Guernsey: bringing together Middle Eastern money and managers

14 www.menafm.com
GLOBAL DOMICILE
Guernsey Finance
GUERNSEY: BRINGING
TOGETHER MIDDLE EASTERN
MONEY AND MANAGERS
Fiona Le Poidevin of Guernsey Finance explains why Guernsey is an
attractive place for Mena family offi ces to allocate their investments
Writing in the October 2013 issue of
Mena FM, I noted that a delegation
from Guernsey was attending
the SuperReturn Middle East
conference in Abu Dhabi. Later
last year a separate team also attended the
Opal Middle Eastern Family Offi ce Symposium
in Dubai.
We found that both conferences were
attended by a signifi cant number of family
offi ces (FOs) of wealthy Middle Eastern patriarchs
looking for suitable investment opportunities
and also fund managers who are
seeking to raise capital from this potentially
lucrative market.
From our conversations, there seemed
to be strong recognition from both groups
that Guernsey is able to bring together investors
and managers in a reputable jurisdiction
which is on the doorstep of - but not
part of - mainland Europe and therefore free
from many of the onerous demands of its
regulations.
Those with the money
Wealth management encompasses not just
preserving but also increasing wealth and
therefore many patriarchs and families often
wish to invest their money in high yielding investment
funds. As such, attendees at both
conferences included a large number of FOs
seeking the right investment proposition.
FIONA LE POIDEVIN
chief executive,
Guernsey Finance
A number of FOs (both Muslim and
non-Muslim) have been instructed by
their clients to allocate money to investment
funds based in domiciles which are
ethical, reliable and uphold high regulatory
and tax transparency standards as well as
having strict investor protection rules; all
of which, broadly speaking, bodes well
within the context of Shariah principles.
Middle Eastern FOs or other direct investors
also increasingly demand quality and
timely service provision.
Therefore, many FOs that we met were
interested in Guernsey as a place to allocate
investments due to the strong reputation
and credentials of our funds sector
(see box). In particular, service providers
in Guernsey lead the way in applying corporate
governance and adopt procedures
to ensure accurate records are maintained.
This is seen as a key differentiator for
Guernsey compared to some competitor
fund domiciles.
Those seeking the money
The other group in attendance at the conferences
was the fund managers keen
to raise capital from the alluring wealthy
Middle Eastern market. They are recognising
that fund domicile increasingly matters
when it comes to going out on the road to
fundraise. They were interested in Guernsey
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as the domicile for their next fund due
to the benefits for them and the attraction
to their investor base, such as the
FOs.
A number of US managers who
have traditionally used Caribbean
domiciles cited that they are under
increasing pressure to have a fund
located in a highly reputable jurisdiction
that employs good governance
which also links with legal robustness
and transparency.
There was also noteworthy feedback
from managers with funds in European
domiciles that – except for the very
large corporate players – the costs of
operating these platforms is getting
to a critical point. The main cost pressures
are coming from two places: the
cost of service providers with high administration
and custodian costs really
impacting the returns which the funds
can give back to investors; and the
costs of complying with the Undertaking
for Collective Investment in Transferable
Securities (Ucits) Directive and
other European regulation.
It is becoming apparent that the
costs of complying with Ucits can
sometimes outweigh the potential
benefits which the pan-European
passport (and Ucits brand) can offer.
Managers need to carefully consider
the relevance of Ucits for their own investor
base, i.e. retail versus institutional,
and European versus non-European.
Questions should be asked about
whether it is beneficial to have a sole
Ucits platform where corresponding
costs apply to the entire platform and
there is no ability to separate costs so
that they only apply, for example, to
the European retail investor base. Parallel
and feeder structures should be
utilised where appropriate and more
managers are giving serious consideration
to complementing their Ucits
platform with a Guernsey operation.
This model is already being used by a
number of European managers.
The Alternative Investment Fund
Managers Directive (AIFMD) is another
set of European fund regulations but
which applies to all non-Ucits funds,
i.e. alternative investment funds. Managers
should again carefully look to
whether the pan-European passport
offered is relevant to their investor
base. Many managers have increasingly
geographically diverse investors
and therefore it is essential to have a
platform which caters for all. European
directives 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 compliance
obligations and costs that come with
those regimes.
Therefore, the attraction of Guernsey
for the fund managers is that it can
provide a European platform which is
not actually in the EU and therefore
can offer flexibility and proportionality.
For example, it makes commercial
sense for a fund manager marketing
almost exclusively to Europe to have
a fully AIFMD compliant platform and
this could be a Guernsey platform, as
the island has introduced a fully equivalent,
opt-in AIFMD route to market
from 2 January 2014.
On the other hand, if a manager has
a Luxembourg platform, it would 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 you potentially
can with a Guernsey platform.
Bringing together those with the
money and those seeking it
The World Shariah Funds PCC Limited
(WSF) was established in Guernsey
in 2010 as a regulated fund to operate
according to Islamic Shariah principles,
and is also suitable for investment
by Ucits funds.
WSF is a protected cell company
(PCC) with a number of cells, akin
to holding/investment companies in
their own right, each of which has a
number of share classes. The PCC
structure allows the flexibility for different
investment objectives within
the one overall investment platform,
thereby appealing to a broader range
of investors, while also providing administrative
benefits, e.g. consolidated
reporting.
This illustrates the way in which
Guernsey can bring together investors
and managers in a reputable fund
domicile that offers both access to
European markets but also provides
an escape from the onerous requirements
of European regulations. 
the attraction of
Guernsey is that it
provides a European
platform which is not
actually in the EU”
• Fund AUM US$438bn; growth of 33% in the last five years
• Global managers and investors, including Mena region
• AIFMD ready – solutions for EU and non-EU business
• Access to capital markets – leader in non-UK London Stock Exchange listings
• 72 tax agreements, including Double Tax Arrangement (DTA) with Qatar
Guernsey – leading investment funds centre