Guernsey: Another Vintage Year For The Guernsey Funds Industry

Last Updated: 15 May 2017
Article by Kate Storey

Most Read Contributor in Guernsey, September 2018

The last twelve months have seen the Guernsey funds industry show its strength and stability during a period of significant international political changes, writes Kate Storey, Funds Partner at Appleby, on behalf of the Guernsey Investment Fund Association.

The investment fund statistics for the fourth quarter of 2016 were very positive for Guernsey, building further on the previous five straight quarters of growth. For the year since 31 December 2015 total net asset value of funds under management and administration in Guernsey increased by 12.5%, bringing the total to £255.9 billion. There was also a year on year increase of 1.4% in the total number of closed-ended investment funds established in Guernsey.

To achieve this growth Guernsey has continued to focus on what it has done best for several decades, including pioneering the use of innovative new products and technologies, whilst meeting the highest international regulatory standards.

Highest regulatory standards

AIFMD

In July 2016, Guernsey's Alternative Investment Fund Managers Directive (AIFMD) compliant regime received its second unqualified positive assessment from the European Securities and Market Authority (ESMA). In making its assessment ESMA examined factors including investor protection, competition, market disruption and the monitoring of systemic risk, tax information exchange and anti-money laundering measures. The European Commission has not yet finalised its assessment of the ESMA advice on the extension of the AIFMD passport to third country jurisdictions, but Guernsey remains at the front of the queue for when the extension is granted. In the meantime, Guernsey alternative investment funds (AIFs) and fund managers continue to have access to the EU markets through the various national private placement regimes (NPPR); those regimes remain unchanged and are working well for Guernsey funds.

Guernsey has been a market leader in introducing a dual funds regime and products such as its Manager Led Product, so that it is prepared for AIFMD whilst giving optionality for non-AIFMD funds. In doing so, the Guernsey regime offers the funds market certainty now and in the future. Guernsey will continue to innovate and use its ability to legislate quickly to ensure that it is prepared for whatever the future environment is.

Base erosion and profit shifting (BEPS)

Guernsey is an OECD member through its relationship with the UK and is actively committed to the development and implementation of global standards in line with the OECD's BEPS Action Plans. It considers itself to be effectively, a 'BEPS-compliant jurisdiction' – due to Guernsey's finance sector model and regulatory framework, which through its focus on business substance prevents the Island being exploited significantly for BEPS and ensures equivalent outcomes to those that both the OECD and EU Commission are seeking to secure.

Guernsey's government has committed to signing the BEPS Multilateral Instrument in order to implement tax treaty-related measures to combat BEPS and has already put in place the implementing regulations for Country by Country Reporting.

Innovation

20th anniversary of the PCC

Guernsey has a long history of innovation in financial services products. 2017 marks the twentieth anniversary of the protected cell company (PCC), a form of legal structure which Guernsey pioneered. In a PCC shares can be issued in separate cells to shareholders who may be different for each cell and different from the shareholders of the 'core' of the PCC. The assets and liabilities of each cell are legally segregated from those of the other cells and the core.

The PCC has great application in the funds industry, for example, using different cells for different strategies. There are clear cost and time savings in using a cell company rather than setting up multiple fund structures.

Cell companies can also be used as 'rent-a-cell' platforms to white label to multiple investment advisers who each take a separate cell or cells for their separate fund(s). This is more cost effective for investment advisers than setting up a standalone fund structure and helps new investment advisers build a track record in an already established investment vehicle.

Dual funds regime

Guernsey took the innovative approach of introducing a dual regime for AIFMD whereby Guernsey fund managers can opt in to an AIFMD equivalent regime in advance of the extension of the third country passport, or alternatively remain out of AIFMD compliance where an AIFMD fund is not required (when using NPPR or marketing outside Europe).

