Originally published in The Fund Business, Guernsey Supplement, February 2008
Andrew Howat, managing director, Capita Financial Group in Guernsey, answers some of the critical questions surrounding the funds industry and specialist investment on the Island.
How Do You Account For The Success Guernsey Has Seen In Attracting Specialist Investment Funds?
The main attraction has been the regulatory environment the GFSC (Guernsey Financial Services Commission) has established us a reputation for robust but pragmatic regulation. Their willingness to talk to and work with the industry has enabled us to be more creative with our offerings.
The Island has had a fund industry for four decades, with significant growth over the last five years. As a result there is a lot of administrative capability on Guernsey, covering the funds sector from private equity to hedge funds, fund of funds and property. There are some well-known participants here who have built up their portfolio and talent pool over time and can support the industry.
Another key factor is the flexible investment vehicles that are available, from unit trusts to limited partnerships, PCCs (Protected Cell Companies), ICCs (Incorporated Cell Companies), and closed-ended companies.
Which Vehicles Are Particularly Suited To The Island, And Why?
In recent years we've seen growth in tax-transparent general partnership and limited partnership structures, especially in the private equity world.
Other areas of growth include qualified investor funds aimed at professional investors. ICCs and PCCs are also important these have been created out of Guernsey with the idea of making the Island more competitive, particularly in terms of turnaround times.
Many Asset Managers Are Considering Diversifying Into Property, Hedge Funds And Fund Of Funds What Are The Practical Challenges Involved?
The big growth areas have been in property and fund of funds. Property managers seeking to invest outside of the UK have had to come to terms with multi-jurisdictional structures perhaps put through places like Luxembourg and Cyprus. Those are becoming more prevelant as the asset base spreads across the continent and farther afield. A big challenge, particularly in property and institutional private equity, has been getting the correct service providers with adequte expertise and accounting platforms. For hedge funds, the focus has been hiring the right administration partner to provide efficient solutions for calculating underlying fees, making equalisation calcuations, et cetera.
What Are Closed-Ended Funds As Defined In Guernsey And Why Are They Popular?
One of the most recent changes that the GFSC has adopted has been the introduction of the registered fund regime for closed-ended companies. This has resulted in the ability to use a structure that's not directly regulated by the Commission the onus is passed on to the administrator for the necessary checks. Commercially the impact has been faster turnaround times for fund raisers to get their schemes together, enabling them to do so within reasonably tight timescales. We had a surge last year, for example, in AIM listings and the turnaround times for closed-ended schemes helped immensely in allowing us to meet their time frames.
The Market For Offshore Domiciling Of Funds Is Very Competitive What Should Asset Managers Look For In A Jurisdiction?
Having a pragmatic, innovative regulator and service providers is a key factor the GFSC's open dialogue has been instrumental in providing a good regulatory environment. That gives our fund industry a competitive edge over other jurisdictions. Having an educated and flexible workforce is also essential, as are well-established and qualified service providers.
How Well Positioned Is Capita Financial Group, And The Guernsey Fund Industry In General, To Manage Asset Growth Going Forward?
Capita Financial Group are very well positioned we have invested in the latest suite of applications from SunGard, capable of catering for most types of offshore structure. We also have a robust outsourcing operating model, with accounting valuations and transfer agency processing handled in our centres of excellence outside the Island. Our solid operating model uses economies of scale and will allow us to grow substantially over the next few years, ensure quality of service, and not be dependent on the restrictions of limited employment within a small jurisdiction.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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