During the last few years a large section of the
European private equity community has been focused on the European
Union's (EU's) drive for increased regulation, principally
through the Alternative Investment Fund Managers Directive
Speaking to promoters and investors further afield it is quickly
apparent that AIFMD has been less of a pressing issue however, when
they discover that it means a growing compliance burden and
therefore increased costs then they are instantly more cautious
about raising money from within Europe.
The Guernsey model
Yet, rather than being part of the problem, Guernsey is part of
the solution because while the Island is in Europe geographically,
it is not in the EU and therefore, has not been required to
Guernsey has introduced a dual regulatory regime whereby it is
possible to continue to distribute Guernsey funds into both EU and
non-EU countries. The approach means managers and funds with no
connection to Europe can still use Guernsey's continuing
regulatory rules which are completely free from the requirements
and costs associated with AIFMD.
For managers wishing to market into Europe, Guernsey provides a
European platform but one which is not actually in the EU. Indeed,
the National Private Placement (NPP) route is being favoured by
many as it means little or no change to how things were done before
AIFMD. For those managers with elements of EU and non-EU business,
parallel structures can be utilised. It will be possible to place
non-EU business in a parallel or feeder structure for which AIFMD
compliance would neither be required nor necessary. Guernsey also
has a new opt-in regime which is fully AIFMD compliant for those
who require it.
The point is that Guernsey's dual regulatory regime provides
optionality that allows clients to be serviced in the manner most
appropriate to their specific circumstances.
Guernsey has significant substance already present within many
existing structures and professionals with expertise in portfolio
and risk management. Corporate governance is enhanced by having a
significant pool of experienced non-executive directors.
Global private equity houses Apax, Apollo, BC Partners, Coller
Capital, HarbourVest, Pantheon and Permira have their funds
domiciled and serviced in Guernsey (with a number also having
offices and staff present).
Guernsey has administrators and custodians ranging from major
international names, such as Northern Trust and State Street, to
specialist independent private equity service providers.
Guernsey's funds industry now manages and administers more
than 1,000 funds valued at nearly half a trillion US dollars, with
the net asset value of private equity funds increasing 123% over
the last five years. Guernsey domiciled investment funds are
distributed to all corners of the globe. The first Chinese currency
focused bond fund, the Renminbi Bond Fund was established in
Guernsey in 2007 by Stratton Street Capital LLP as an open-ended
fund in a Protected Cell Company (PCC) structure. It is listed on
the Irish Stock Exchange. Quality of service in Guernsey is
evidenced by the fact that our providers now service $140 billion
worth of open-ended funds which are domiciled in other
jurisdictions where there may be local substance challenges.
Guernsey's strong ethos of corporate governance is also
demonstrated through its position as a centre for listed vehicles;
the two largely go hand-in-hand as companies are subject to and
adhere to the rules applicable to the various international stock
exchanges on which they list. Guernsey acts as a gateway to list
vehicles on stock exchanges around the globe, including, among many
others, the local Channel Islands Securities Exchange (CISE),
exchanges in Frankfurt and Amsterdam, the Hong Kong Stock Exchange
(HKEx) and the London Stock Exchange (LSE). LSE figures show that
there are more Guernsey entities listed on its markets than from
any other jurisdiction globally (ex-UK).
Non-EU managers, including many from Asia, are of the view that
regulation is making it especially difficult to market funds into
the EU. Guernsey offers a solution based in a European time zone
with access to the EU market but without the administrative and
cost burden of AIFMD and from a jurisdiction which has significant
substance, high standards and a global reach.
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