Manager Led Product

Building on the interest generated by the dual funds regime in locating fund managers in Guernsey, in May last year the Guernsey regulator (GFSC) introduced the Manager Led Product. This may be used by Guernsey-based managers that are considered AIFMs under the Guernsey AIFMD Rules (rules which are equivalent to the AIFMD regime) and are seeking to market an AIF into a host country under the NPPR. Once licensed by the GFSC the manager is able to launch new fund structures by simple notification to the GFSC, which will be registered by the GFSC within one business day of receipt. No regulatory rules are applied to the fund structures, only to the manager, which must comply with the Guernsey AIFMD Rules. Capital may be concentrated at the manager level. The manager may request derogations from the AIFMD Rules if acceptable to the host country and the reporting requirements are maintained to the required standard.

The product therefore offers a proportionate risk based level of regulation, maintaining reporting requirements to AIFMD standards. It enables the fast track establishment of fund structures without duplication of regulatory requirements over several entities.

Private Investment Fund

In November 2016 the GFSC launched a new product termed a 'Private Investment Fund' or 'PIF'. The philosophy of a PIF is a close relationship between investors and the licensed manager, who will be responsible for providing warranties on the ability of the investors to assume loss. The number of investors is restricted to no more than 50 legal or natural persons, however, an investment manager acting as agent for a wider group of stakeholders can count as one investor.

The key benefits of a PIF are:

  • No information particulars required, significantly reducing cost and processing time;
  • Licensing of manager and registration of PIF within one business day;
  • No rules applied against licensed manager;
  • No custodian required, including for open-ended funds;
  • No limit on number of investors to whom PIF may be marketed (in contrast to comparable regimes of other jurisdictions);
  • No requirement for PIF to be sub-threshold product for AIFMD.

Blockchain

Guernsey was recently involved in the first commercial deployment of blockchain technology, which is being used in the management and administration of a private equity fund managed by Unigestion and administered by Northern Trust in Guernsey. Blockchain technology allows the fund to transfer ownership stakes and be managed, serviced and audited throughout the investment lifecycle on a transparent platform, accessed via secure means.

Listings

LSE

Guernsey remains the number one offshore jurisdiction through which to set up funds for listing on the London Stock Exchange markets, offering a proven and expert platform from which to launch into the City.

TISE

Earlier this year the Channel Islands Securities Exchange rebranded as The International Stock Exchange (TISE), to reflect its international client base of issuers. As the Channel Islands are outside of the EU, the EU's Market Abuse Regulation does not apply to securities listed on TISE, which applies its own market abuse rules proportionately to the type of listed product.

Over the last year TISE listed the first regulated bitcoin fund to be listed on an exchange globally, and has seen a resurgence of real estate investment trusts (REITs), reflecting the growing interest in UK real estate since Brexit. As at January this year, more than a quarter of all UK REITs were listed on TISE.

In April this year TISE received recognition from BaFin, the German regulator, meaning that German UCITS can now invest into securities listed on TISE. This demonstrates that the German financial services authorities recognise the role that the British Crown Dependencies play in the flow of global capital.

Look ahead

Items on the GFSC's agenda for 2017 include:

- development of a manager-led product for managers targeting markets excluding Europe;

- giving guidance on products which are not funds and fall outside regulation in Guernsey. This includes, for example, structures with a single investor or which are closely held or where the investors are closely associated; and single asset structures;

- revising the Guernsey regulatory laws to address MiFID II.

Aside from Brexit there is current international focus on the two quite conflicting areas of data protection and public registers of beneficial ownership. Guernsey is responding to ensure appropriate legislation is put in place addressing both, albeit Guernsey funds will not be subject to its proposed Beneficial Ownership of Legal Persons (Guernsey) Law, as they are appropriately covered by the existing framework of disclosure by and to regulatory, tax and police authorities.

Outgoing Chairman of the Guernsey Investment Fund Association, Andrew Whittaker, recently noted, "Guernsey has put in place building blocks post-Brexit and has the skills and nimbleness to exploit opportunities as they arise". Testament to this is the quality of the fund managers who continue to use Guernsey, such as Permira – whose latest fund recently closed at EUR7.5 billion – Apax and Cinven.

Whatever the future holds, the pedigree of Guernsey's funds industry puts it in good stead to take advantage of the ever-changing global market.

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

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 Mondaq.com.

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
GuernseyFinance
GuernseyFinance
Carey Olsen
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
GuernseyFinance
GuernseyFinance
Carey Olsen
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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