increased 33% year on
year to the end of December 2013.
VALUE OF PRIVATE EQUITY FUNDS IN GUERNSEY
PE Growth 5yr: +123%
Value of private equity funds in Guernsey reached £86bn at the end of December 2013 – up 123%
over the past five years.
F I N A N C I A L S E R V I C E S
8 HFMWEEK . COM
GUERN S E Y 2 0 1 4
to be based in a mainland European domicile and indeed,
it could be a Guernsey platform given that there is a fully
equivalent, opt-in AIFMD route to market in place.
Managers should review whether the pan-European
marketing model is relevant to their investor base. Many
managers have increasingly geographically diverse
investors and, therefore, it is essential to have a platform
which suits all. European directives – such as the
AIFMD but also the Undertakings for Collective Investment
in Transferable Securities (Ucits) Directive – cater
for European investors; as such, if you don’t need Ucits/
AIFMD or only need limited access to them for certain
investors, then it is advisable (and possible) to structure
in a way that will greatly reduce the obligations and costs
that come with those regimes.
For those managers with elements of EU and non-EU
business, it will be possible to break the non-EU business
away into a parallel or feeder structure for which
AIFMD compliance would neither be required nor necessary.
The potentially onerous administration burden
and costly compliance with the AIFMD will mean that
parallel structures are likely to be given serious consideration.
Conversely, if a manager has a platform in a mainland
European domicile then it will have to comply fully with
the AIFMD even if there were a large proportion of non-
EU investors. European mainland platforms do not offer
the ability to separate the reporting obligations away
from non-EU investors, as with a Guernsey platform.
One important factor is that AIFMs should ensure that
they do not fall foul of the letter box entity provisions,
i.e. sufficient substance is needed to demonstrate that
the management entity is established outside the EU, if
that’s what it is aiming to achieve for AIFMD purposes.
Therefore, investment houses must ensure they have
enough substance in the domicile of their fund if they
opt for it to be self-managed, for example.
Guernsey has an advantage over a number of other
third countries as there is already significant substance
to our fund structures. For example, large hedge fund
managers such as BlueCrest and Unigestion and private
equity houses such as Apax, BC Partners, Mid Europa,
and Permira have Guernsey-domiciled funds as well as
offices and staff based here.
There are also administrators ranging from major
international names such as Northern Trust and State
Street to specialist independent administrators as well
as a significant pool of experienced non-executive directors.
There are also a number of global custodians based
in Guernsey and they are soon to be supplemented by
those specialist administrators who are applying to establish
Guernsey-based depositaries. These are being
particularly established to service private equity and real
estate funds which have not previously had the requirement
for a depositary but who can take advantage of a
depositary-lite regime for non-financial assets.
Quality of service is evidenced by the fact that Guernsey
providers now service open-ended funds that are
domiciled in other jurisdictions, typically the Cayman
Islands, where there may be local substance challenges.
Until recently, awareness among fund managers of the requirements
imposed by the AIFMD was extremely mixed,
with some on top of the situation and others more uncertain.
Ironically, this ‘wait and see’ attitude has been perpetuated
by the fact that several jurisdictions, such as the UK,
have had a transitory year for implementation.
However, this is now coming to an end and so managers
need to know what they are doing by the end of July. That
said, manager attitudes have been driven by where they
stand in the fundraising process and so those with funds
that have already closed or are below the minimum threshold
to be caught by the AIFMD have been less engaged
than those who are currently fundraising.
It is important for managers to realise that an EU
AIFMD compliant platform is not the only answer and
that in particular, Guernsey offers a dual regulatory regime
for the continued distribution of funds into both EU and
non-EU countries. Guernsey offers optionality which allows
clients to be serviced in the manner most appropriate
to their specific circumstances.
These remain early days but the initial indications are
positive, with Guernsey’s funds industry busy domiciling,
re-domiciling and servicing more new funds in 2014.
REGISTERED FUNDS IN GUERNSEY
Registered Funds Growth 1yr: +18%
There are 824 Guernsey-domiciled funds; 192 have been established using Guernsey’s ‘fast track’
registered regime – this is up 18% year on year.
QUALITY OF SERVICE IS EVIDENCED BY THE FACT
THAT GUERNSEY PROVIDERS NOW SERVICE OPEN-ENDED
FUNDS THAT ARE DOMICILED IN OTHER JURISDICTIONS ”