Guernsey: Guernsey And A New Era For The Fund Industry….In MENA

Last Updated: 16 October 2009
Article by Peter Niven

Most Read Contributor in Guernsey, September 2018

Originally published in MENA Fund Manager, October 2009

Guernsey benefited from the flight to quality during the worst of the financial crisis but is now looking to establish itself as the domicile of choice for the next generation of MENA funds. MENA FM speaks to William Simpson, Managing Partner at Ogier; Martin Tolcher, Managing Director of Legis Funds Services; and Stuart Place, Marketing Director at Argyll Fund Services.

MENA FM: How does Guernsey differ from other fund jurisdictions and what advantages does it offer potential Middle East fund clients?

William Simpson (WS): Guernsey is a regulated jurisdiction and does not offer unregulated fund structures. There are two types of fund: the authorised fund and the registered fund. The authorised fund is subject to a higher ongoing regulation and to review by the Guernsey Financial Services Commission (GFSC) upon and as a condition of establishment. The registered fund provides for a regulated fund, although the GFSC do not conduct a review of the fund prior to establishment, instead of relying upon due diligence and certification by the Guernsey-based administrator. Registered funds can be established quickly. It is possible to transfer between two different statuses, both of which are provided for under the same governing law.

The advantages for Middle East clients are (a) on either basis a regulated fund in a well-respected jurisdiction and a convenient time zone and (b) in respect of registered funds, a speedy establishment. The fact that Guernsey has no un-regulated funds means that it is generally one of the best regarded jurisdictions for regulated funds. However, flexibility is retained in that funds established outside of Guernsey may be administered in Guernsey, subject to complying with certain requirements. Such funds would not, however, be regarded as Guernsey funds nor would they be regarded as regulated.

Martin Tolcher (MT): Guernsey's ongoing legislative changes, especially in streamlining the regulatory approval process for open-ended and closed-ended funds, together with the continued perception of Guernsey being very well regulated and being particularly strong on corporate governance, enables it to maintain its position in the very top echelon as a fund jurisdiction.

With respect to Middle East fund clients, Guernsey is able to offer structuring and servicing to meet the requirements of Shariah funds and Islamic finance. The various fund types that can be established in Guernsey are such that they are flexible enough to ensure compliance with Shariah law.

Stuart Place (SP): In comparison to other jurisdictions, Guernsey has taken a lead in fund administration for a number of years. This is in part due to the fact that the approval process by the island regulator, the GFSC, places a greater onus on the licensee, as opposed to the product, which focuses more on ensuring that Guernsey and its licensees meet international regulatory standards. As an asset manager, being based in Guernsey gives Argyll the ability to offer some unique products – the GFSC does not take the view that they know best and as such, we are able to launch innovative offerings that we might not be able to in other jurisdictions.

MENA FM: In what areas is Guernsey currently experiencing growth?

MT: Despite the current economic downturn, which has resulted in a reduction in the value of assets under management and administration in Guernsey due to performance, we still see positive signs with respect to new fund business being established in Guernsey. Property fund structures, where the ultimate assets are increasingly located in the MENA region and Eastern Europe, as well as the more traditional areas of the UK and Continental Europe are being launched, as are venture capital structures.

SP: Guernsey-based firms have certainly benefited from a flight to quality in recent times. What's more, the long-standing reputation of Guernsey combined with the efficiency with which products can be launched has led to a rise in assets under management year after year. In times of financial difficulty, as has been recently experienced, people often find that putting their money into premier financial centres provides a sense of security, and this has had a markedly beneficial impact on Guernsey, and other jurisdictions like Guernsey.

WS: Guernsey is currently experiencing growth in funds of all types, but predominantly private equity, infrastructure and property funds. Hedge funds and funds of funds are slightly less prevalent.

MENA FM: What challenges has Guernsey faced as a result of the current economic climate and what measures have been taken to tackle them? Have any of these challenges been turned into an advantage?

MT: In common with other fund jurisdictions, Guernsey has been impacted negatively because of the current economic climate, in that clearly there is a downturn in the number of new funds being established, and those that are take longer from establishment to launch and are often looking to launch with assets lower than those originally targeted. This has also resulted in fund promoters focusing more on consolidating and restructuring existing funds and examining the service levels of providers, especially administrators and custodians.

Potential investors in the funds too are far more demanding in terms of the jurisdiction, corporate governance and service providers. However, such challenges should be seen positively for Guernsey, since its reputation as a well-regulated jurisdiction, with high- quality service providers positions us well not only to demonstrate to existing funds – their promoters and investors – the benefits of being in Guernsey, but also to potential new funds and promoters for when the upturn starts.

WS: The principal challenge has been in respect of sizing businesses to the current workload. However, there have been very few redundancies in Guernsey and, generally speaking, the workload for all financial services businesses has held up well. It is likely that businesses will nevertheless focus more keenly on resource planning and cost control going forth. No obvious gaps have appeared in the regulatory control exercised by the GFSC as a result of the current economic climate. However, Guernsey is likely to take all reasonable measures in support of developments in other jurisdictions, such as the UK and Europe, for the purpose of ensuring financial stability, countering financial crime and preventing tax evasion.

