Originally published in the HFM Week, Guernsey Report, June 2008
Kevin Gilligan of Louvre Fund Management looks to the future of Guernsey
The Guernsey funds sector continues to reach new highs as the island becomes the jurisdiction of choice for fund promoters and sponsors looking to establish a broad spectrum of hedge funds, funds of hedge funds, private equity, syndicated loans and property vehicles. Recently released data indicates that the overall value of funds under management and administration in the island has risen to in excess of £203.8bn. Enjoying record levels of new business combined with a rich heritage spanning four decades is the enviable position Guernsey finds itself in today.
Competing jurisdictions will look on and question whether this could lead to complacency; however, Guernsey and its experienced service providers do not intend to rest on their laurels. Innovative legislation supported by an approachable forward-thinking regulator is ensuring that the island remains the jurisdiction of choice for funds. The introduction of the registered fund regime at the start of 2007 provides an adequate illustration of this. It provides a promoter with a fast-track approval process for closed ended funds, although to be able to self-certificate the fund, the administrator still requires sufficient time to fulfil its due diligence requirements. Once this process is complete and the application is submitted, the fund will be approved for launch within 72 hours.
Guernsey is also home to the Channel Islands Stock Exchange. The CISX has been designated as a recognised stock exchange which makes a fund accessible to UK ISAs, PEPs and SIPPs. The listing rules have been kept broad to encourage innovation while maintaining international standards of issuer regulation. The CISX has been operating since 1998 and with some 2,000 securities already approved it is a cost-competitive alternative to more established exchanges such as London.
What's new for 2008? Following on from the success of the registered fund regime outlined herein, we look forward to the introduction of the open-ended equivalent. This may be constituted as a company, unit trust, limited partnership or the increasingly popular protected cell company. A PCC is a single legal entity with distinct cells, the assets and liabilities of each being segregated by law from the assets and liabilities of the other cells. In essence it is an extension of the more traditional single-company, multi-class umbrella fund but provides greater protection for investors from the risk of cross contamination.
Modernising the legislation
A new company law will come into force in the second half of 2008. While there is not a great deal wrong with the current legislation, modernising and consolidating the secondary legislation can only improve the present arrangements further. One other significant development is the introduction of a computerised registry which will streamline and reduce the time it takes to incorporate a company. This will reduce costs significantly and make the island a more attractive proposition.
These initiatives can only improve the level of service provided within the fund sector and the finance industry in Guernsey as a whole. With such a broad range available to fund promoters it is increasingly important to make the right choice of administrator. Whether it is blue chip or boutique, Guernsey has a variety to offer. The growing complexity of alternative hedge funds and the fast-track approach adopted by the regulator would lead many to presume that this was an environment that favours the bigger players.
In reality the opposite is true and companies such as Louvre Fund Management Limited are able to provide a more personable and flexible service. It is Louvre's independence that enables us to offer choice and take on a crucial co-ordination role from the outset through to the establishment of the fund. This can be particularly useful for the smaller manager who may have recently left a large institution to set up his or her own fund.
Guernsey's fund industry continues to go from strength to strength ably supported by the niche players in the fund-administration market. The developments are a response to the needs of the growing number of alternative fund managers and reflect the depth of experience and expertise that is available within the island and the maturity of the industry as a whole.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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