Guernsey: First Choice For Property Funds

Last Updated: 4 November 2011
Article by Mark Douglas

Most Read Contributor in Guernsey, September 2018

Originally published in MENA Fund Manager, October 2011

Mark Douglas, Managing Director of Mercator Fund Services Limited, explains why Guernsey remains the premier jurisdiction for property funds.

Over recent years the Island of Guernsey has developed a reputation as the jurisdiction of choice for a wide variety of investment funds. Against a backdrop of extremely challenging global economic conditions, Guernsey's fund industry continues to go from strength to strength, as is borne out by the latest official statistics. As at 30 June 2011, the net asset value of investment funds under management or administration in Guernsey reached a record high of £275 billion, an increase of 23% over the year.

Over the past two decades, the fund industry in Guernsey has experienced a gradual shift from high-volume retail funds to institutional niche funds and service providers now have significant experience in dealing with asset classes such as property, private equity and funds of hedge funds, as well as more esoteric investments.

Whereas traditional open-ended equity and bond funds once dominated, the balance has gradually shifted so that closed-ended funds now account for two-thirds of the value of Guernsey domiciled investment funds. The closed-ended sector encompasses a number of different investment classes but is dominated by private equity (42%) and property (19%).

Guernsey has been at the forefront of the development of offshore property funds over the past 30 years and fund promoters include many household names. A proven route for investing in property, Guernsey funds have tended to outperform onshore funds and produce above average income, largely due to their tax advantages and a flexible regulatory regime.

Guernsey property funds can cater for investors in a number of different regions and the Island is seeing increased flows of business from the Middle East, with Shariah compliant funds also becoming common.

Choice of structure

Closed-ended funds are ideally suited to illiquid asset classes such as property. Liquidity, especially for those funds which do not have a fixed life, can be offered through a stock exchange listing. For a long time Guernsey has been the most popular domicile for investment companies listed on the London Stock Exchange.

Funds can be constituted as companies, unit trusts or limited partnerships. Guernsey law also provides for the incorporation of protected cell companies or incorporated cell companies, where each cell is ring-fenced from the insolvency of the other cells. The choice will largely depend on the needs of the investors, including the tax treatment of income and capital distributions in the investors' home jurisdiction.

The majority of Guernsey property funds are structured as companies, which are often more widely acceptable for marketing purposes and provide greater flexibility for listing on stock exchanges.

Tax advantages

Funds are granted exempt status for Guernsey tax purposes so no income tax is levied and there is no capital gains tax. There is no VAT regime in Guernsey so funds are not subject to this tax either.

There is no withholding tax on dividends paid by Guernsey funds, so dividends are paid gross (other than to Guernsey resident investors). The payment of dividends is also more flexible as they do not have to be paid out of retained revenue and as a result only a basic solvency test must be undertaken.

To mitigate withholding taxes in jurisdictions where the underlying assets are located, special purpose property holding subsidiaries can be established in jurisdictions where there may be tax treaties suited to the location of the underlying asset. Where property is held directly by a fund, tax on rental income in the relevant jurisdiction may be mitigated by the use of a Guernsey property holding subsidiary funded by loans from the Guernsey parent, the interest on which will be exempt from tax in Guernsey.

The absence of income and withholding taxes mean that Guernsey funds can be particularly appropriate for MENA investors who do not tend to pay income taxes in their country of residence, as income is repatriated to investors in a tax efficient manner.


Guernsey features alongside the UK and US on the OECD white list and has recently received recognition from the International Monetary Fund for its high standard of regulation.

Recent high-profile corporate failures around the world mean fund promoters and investors are, more than ever, looking for well regulated jurisdictions in which to domicile funds. Whereas previously certain jurisdictions may have been favoured for their lighter regulatory touch, the focus now is on robust but sensible regulation. This is an area where Guernsey has excelled in recent years due to the willingness of the regulator to engage with industry, whilst keeping investor protection at the core of the regulatory framework. As a result, regulations in Guernsey have evolved to meet the changing nature of the fund industry and Guernsey is at the forefront in terms of developing new fund products.

A streamlined approval process has been introduced in Guernsey in recent years for Registered Funds and Qualifying Investor Funds whereby regulatory approval may be obtained in three business days provided certain conditions are met, thus allowing promoters to bring their funds to market more quickly and with greater certainty.

It should be noted that all Guernsey domiciled funds need to appoint a Guernsey resident and licensed administrator. However, fund managers and advisers can be located elsewhere and do not need to be licensed in Guernsey unless they provide services from the Island. A Guernsey closed-ended fund does not need to appoint a custodian.

Quality of service providers

Guernsey's fund industry has been established for over 40 years and has a range of highly experienced service providers. All the major accountancy firms are represented on the Island and there are also an increasing number of international law firms to supplement the established and well respected local practices. There are over 50 licensed fund administration companies and the workforce is well-qualified with numerous training courses run locally, which are tailored to the needs of the industry.

Promoters need to know that the fund administrator they choose is capable of handling complex arrangements, including corporate structures with multiple subsidiaries in different jurisdictions. In Guernsey they can be confident of finding a competent company secretary with experience in complying with the listing rules of various stock exchanges and the requirements of applicable codes of corporate governance.


Being in a European time zone, Guernsey is convenient for fund promoters and investors from a large geographic area, including the Middle East. Guernsey's proximity to the City of London is also an important factor given the number of Guernsey funds listed on the LSE or AIM, and it allows service providers to maintain close contact with the major London law firms and tax advisers.

For property funds with assets located in the UK or Europe, Guernsey's location facilitates the inspection of these properties by the fund directors. Central London property is particularly in vogue at the moment and these properties can be readily inspected by fund directors and trustees.

However, care should be taken to ensure that a fund is considered tax resident in Guernsey only and, in particular, not considered to be UK tax resident. Guernsey's location makes it easy for directors and advisers to attend board meetings in person, thus consolidating the tax residency of the fund.

The Future

Property has always been considered as an essential element of any diversified investment portfolio and the recent turmoil in global markets has only confirmed this view. While many investors may choose to purchase an individual property (often via a Guernsey company or trust), a property fund provides further diversification.

The strengths that Guernsey's success has been built on are more important now than ever and the latest statistics show an eighth consecutive quarter of growth, indicating that Guernsey is likely to remain a leading jurisdiction for property funds for many years to come.

With a history going back over 30 years, Mercator has developed into one of the leading independent fiduciary companies in the island, employing over 70 people. We recognise that no two funds are the same and we provide a bespoke service rather than a 'one size fits all' solution.

At Mercator we have extensive experience of administering both listed and unlisted property funds, as well as property holding structures for private clients. We also have substantial experience of dealing with investors from the MENA region and handling Shariah compliant property transactions.

For more information about Guernsey's finance industry please visit

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Carey Olsen
Bedell Cristin
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Carey Olsen
Bedell Cristin
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions