Consultant Paul Bannier of Icorserv discusses why Guernsey is a good choice for establishing an alternative investment fund.
It is that time of year when many in the alternatives investment industry in Europe head off on vacation for a couple of weeks rest and relaxation. Whether chilling out by a pool or enjoying some fresh mountain air, this is often an opportunity to grab some time for strategic thinking – which in many cases involves planning the next career step.
For some, that next step may be a move within an existing organisation or to a competitor. For others, thoughts may turn towards setting up in business on one's own. If you fall into the latter group, establishing your own fund management operation or investment fund may be your goal.
Whilst the tropical climes of the Caribbean hold a certain attraction as a domicile for new ventures such as these, there are credible alternatives far more convenient for those living in or near the mainstream European financial centres – and which also provide beautiful sunsets without the need for long-haul travel!
One such location is the Channel Island of Guernsey. The Island has long been regarded as an attractive domicile for alternative investment vehicles. Open ended funds, including hedge funds and other "liquid alternatives" were the foundation upon which the fund servicing industry originally developed, and still make up a substantial proportion of the assets under management and administration. In recent years, the private equity, venture capital and real estate sectors have flourished – recent figures released by the Guernsey Financial Services Commission show that the value of funds under management and administration on the Island grew for the seventh consecutive quarter and now stand at GBP 266 billion, as of the end of March.
So what are the reasons why Guernsey should be high on the shortlist for those looking to set up an alternative investment fund? In brief, these are:
- A globally –recognised domicile with a wide range of versatile structures on offer.
- A jurisdiction well regarded by investors who appreciate good client service combined with appropriate levels of investor protection.
- The wealth of expertise that service providers can bring to bear. Those present on the Island range from large global firms such as JP Morgan, Northern Trust and Citco, who can provide a true "one stop shop", to small independent firms. These administrators and custodians are supplemented by leading law firms and the "big four" audit firms.
- A pragmatic, responsive regulator which has established several regulatory regimes including what may be regarded as a "light touch" regime in which new funds can be launched quickly where certain criteria are met. Other authorisation routes bring the potential benefit of international recognition from a marketing or distribution perspective.
- An environment where innovation flourishes and where new concepts can be brought to market within a short space of time. Over twenty years ago Guernsey led the way with the use of protected cell companies ("PCCs") for mutual funds. Those trends continue today with Northern Trust recently announcing its operation on the Island as the base for the first commercial deployment of blockchain technology for the private equity market.
- A stable jurisdiction where true substance exists on the Island. For many this aspect is becoming increasingly important in the wake of the OECD's Base Erosion and Profit Shifting ("BEPS") project.
- Plentiful support for start – up operations. This ranges from the practical support provided by Locate Guernsey, which has already assisted a significant number of businesses and individuals relocate to the Island, to that offered by consultancy firms such as Independent Corporate Services which are independent of any administration or law firm operating on the Island.
Whilst a favourable track record is normally required for those establishing or intending to manage investment funds on the Island, there is flexibility on how this track record can be demonstrated. The GFSC has stated its openness to meet with prospective fund promoters and in particular its willingness to discuss innovative proposals.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
An original version of this article was first published on www.icorserv.com, 2 August 2017.