Originally published in the Private Equity Wire, Guernsey Supplement, April 2008
Since 2000 Guernsey has been growing its reputation as a leading private equity domicile. There is strong competition between jurisdictions for this business but events of the past few weeks and months have really crystallised the fact that the Island now heads the pack.
What really set the ball rolling was the Guernsey listed fund transaction, KKR Private Equity Investors LP, from Kohlberg Kravis Roberts & Co, raising more than US$5bn before being launched on Euronext Amsterdam. It subsequently won 'Equity Deal of the Year' at last year's International Financial Law Review (IFLR) European Awards.
Following on from KKR there have been other notable Guernsey private equity funds, including the largest central European buyout fund – in excess of €1bn – Mid Europa III LP; Valdivia Private Equity Fund; Energy Ventures III; AA Development Capital India Fund – a joint venture between Ashmore and Alchemy; and EQT V Limited (Clifford Chance) which raised €4.25bn.
The latest statistics released by the Island's financial services regulator, the Guernsey Financial Services Commission (GFSC), show that overall fund business in Guernsey grew by £13.7bn (8.3%) in the final three months of 2007 despite continued market turbulence during the quarter. That took the total value of funds under management and administration to a new high of £178.2bn – an increase of £48bn (37%) year on year.
The value of private equity funds trebled between the end of 2002 and the end of 2006 and at the close of last year values had increased by £5.5bn (19%) during the fourth quarter and £13.6bn (66%) year on year to reach £34bn at the end of December 2007.
These impressive figures have also been backed up by the fact that at the start of this year leading private equity firm Terra Firma opened an office in the Island.
There has also been significant third-party endorsement by way of London lawyer Bridget Barker, Partner at Macfarlanes, who has asserted that Guernsey is "the jurisdiction of choice for private equity."
In addition, Jon Moulton, Founder and Managing Partner of Alchemy Partners and who now lives in Guernsey, has described the Island as "a terrific place in which to do business." Indeed, he will be the keynote speaker at the private equity masterclass 'Guernsey – leading the way in private equity' which is being held in central London at the start of May in conjunction with the Guernsey Investment Funds Association (GIFA).
I agree with senior GIFA figure Mike de Haaff when he says: "Even putting aside the tax neutrality of the Island, our success in private equity is down to the intellectual property that has built up, the experience and infrastructure now on the Island in not only setting up these products but also in their administration. Guernsey has a long-established expertise in this area.
"The majority of the business still comes through lawyers in London and it is a known fact that people come to Guernsey for private equity. Word of mouth is a big factor in the relatively small private equity community. It's recognition that we have everything in place and are well placed to set up these products.
"Also in the private equity arena, as with many other products now, management control issues and corporate governance are more to the fore and we are very conveniently located for directors to get on an aircraft to Guernsey for board meetings on the Island."
This body of evidence is just the tip of the iceberg but it clearly illustrates Guernsey's credentials as the jurisdiction of choice for private equity – the Island is pre-eminent in private equity.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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