Guernsey: Domicile Of Choice

Last Updated: 11 June 2009
Article by Chris Gambrell

Most Read Contributor in Guernsey, September 2016

Originally published in the HFM Week Guernsey Report, 2009, distributed May 2009

Christopher Gambrell of Praxis talks to HFMWeek about the future of the hedge fund industry and how Guernsey can become the domicile of choice for fund managers

Governments and financial regulatory authorities are making changes which will impact on the way hedge funds are administered, following the recent financial crisis and the Madoff affair.

In light of recent events, HFMWeek spoke to Christopher Gambrell, managing director at Praxis, one of the leading independently owned financial services groups in Guernsey, about the new challenges and opportunities increased regulation will bring and how it will affect investor confidence, investment strategies and the future of the hedge fund industry.

HFMWeek (HFM): How do you see the state of the hedge fund industry in light of the recent economic crisis?

Christopher Gambrell (CG): The hedge fund industry is obviously going through a period of unprecedented change that has resulted from the economic crisis. Further change may be dictated by changes by national governmental and regulatory authorities, as they strive to tighten controls to prevent some of the issues that precipitated the crisis to occur again.

The real losers in the current economic crisis have been investors who have suffered disappointing returns after having been exposed to potentially greater than anticipated risk. Many have or are in the process of re-assessing the investment strategies they deploy and the managers they select. Those managers who have performed consistently or satisfactorily during these testing times will be the winners, as they will attract the lion's share of new inflows of monies. The losers on the other hand are likely to suffer significant outflows, as investors will seek to penalise those managers who have failed to perform at a consistent or satisfactorily level. Ultimately, natural selection will see the emergence of new managers out of the fragmented remnants of the current industry and this development will also see the development of innovative funds structures.

HFM: How have hedge funds been affected by the crisis and what effect has this had on the administration services provided to funds and the expectations of a fund administrator?

CG: The general perception is that hedge funds have experienced more problems than other fund asset classes. This perception has been created to some extent by the media reporting of the Madoff affair and the problems and losses suffered by other high profile hedge fund managers. This media exposure had added to the gloom and despondence surrounding hedge funds and assisted in the negative attitude that has been generated at hedge funds in general. In reality, a significant number of hedge fund managers have either performed as predicted or exceeded predictions, but even with such performance many managers have suffered from the 'rush for liquidity'. Despite this, and to their credit, many hedge funds have not imposed any redemption restrictions and have in fact retained investor liquidity.

This has provided administrators with some interesting challenges, particularly in the area of increased redemption levels. More significantly, there have been a number of cases where hedge funds have imposed redemption restrictions, and even fund suspensions or terminations. This in turn has seen a considerable increase in board meetings, as the directors of the fund are being required to meet more frequently to resolve a whole plethora of issues created by the current economic crisis.

While such events have provided a challenging environment, the combined experience of the senior management team within Praxis has enabled us to deal with each issue in a professional and competent manner in spite of the sheer quantity of those issues.

HFM: How can an independent service provider help provide comfort and safety to a fund manager during economic instability?

CG: The appointment of an independent fund administrator will provide investors with the knowledge that the net asset value of the fund is being calculated independently from the fund manager, since it is important to remember that a fund manager will always be conflicted if they perform the calculation and publish the net asset value. An independent fund administrator will ensure that asset values are not inflated in any way and that liabilities are properly calculated.

Most fund managers normally perform some degree of shadow pricing so they can validate the independent price calculated by the fund administrator. Under normal circumstances the conflict may be manageable, however, in a crisis the conflict leads to compromise and ultimately the fund manager's interests may override those of investors. These conflicts encompass performance fees, contingencies, adherence to investment policy and investment restrictions among others. It is extremely likely that future investors will regard the appointment of independent service providers as key criteria when considering an investment in a particular fund. In addition, a fund manager may struggle to raise investor monies if service providers are not independent of the manager.

HFM: In terms of corporate governance or regulation what changes have you seen?

CG: The respective fund boards have become more conscious that they need to be fully appraised and provided with the relevant information so they are able to make meaningful decisions. Part of this process is the provision by the administrator of comprehensive board information and packs combined with well-organised meetings and agendas. In view of the economic crisis, the number of funds undertaking 'exceptional' activities has increased significantly and this has resulted in an increase in board meetings.

This combination of heightened emphasis on corporate governance, together with recent events, has significantly increased the demands on corporate secretarial services and in my opinion the standards being adhered to now are unlikely to reverse. In fact, I anticipate standards will continue to increase and this will mean that corporate secretarial services will be the fastest growing sector in the fund administration industry. This trend is borne out by the number of fund beauty parades that we have participated in, where this specific service has been one of the most significant issues discussed.

HFM: What challenges do you see occurring in the coming year and how well is Guernsey positioned to take advantage of this heightened demand for outsourcing?

CG: The challenges in the forthcoming year will be driven by the length and depth of the economic crisis. It is widely anticipated that some of the issues that contributed to the crisis will be subject to increased regulation and there have been rumours that the hedge fund industry could bear the brunt of increased regulation.

However, regulation for regulation's sake does not necessarily provide investors with increased security. Any new regulation must not be implemented simply as a knee-jerk reaction to the events that have unravelled in the past 12 months. However, any new regulation will inevitably increase the workload of the administrator. For example, I wonder whether we will be completing a number of new international statistical returns in addition to our own jurisdictional return? I also believe that administrators will increasingly be visited by underlying fund investors, so that they can scrutinise controls, general service levels and the monitoring performed by the administrator. Another trend likely to emerge will be greater reporting on liquidity and maturity of assets, to ensure that liabilities can be met as they fall due. Not all managers will welcome this reporting, but it will provide investors with more transparency, particularly in relation to redemption proceeds.

HFM: What opportunities do you expect to see over the coming year?

CG: At Praxis, we believe that 'change brings opportunity'. This is certainly true of the recent economic crisis. I suspect that industry professionals will look to well-regulated jurisdictions in order to domicile funds in the future. In this context, Guernsey has weathered the storm in good shape. A jurisdiction's regulatory framework must have demonstrated, both through international scrutiny as well as through practical fund operation that investors have been uppermost in people's minds, that suitable structures worked and independent service providers met the challenges that arose. Guernsey certainly ticks these boxes. Most noteworthy is that Guernsey has complied with its international obligations in terms of anti-money laundering and the signing of tax exchange agreements and has been noted positively by the OECD following the recent G20 meeting in London.

Guernsey continues to be an offshore centre that offers innovation and high quality regulation, which allows it to be able to service the ever changing needs of fund managers and other service providers, particularly administrators in Guernsey. The majority of administrators in Guernsey are independent of fund managers and the adoption by the administrators in Guernsey's best industry practice will provide the opportunity for Guernsey to become domicile of choice for fund managers, who will regard it as a 'blue chip' jurisdiction which will also provide comfort not only to fund investors, but increasingly to their own home regulatory authority. Consequently, I believe that Guernsey will continue to increase its market share in the fund arena and specifically I see more hedge funds and fund of hedge funds choosing to use Guernsey as their domicile.

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
Mondaq Advice Centre (MACs)
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.