Guernsey: AIFMD & Guernsey - More Options Than You Might Think

Last Updated: 25 July 2013
Article by Fiona Le Poidevin

Most Read Contributor in Guernsey, September 2018

Guernsey Finance Chief Executive Fiona Le Poidevin outlines Guernsey's funds offering following the introduction of the Alternative Investment Fund Managers Directive (AIFMD).

In July 2013 the global economy is continuing to throw up significant events but these are nothing in comparison with what we saw and experienced five years ago when the financial crisis was unravelling before our eyes. Indeed, it is precisely the events of 2008 which now frame our current environment, including economic, as well as political and social developments. This includes the introduction of the Alternative Investment Fund Managers Directive (AIFMD) with effect from 22 July 2013.

AIFMD was born out of a belief within the European Union (EU) that a lack of oversight of the alternative investment funds sector, in particular hedge funds and private equity, had contributed to the global financial crisis. Yet, now it's not so much what got us to this point but how we will go about dealing with it which concerns us, particularly with still so many unknowns. The Directive has been the subject of much debate and its implications remain unclear – and are likely to do so post 22 July 2013 – due to the fact that much of the detail is open to interpretation by individual Member States.

AIFMD seeks to regulate EU-based Alternative Investment Fund Managers (AIFMs), managers of EU established Alternative Investment Funds (AIFs) and managers that market AIFs into the EU. So, in essence, if either the manager or the fund has a relationship with the EU then the Directive comes into play.

Guernsey is not in the EU and therefore, is not required to implement AIFMD. However, with Europe still one of our biggest markets, we have a large proportion of business which does relate to the EU in some form and so potentially falls within scope of the Directive. As such, we have had to be alive to what will be required now and in the future to maintain access to EU markets. Yet, Guernsey also has a substantial – and growing – amount of funds business which originates from locations such as the US, Middle East, Latin America, Russia, India and Asia that does not touch the EU at all.

Therefore, we have also had to be mindful of the fact that we do not want to prohibit this business and in fact, we believe that our position outside of the EU but within the European time zone actually offers an opportunity to attract more non-EU work.

The Guernsey options

Guernsey is introducing a regime to ensure that we can continue to service both EU and non-EU business following AIFMD coming into effect. There will be a full AIFMD equivalent offering for those EU investors and managers who need or choose to take this route. There will also be a continuation of the existing regime for those who fall outside the scope of AIFMD (non-EU business); and the maintenance of the same, if slightly amended, process for those who are able to take advantage of National Private Placement (NPP) regimes.

An important point to make is that Guernsey's position as a third country means that we do not have to introduce a fully equivalent AIFMD regime for our alternative investment managers and funds to maintain access to EU markets from 22 July 2013. The existing NPP regimes will continue to offer a route for managers and funds based in third countries, such as Guernsey, to access the EU until at least 2015 and most likely, 2018.

However, in order to continue under NPP after 22 July 2013, AIFMD imposes additional regulatory obligations under Articles 42 and 43. On 7 June 2013, the Guernsey Financial Services Commission (GFSC) issued The AIFMD (Marketing) Rules, 2013, together with a notification form. The forms are for Guernsey-based managers to notify the GFSC of which EU (and wider EEA) countries they will market each fund. The GFSC has confirmed that it is able to accept completed forms prior to 22 July 2013.

In addition, it has recently been confirmed that the GFSC has signed bilateral cooperation agreements with 27 securities regulators from the EU and the wider European Economic Area (EEA), including the UK, Germany and France.* The European Securities and Markets Authority (ESMA) had previously given its approval for the content of potential cooperation agreements but the fact that they have now been signed means that Guernsey funds will continue to be able to receive investments from appropriately qualified investors in all these EU/EEA countries through their NPP regimes post 22 July 2013, subject to completion of the notification procedure of the relevant national securities supervisor.

However, the Directive does also provide the framework for establishing a full passporting regime and the European Commission is expected to implement this regime for non-EU managers of alternative funds in July 2015. Guernsey intends to fully engage with the consultations on the third country passporting regime to ensure that Guernsey AIFMs will be ideally placed to take advantage of the new benefits of being able to market AIFs on a pan-European basis with a single authorisation, as the regime is currently envisaged to work. Indeed, the GFSC is expected to shortly issue a domestic consultation on the full AIFMD equivalent opt-in rules which Guernsey will introduce in due course.

