Originally published in the HFM Week Guernsey Report, 2009, distributed May 2009
Kevin Gilligan of Louvre Fund Management tells HFMWeek how Guernsey is a leading financial force, particularly in the funds sector, and is prepared for the return of a more stable market.
Guernsey is one of the leading international finance centres in the world and one area where this is most apparent is in the funds sector. A raft of client focused, cutting edge, user-friendly, yet robust legislative and regulatory changes – several in the past few months alone – have ensured that Guernsey remains resilient during difficult times and continues to build an enhanced platform of services ready for the return of a more buoyant market.
Guernsey is populated by an interactive mix of specialist fund administrators – from the boutique to the all-in-one – top-quality fund lawyers, accountants, custodians and bankers and governed by a legislature that listens to the regulator, who talks to the fund industry, who actively seeks feedback from its clients, which is then passed back up the chain. It is a level of communication that creates and ensures that the practical, hands-on fund administration environment, is supplying the exact tools that are needed by the fund architects, fund managers and fund institutions around the world.
A fund environment that works
That the fund environment works is clear from the international spread of institutions using Guernsey, which, at the last count, covered 38 countries. This is also apparent from the figures of total funds under management and administration.
Times may be tough, but the 2008 year-end figures show a year-on-year, total funds increase of 12.5% – up to £200.4bn. In this figure is closed-ended fund sector growth (up 19.8% year-on-year to £91.5bn) and an increase in non-Guernsey schemes (for which some aspect of management or administration is carried out in Guernsey) of 39% year-on-year to £45.3bn.
The figures show it and the world clearly knows it, but what are the key areas, which keep Guernsey in demand and at the forefront of the hedge fund world? There are many and it is perhaps best illustrated by looking at two that interact – the narrow, bespoke boutique fund administrator and the larger legislative and regulatory machine which builds the platform on which the former performs.
Legislation and regulation creating opportunities
It is the consistent stream of quality legislative initiatives, which, firstly, create the new structural opportunities for funds but then, secondly, loosen regulatory constraints and time-consuming processes. Structural opportunities promoted by Guernsey have all been in direct response to end-user needs and, arguably, the best example is the introduction in 1998 of the much-copied protected cell company (PCC). The PCC has evolved in recent years to the incorporated cell company (ICC) – an example in itself of a responsive legislature and industry that never stands still.
Yet it is not the structural opportunities alone that make a finance centre attractive to a fund manager, the clever part is in facilitating the use of them through a user-friendly process, enabling legislation and regulation.
The introduction of the registered fund regime at the beginning of 2007 provides an excellent illustration of this. In one quick sweep it did away with the drawn-out processes of obtaining regulatory consents and provided fund promoters with a fast-track approval process for closed-ended funds. Under strict guidelines, it allowed licensed fund administrators to self-certificate new applications once they had collected (and were satisfied with) all the necessary compliance details. With this tailored package submitted to the authorities, it allowed a fund to be approved for launch within 72 hours.
It is also worth mentioning that this was achieved against a fairly hostile background of AML and CFT regulation and any perception of a relaxation of rules had to ensure that compliance and regulatory supervision remained robust and strong enough to satisfy external government agencies. This it duly did.
Extended to open- and closed-ended funds
Typically, at the end of 2008, the success of this regime was followed by legislative changes and new rules that now allow both Guernsey open-ended and closed-ended funds to be established as authorised or registered funds, while still offering the fast-track 72-hour option.
Authorised funds still have to follow the traditional route, unless they are established under the 2005 qualifying investor fund (QIF) rules, in which case they too can go for a 72-hour fast-track option.
In addition to this, there is also a new, 10-working days fast-track procedure, that will allow fund managers and general partners who need to be licensed under Guernsey law to receive approval.
If there is one clear theme running through all of this it is that of facilitation – make it quick, make it easy, be pragmatic, ensure the compliance requirements remain robust and the business will flow.
The boutique fund administrator
One of the clear beneficiaries of such a sound and supportive platform is the boutique fund administrator.
Their focus is on providing a first point of contact service which is tailored and unique to each of their clients, usually with client specific teams delivering a bespoke service.
This will include initial advice on the set up and structuring of the fund, building specific accounting packages to meet the individual reporting requirements, applications to the authorities and introductions to other specialist advisers such as fund lawyers.
The speed and the skill with which boutiques can do this and the different structuring options available under the Guernsey legislation suits the smaller fund manager, who may also require the dedicated personal service necessary to complement the establishment of a specialist fund.
Other advantages in Guernsey
The platform that has been built to set up and launch new funds is not limited to the fund legislation alone. There are other complementary attractions such as the new companies law; a new online companies registry that eases administration and, if one were required at short notice, allows for the incorporation of a new company in 15 minutes; and, for future listing and trading, the Channel Islands Stock Exchange.
The latter having received formal recognition from HMRC and the US Securities Exchange Commission and approval as an affiliate member of the International Organisation of Securities Commissions.
With talk of billions of dollars out in the market waiting to be invested into new funds, the fund administration industry in Guernsey has taken positive steps to enhance its offering to fund managers. And with the support of experienced, specialist administrators and a regulatory and legislative regime which listens and encourages continual dynamic change, it is an industry positioned and ready to respond rapidly to the needs of the market.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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