Originally published in the Private Equity
Wire, Guernsey Supplement, April 2008
Having already built up a reputation as one of the best
offshore centre for private equity business among fund
promoters and their advisers, Guernsey is benefiting from
growing volumes of business thanks to the global expansion of
the sector, which has seen some of the industry pioneers launch
as many as five or six funds over a decade with steadily
increasing volumes of capital.
Once a private equity house has made the decision to use
Guernsey as a domicile, it's rare for them to change
jurisdiction for the launch of subsequent funds. When they have
built up relationships with auditors, administrators and tax
experts, managers generally use the same providers as they
develop their business. Meanwhile, the Island's private
equity activity is also being boosted by newcomers to the
Initially the Guernsey private equity industry attracted
business principally from leading European and global players
such as the Carlyle Group, BC Partners and Apax, but in recent
years dealmakers spinning out of larger firms to set up their
own start-up private equity operations have been coming to
Guernsey as well, having developed contacts on the Island with
their previous employers.
It's more than just convenience and habit that keep
some of the world's leading private equity
professionals coming back to Guernsey. The Island is one of the
top choices for UK gatekeepers because of the experience and
expertise possessed by its administrators, accountants and law
firms, and the fact that establishing and servicing private
equity structures on the Island is now a tried and tested
process with a fast and efficient turnaround.
The legal environment has improved greatly over the past few
years following the introduction of the Registered Funds
regime, which replaced the existing supervisory structure based
on regulation of the product. The new regime is based on
regulation of the service provider and offers a level of
protection appropriate to the kind of investors that private
equity funds attract, such as pension funds and other
While Guernsey has long enjoyed an impressive reputation
among private equity houses in the UK and Europe, it gained
fresh momentum in the US and beyond two years ago with the
launch of the USD5bn KKR
Private Equity Investors listed vehicle. The deal awakened
interest in the Island from managers all over the world and put
it on the map as a domicile for private equity funds listed
mostly on Euronext Amsterdam or the London Stock Exchange.
Apart from the Island's ability to offer a
tax-neutral environment for managers and investors, the KKR
launch hinged on a ground-breaking agreement between the
Guernsey Financial Services Commission and the Dutch regulatory
authority that exempted Guernsey funds from additional
regulation in the Netherlands when listing in Amsterdam.
The past couple of years have seen various significant
developments for Guernsey. First, while private equity houses
are continuing to structure and launch classic buyout funds,
they have also have sought to diversify into other related
areas such as infrastructure and opportunistic distressed debt
Secondly, managers are increasingly starting to set up
middle-office operations on the Island. In many cases the
private equity houses have recruited from their administrators
experienced staff with whom they been working for a number of
years, and a key benefit is the ability to provide continuity
for their investors.
Now that the United Kingdom has served notice to leave the European Union under Article 50 of the Lisbon Treaty, managers of offshore funds have a clearer timetable for when Brexit will happen, with the UK scheduled to leave the EU in March 2019.
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