These opt-in rules should allow bilateral marketing of an AIF product to certain EU Member States prior to the implementation of a third country passport regime.

What does this mean for you?

So, in summary, Guernsey managers and funds with no connection to the EU will continue to be able to use the existing regime. Those who want to be able to continue to access the EU will continue to be able use to the NPP regimes. However, a fully AIFMD equivalent regime for those with an EU connection who need or choose to take this route will also be available. It is expected that this will be introduced early in 2014 so that there is time for it to be fully embedded prior to the full passporting regime coming on-stream from July 2015.

For those marketing into the EU, it is likely that the NPP route will continue to be favoured by many due to the depth and breadth of the requirements that fund managers will have to satisfy for AIFMD. Indeed, it is expected that full-blown AIFMD compliance will only be sought if there are particular reasons to do so, e.g. for investor relations.

For those managers with elements of EU and non-EU business, the potentially onerous and costly compliance with AIFMD will mean that parallel structures are likely to be given serious consideration. It will be possible to break the non-EU business away into a parallel or feeder structure for which AIFMD compliance would neither be required nor necessary. If, on the other hand, it is necessary or otherwise desirable to comply with the AIFMD requirements, then you can do this in Guernsey too.

What we are trying to say is that a one size fits all approach does not suit everyone and Guernsey is able to provide a range of options. We believe that this approach enables us to provide an offering with real choice in servicing both EU and non-EU markets. However, as mentioned at the outset, the real implications of the Directive are still evolving – and will continue to do so post 22 July 2013 – due to the fact that much of the detail is open to interpretation by Member States.

Substance: managers and depositories

A recent survey of European asset managers by fund software provider Multi funds showed that 77% of respondents were considering establishing AIFs for non-EU investors 'offshore' as a way to put them outside of the scope of the Directive. However, of course, this can only be truly claimed to be the case if there is sufficient substance offshore. This also applies to managers of AIFs for EU investors who are looking to avail of the continuing NPP regimes.

Indeed, interpretation over what constitutes 'substance' goes to the heart of much of the debate about the implications of AIFMD. What is clear is that letter box entities cannot claim to be managers and substance will be required in a jurisdiction where a manger is claiming to be domiciled. Similarly, under the delegation rules, the extent to which activities such as portfolio and risk management can be outsourced must be considered and it needs to be ensured that the real decision making powers lie with the entity that is claiming to be the manager.

Guernsey is at a huge advantage as a fund domicile because of the existing standards we already employ regarding oversight and because of the substance which is already present in structures domiciled in the Island. For example, Guernsey already plays host to a number of major managers, such as Apax, BC Partners, Man Group, Permira and Terra Firma who all have offices and staff here. In addition, we have a range of fund administration groups, ranging from major international names to boutique, independent operations, coupled with qualified Non-Executive Directors, who are experienced in providing management functions.

In addition, AIFMD is introducing a requirement for depositories to provide extra oversight to the fund structure. Guernsey can service depository requirements through its existing range of on-Island custodians who are already used to providing not just custody services such as dealing and settlement but also a fiduciary role played by a trustee – hence the name, custodian trustee.

Yet, much of Guernsey's core business of closed ended private equity and real estate funds will be able to access AIFMD's lighter touch regime that permits a wider range of entities, such as lawyers and registrars, to carry out custodian functions.

Therefore, Guernsey is already extremely well placed to meet the requirements for enhanced oversight and substance and yet, many of our AIFs will be able to access a lighter regime in relation depository requirements. In addition, we have the benefit of having opened in early June this year for applications from managers and depositories who want to continue to access the EU market post 22 July 2013.

Of course, providing they can prove sufficient substance to their arrangements, one option might be for a fund to opt to be self-managed. Ben Morgan, a Partner at Carey Olsen in Guernsey, has said that it would be wrong to assume that all existing Guernsey funds will opt to be self-managed and therefore be non-EU AIFM managed. He believes that some will want their UK operation in the EU to be the AIFM and will therefore have the option to be AIFMD authorised but managing a Guernsey fund.

To conclude, Guernsey's position as a third country, the Island's planned regulatory regime and its infrastructure and expertise mean that as a domicile it ultimately offers optionality for the international fund community. In dealing with AIFMD, Guernsey has recognised not only the importance of the EU market but also the truly global nature of its investor base.

Originally published in Global Fund Media's Special Report: AIFMD Implementation Guide, July 2013.

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
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
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