The less than customary annual increase in business, due to the current economic climate, has also caused businesses to consider more closely the geographical source of work. This has been a positive aspect for the jurisdiction, leading to a greater interest in the Middle East and Far East as a location for source of work.

SP: While, domestically speaking, Guernsey has been less affected by the global financial climate than many conventional jurisdictions, the effect of the downturn on the entire financial services sector, and the subsequent impact on Guernsey itself, cannot be ignored. However, that said, the island is still benefiting from continued innovation, and (to give an example) several businesses are currently developing their expertise in Islamic finance – in September alone, three seminars on the topic of Islamic finance are set to be held in Guernsey. Although the economic downturn was somewhat expected, the extent of the crisis was surprising to many and looking forward, I believe that lessons can be learnt from the Islamic model.

MENA FM: What is the domicile doing to attract business from the Middle East? What developments been made?

MT: As mentioned previously, Guernsey is already well positioned to deal with business from the middle East, whether that be for Shariah-compliant structures, or where promoters establish funds for investment by individuals from the region, without any such Islamic restrictions. Legis Funds Services is highly experienced in both areas – we administer, for example, a closed-ended fund investing in Lebanese venture capital opportunities, as well as open-ended funds of funds, established as Protected Cell Companies (PCCs), seeking investment from individuals and entities from the region. Legis also administers a PCC listed on the internationally recognised Channel Islands Stock Exchanges (CISX) that includes a Shariah-compliant Sukuk and Murabaha investments. It is important for the Guernsey lawyers, custodians and administrators to ensure they have the expertise to service such vehicles. Within Legis Group, we have such Shariah-law expertise.

It should also be remembered that not only is Guernsey continually looking to attract business and clients from the Middle East, but also sponsors and promoters are looking to the MENA region in which to invest. For example, Legis Fund Services is the administrator of a recently established open-ended fund investing in real estate in Dubai.

SP: The majority of the Middle East is tax neutral, and it is clear why Guernsey, an established financial centre that imposes no taxes on external investors, is considered to be a natural home for Middle Eastern products. Additionally, we have the Channel Island Stock Exchange, and the ability to do exchange listings can potentially give Middle East products a better route to market, particularly in Europe, without being compromised by being in a conventional jurisdiction like the UK, where tax can inhibit performance. Guernsey Finance, the island's promotional agency, is also working to attract business from the region and has visited the Middle East, and attended fund conferences in the region, on a number of occasions.

WS: Guernsey Finance will be active during the latter half of this year in the Middle East and a number of the finance businesses in Guernsey are despatching representatives to visit different countries in that region for the purpose of promoting their firm and Guernsey. There is no need to change the structure of Guernsey regulation or indeed provide for any different legal structures for this purpose. All current requirements are adequately catered for by the legal and regulatory framework currently in place. However, Guernsey does need to and is taking steps to make Middle East clients more aware of what is currently available. Additionally, there is a level of growing knowledge and awareness in Guernsey of individual requirements of Middle Eastern clients, in particular, in some cases, in respect of Islamic finance.

MENA FM: What opportunities do you see arising for Guernsey in the near future?

SP: We are seeing continued active investment into the Middle East, with a number of Middle East and North Africa funds established over the past few years - for example, Argyll Investment Services itself is currently responsible for a recently launched property fund in Dubai (the Bluestone Fund), in a region which is continuing to develop in a number of areas, such as development finance.

In terms of fund products, Guernsey has established itself as a centre of excellence, particularly with regard to pension funds. The concept of a pension in Guernsey has, historically speaking, always been a fiduciary concept as opposed to an insurance-based promise. Today, a rising number of international investors – often ex-pat or retired ex-pats – located in third-party jurisdictions want their pensions affairs to be handled in a neutral jurisdiction and Guernsey has worked hard to become the pensions jurisdiction of choice.

MT: In order for Guernsey to be positioned to take advantage of opportunities in the near future, it needs to continue to demonstrate the highest standards, be that of the regulator and/or the local service providers. Earlier this year, Guernsey secured a position on the OECD "White List" of offshore jurisdictions, which are considered well regulated and tax transparent. Opportunities will arise for Guernsey, as it continues to adapt and be flexible in meeting the demands of the international regulatory community, fund sponsors and promoters, and investors.

WS: The economy worldwide appears to be improving and investment opportunities abound. Guernsey has retained and in some areas slightly expanded its workforce in the financial services sector. It is well known for regulated funds, as discussed previously, in a broad range of areas. It is likely that Guernsey will benefit significantly from the upturn in investment activities in Europe in any event. However, continuing efforts in the Middle East and Far East present a real opportunity for Guernsey. It is a strong, but less well known, competitor to the jurisdictions which are currently popular in those areas.

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
 
In association with
Related Topics
 
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