Guernsey: The Growth Of Private Funds

Last Updated: 23 July 2019
Article by Marcus Leese

With 20 years' experience as an offshore practitioner, Marcus Leese advises clients across the full range of investment funds, private wealth and Banking & Finance matters. Besides his role as head of Ogier's Guernsey office, Marcus advises on Guernsey and BVI law to an international client base including many Asian clients, having spent four years in Ogier's Hong Kong office.

How are private funds blurring the old distinctions between Private Wealth and Investment Funds work?

We are already getting instructions for this work, and we are seeing it across all our jurisdictions – and particularly in Guernsey, Cayman, BVI and in Jersey. Traditional investment funds function as a collective investment structure – they are simply a vehicle for a range of investors to pool their money together and invest in a project, or multiple projects. That is a tried and tested model with which we're all very familiar. What we are seeing now is using the same vehicle for a single investor or family to provide them with a structure in order to invest in one or more projects.

The structure provides a pooled, organised vehicle for the family's assets and can define their interests and rights in relation to the assets. It may also provide future opportunities to open investment to others outside of the family to tap into a larger investment pool. This is a different and largely untapped market for fund managers and fund administrators to be thinking about.

What is motivating the clients behind the trend?

Clients are not always establishing new investments – we have seen instructions where they have been moving family-held investments out of one structure, and into a private fund structure, because they saw it as a much more flexible option. So in this example, we were not establishing a fund vehicle in order for that family to invest in new things, we were taking existing investments and effectively putting a fund structure around that for them.

In a recent case the clients were an international family who have UK-based real estate assets worth approximately £400 million currently owned by different offshore companies. The thinking was that as time goes by there were more family members and an increasing risk of the shareholding in the companies becoming more widely spread.

The solution was a private fund – with assets on that scale it was important to put some professional management and structure behind them, and to allow everyone to contribute their respective shareholdings in a new fund vehicle, and finally to distribute the shares so that all of the family members became passive owners.

That new structure adds new options. The investment manager – one of the family members who is qualified in this area - can go out and borrow to increase the portfolio. Moreover, a fund is regulated and recognised and so more attractive to third party investors. Accordingly they have the ability to offer shares in the fund to third parties – the family vehicle could potentially become a vehicle used by third party investors.

The assets in this case have all been real estate – but there is absolutely no reason why it needs to be limited in that way, it could be any asset class.

Where is this work happening?

We are seeing instructions along these lines in all our jurisdictions but certainly including Guernsey and Jersey – the regulators and legislators in both islands have developed new "private investment funds" products which restrict the number of investors, establish a minimum investment and which prohibit or limit retail public offerings in return for a less demanding regulatory regime than would be applied to funds offered publicly to retail investors.

How does the Ogier team service this trend?

We're well-placed to deal with this kind of work – my practice has spanned funds and Private Wealth work for many years and it is the combination of these two different elements which is so important.

In addition, we operate in the three key jurisdictions for this kind of activity – Cayman, Guernsey and Jersey, and we have Cayman attorneys in our Guernsey and Jersey offices offering advice within the European timezone.

Looking forward, how is this likely to develop?

As an alternative to trusts, private funds have a role, and that's driven by the value of the assets and the changes in the profiles of beneficiaries as families grow and develop in sophistication. They are quite different in a way but in Guernsey there is no limit on the legal vehicle that you use – company, limited partnership, or unit trust.

In some respects the motivations driving these clients to Guernsey are the same ones driving professional fund promoters here as opposed to any other jurisdiction, which is a mixture of familiarity with the jurisdiction and structures, infrastructure and connections, the quality of the regulatory framework and the range of regulatory levels, the quality of service providers, the timezone, and the quality of the courts.

And if they are looking in the future to move beyond family investors and move to seeking third party investment money – that will be a consideration. What would third party investors be wanting to invest in? The empirical evidence based on the past several decades of the investment fund industry is that Guernsey is an extremely attractive jurisdiction.

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
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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