VISITING BRAZIL, CHILE and Colombia earlier this year I was struck by the way in which Latin American institutional investors are shifting their allocations away from simply the traditional domestic market to incorporate wider asset classes, such as private equity and with global exposure, including Europe.
These factors, coupled with a desire to access European capital, are driving Latin American fund managers to establish European-based platforms subject to European regulation, such as the Undertakings for the Collective Investment in Transferable Securities (UCITS) and the Alternative Investment Fund Managers Directive (AIFMD).
However, these platforms require additional layers of compliance and as such, drive up costs which may be passed on to investors. Some may be established in this way due to a perceived requirement for an AIFMD compliant platform.
Whether this is the case or not, Latin American managers and investors should be aware that Guernsey is a long-standing fund domicile and service centre, with particular expertise in private equity, which is able to offer a well regulated environment and distribution to both EU and non-EU countries.
THE GUERNSEY SOLUTION
Guernsey is in Europe geographically but it is not in the EU and, therefore, is not required to implement EU directives, such as UCITS or AIFMD. Guernsey has introduced a dual regulatory regime whereby it is possible to continue to distribute Guernsey funds into both EU and non-EU countries. The approach means managers and funds with no connection to Europe can use Guernsey's regulatory rules which are completely free from the requirements and costs associated with AIFMD.
For managers wishing to market into Europe, Guernsey provides a European platform but one which is not actually in the EU. Indeed, the National Private Placement (NPP) route is being favoured by many as it means little or no change to how things were done before AIFMD. For those managers with elements of EU and non-EU business, parallel structures can be utilised. It will be possible to place non-EU business in a parallel or feeder structure for which AIFMD compliance would neither be required nor necessary.
Guernsey's dual regulatory regime provides optionality that allows clients to be serviced in the manner most appropriate to their specific circumstances. Guernsey's funds industry now manages and administers more than 1,000 funds valued at nearly half a trillion US dollars, with the net asset value of private equity funds increasing 6.2% over the year. Guernsey domiciled investment funds are distributed to all corners of the globe. Global asset managers such as Apax, Ashmore, Coller Capital, HarbourVest, Investec, Pantheon and Schroders have their funds domiciled and serviced in Guernsey. In addition, Brazilian fund manager Providence Investment Management established an office in Guernsey earlier this year.
Guernsey also has administrators ranging from major international names, such as Northern Trust, State Street and Citco, to specialist independent private equity administrators. Major global custodians are based in Guernsey and they are now being supplemented by specialist depositary-lite operations. In addition to Guernsey funds, our providers service $150 billion worth of open-ended funds which are domiciled in other jurisdictions, typically the Cayman Islands or Delaware, where there may be local substance challenges.
Guernsey offers a solution based in a European time zone with access to the EU market but without the administrative and cost burden of AIFMD and from a jurisdiction which has significant substance, high standards and a global reach.
An original version of this article was published in Funds Global Latin America, October 2014.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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.