Guernsey: A Different Perspective

Last Updated: 23 July 2008
Article by Gavin Farrell

Most Read Contributor in Guernsey, September 2018

Originally published in the HFM Week, Guernsey Report, June 2008

Gavin Farrell of Ozannes shares a refreshing perspective on the hedge fund industry and gives his view on how the island is withstanding the credit crisis.

As assessments of the world's current economic state go, you are unlikely to find anything more frank than the following, provided by Gavin Farrell, corporate partner with Guernsey-based law firm Ozannes: "If there's one lesson to be learnt, then it's that easy money can only last so long."

In an industry primed for damage limitation, it is a somewhat refreshing perspective. But then, by virtue of his position as an offshore lawyer, Farrell is afforded a more objective view than most. And while he freely admits to possessing neither the solution to the global crisis nor the type of knowledge to address it, he is more than qualified to present a matter-of-fact evaluation of its impact on the offshore fund structures he deals in.

Before Farrell assesses the impact, however, he establishes the fund environment in which both he and Ozannes operate. What is it about the nature of Guernsey's fund structure that attracts clients over other offshore jurisdictions?

He highlights three types of offshore competitors. There is the polarised competition; European offshore centres such as the Channel Islands and the Isle of Man, then the EU offshore centres such as Dublin, Luxembourg and, increasingly, Malta, and thirdly, the Caribbean. Farrell has found that clients choose the first type, Guernsey in particular, to capitalise on the facilities including those measures that relate to corporate governance and which support the offshore tax neutrality of the funds, a benefit that certain jurisdictions, in the Caribbean for example, may lack. "Some potential end fund users, especially in the UK with HMRC's central management and control rules, have concerns with the Caribbean, as a fund industry," he says. "They believe its offshore tax structure may be too precarious to sustain the offshore nature of the product."

He continues: "Our business is not only to offer a structure and flexibility similar to that of other offshore jurisdictions, but to place great importance on the administration as well as the corporate governance aspect of an offshore structure. This, in turn, supports the offshore tax neutrality treatment of a fund. Indeed, clients come to us because we strive to have a structure which would withstand any attack by an onshore tax authority claiming we are smoke and mirrors and nothing else. We take great mileage from cases such as Wood vs Halden."

A robust, yet flexible, regulatory framework

Potential clients may have a greater level of comfort when choosing a jurisdiction like Guernsey. While it is not over-regulated, it is sufficiently so to offer comfort to institutional investors, promoters, sponsors or managers looking to set up new structures. This robust, yet flexible, regulatory framework has been an important factor in Guernsey's stability in the face of the volatile global market and is increasingly centred on the Guernsey service providers and not the products.

In terms of the credit crunch impacting Guernsey and similar offshore jurisdictions, Farrell mentions two main effects.

The first is that, unsurprisingly, certain launches have been either delayed or aborted. Ozannes' lawyers get their instructions from the major law firms which are there for structuring deals, and the effect the crunch has had on a number of launch programmes has been dramatic. Simply put, some sponsors have either not wanted to proceed in the current climate or wished to delay, at times indefinitely, or have not been able to raise enough capital to justify a launch.

The second main effect is more positive. Guernsey's business diversity means it is not centred on one type, or one small group of funds. To that effect, while Guernsey has had its casualties, business has continued to flow. For this, Farrell pays tribute to the island's regulator. "We don't put all our eggs into one basket," he says. "Our flexible regulatory regime has always seen us attract a great diversity of fund types and now some new lines of business have been set up in light of the credit crunch. We've been able to capitalise on opportunistic structures; including private equity structures or opportunistic funds in terms of distressed debt."

Farrell indicates that Guernsey is at the forefront in terms of industry efficiency. "All offshore jurisdictions are trying to lessen the regulators approval system for alternative funds. However, we were at the forefront of the self-certified certificated regime for offshore funds a number of years ago; including the original open ended Class Q Schemes in the 90s. We have mileage on regulatory flexibility because we were among the trailblazers in implementing a self-certified regime for products."

Guernsey's fund business legacy

Farrell is under no illusion and accepts that all offshore jurisdictions will lay claim to similarly impressive flexibility. The reason he gives for it being particularly apparent in Guernsey relates to, what could be called, its fund business legacy. "In many ways, the island has been successful by default," he says, candidly.

This assessment derives from Guernsey's traditional industry position. Fifteen to 20 years ago, Jersey's fund industry's primary interest was in retail, blue-chip types of business, and there was even a message that it was closed to new business of non-retail type. As a result, Guernsey, not being as well known at this point, had to find another source and started capitalising on the alternative types that Jersey did not want. The alternative classes, not being as popular, took advantage of Guernsey's willingness to develop that line of business, and made the island the centre for variation.

When, a few years later, there was a reversal of the business flow into the Channel Islands, whereby the blue-chip end of the market waned in favour of alternative types, Guernsey had a head start.Because alternative types covered the close-ended sector of the market, including fund of hedge funds and private equity, Guernsey now has a large diversity; grown from the concept of alternative or nonmainstream retail products. This legacy means that the island is, currently, far better equipped to hedge its bets and deal with multiple structures.

"It's difficult, however, to say whether we've withstood the credit crisis more because of a framework," Farrell concedes. "But the fact that we've got a great deal of flexibility borne from our ability to diversify the type of business lines coming into Guernsey means we were more attuned to scoop up any alternative types of fund coming in, and not necessarily just those that were affected by the credit crunch."

Because, like all financial centres, Guernsey has suffered in recent months, Farrell is keen to avoid using the credit crunch as a means of validating the island's framework. He uses it, instead, to highlight its welcoming approach to business. "What the crisis has demonstrated is that Guernsey is not just in a one horse race. That's been very apparent, not only through the regulatory regime but through the experience of our back-office service providers, primarily the administrators. They have been able to deal with anything that comes through the door because they have been doing so for the last two decades and have built a book of experience and expertise."

The biggest challenge for Guernsey is to maintain investor confidence. It has a stable economy, that hasn't been effected by the credit crunch to the same extent that the UK and US have. "It hasn't had a major impact on our general economy," says Farrell. "There is safety for end users of Guernsey products – it's not going to go belly up tomorrow. Relaying this to potential clients is integral."

Guernsey's business hasn't slowed in the way it was expected. The main difference is that there isn't the same number of large transactions; raising US$200m-US$500m for new funds in the current climate is a considerable challenge. "We are definitely doing more small transactions and less of the larger ones." Farrell says. "But that's to be expected. It's merely reflecting the current state of the market in light of the capital raising, investor confidence and comfort in investing."

Farrell maintains his realistic perspective in conclusion. "My understanding is that there still is a lot of liquidity in the market but people are going to think twice before ploughing into particular products. After all, we must not be complacent." However, he finishes on a positive note. "While we were slightly less busy in Q1 of this year than at the same period last year, we are flat out at the moment. And I'm sure it's the same for other law firms. Business continues to flow and that's always encouraging."

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.

In association with
Related Topics
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