Bermuda: An Innovative Tool In Private Wealth Management

Last Updated: 21 July 2016
Article by Peter Ch'ng


The benefits and uses of Bermuda segregated accounts companies (SACs) to ring-fence assets and liabilities in insurance and investment fund structures are long-established. The Bermuda Supreme Court has consistently upheld confidence in, and the strength of the SAC.

In the private client sector, use of an SAC mutual fund company can be a unique addition to the usual combination of trust and corporate entities for wealth management. A private SAC mutual fund dedicated to a high-net-worth family may achieve flexible and diverse investment and inter-generational asset protection objectives, while offering a greater degree of engagement by family investors.


Affluent families often use a family office to preserve wealth and manage their affairs separately from their business activities. With family members and their wealth and interests spread out globally, contending with diverse legal and cultural considerations in their wealth and estate planning, family offices provide an integrated professional and administrative service, navigating today's highly regulated environment. The family office can be the central coordinator of specialist advisors to determine the best options for the family in terms of philosophy, governance and objectives, including strategic philanthropy.

The family office may also undertake the education of future generations. A chief concern is the need to share the family blueprint with the next generation and to involve them in the management of their own wealth in a controlled family mutual fund structure.


The family office incorporates a "personal" mutual fund company registered as an SAC. Segregated Accounts (accounts) may be created by the SAC to individually hold diverse assets or strategies. Each account may issue redeemable participating shares to members of the family and affiliates (in their personal capacity or through a buffer entity such as a company, limited partnership or trust).

They may become beneficial owners of the assets of the accounts through the participating equity. Separate trusts for different branches of the family may hold account-linked shares. A typical family office SAC structure may be depicted as follows:

Redeemable investment shares and associated investments are made available only to family members or their relevant trusts or trustees and would likely be regarded as a qualified private exempted offering.

By creating individual accounts with different investment strategies, the family may mix and match investment portfolios through equity subscriptions.

For example, an SAC may create separate accounts to hold commodities, publicly traded securities to be managed by a licensed US broker-dealer, and more speculative investments such as coal mines in Brazil. The liabilities of each account are segregated and ring-fenced. An investor may choose to invest in the accounts in any desired combination. Further, the shares may be gifted or held for succeeding generations as a nest egg in one or more trusts.

A Bermuda mutual fund SAC with fewer than 20 participants will generally qualify as an excluded private fund under the Investment Funds Act 2006 and will therefore be excluded from regulation by the Bermuda Monetary Authority. Certain investment funds eligible for exemption incur minimal reporting obligations. Audited financial statements for each account may be prepared or collectively waived by the investors.

Unlike unlimited partnerships, investors may also participate actively in investment supervision by appointing themselves or their advisors to investment committees for specific accounts without losing their status as limited liability investors.


Separation and Protection

An SAC affords greater protection against risks and losses, and insulates investments without the need to establish corporate entities. The failure of one account will not affect the solvency or viability of another, unless the latter has undertaken to underwrite the former.

The SAC structure permits portfolio diversity and solates the risk from each strategy. Each investment is ring-fenced and compartmentalised in respect of access to account reports and information.

In a trust structure, an obligation exists to act in the overall interest of every beneficiary. Investors/beneficiaries in an SAC may choose which account to invest in, according to their individual risk profile and diversification strategy, as each investment is separately owned and maintained. An investor (i.e. a family member or a related trust for their benefit) wishing to exit an investment strategy is able to redeem shares, providing greater flexibility than does a trust.

By law, account transactions may not be inspected by third parties with no interest in the account, potentially offering a wall of confidentiality from exited investors or other family members.

Individualised Dividends and Distributions

The account must be commercially solvent when paying dividends and distributions. There is no requirement for the SAC or all its accounts to be solvent when a dividend/ distribution is declared or paid from a solvent account.

Inter-account Support

With investors' consent, the SAC structure allows for one account to transfer assets to or financially support another account. For example, an account may enter into derivative contracts such as currency calls or put options, with another account providing collateral support to the first account. The supporting account is insulated against any direct claim by the trading counterparties of the first account.

The Offshore Benefit

In some instances there could be tax and other legal advantages of legitimately deferring income tax on dividends or capital gains tax from realisation of overseas investment assets, including arising from the redemption of the shares by a SAC that is managed offshore.

A unique feature of the family offshore SAC is for each account to be accompanied by a dedicated and separate "redemption account", for the sole purpose of receiving the proceeds of redemption of shares in the account, without repatriating the proceeds back to the home jurisdiction, possibly incurring a taxable event (see the illustration above). The investors would exchange their participating shares in the account for similar shares in the redemption account, effectively exiting an investment strategy and parking their proceeds in a ring-fenced fund held by the same SAC. Proceeds in the redemption account may subsequently be deployed for reinvestment in any other investment account of the SAC or to external investments.

Costs and Economies of Scale

The administration of separate trust and corporate entities can be costly. An SAC may have any number of accounts, at a lower cost per fund, while centralising administrative control in the same entity.

The family office can take on part of the role and functions of the investment manager or advisor to the SAC and charge a fee/commission to defray its administration costs. It may also fund family-oriented goals and projects. A family office/investment manager not operating within Bermuda need not be licensed or regulated in Bermuda.

Incorporated Segregated Accounts Companies

Bermuda has been exploring the potential for Incorporated Segregated Accounts Companies (ISACs). ISACs create incorporated accounts with separate legal identity, being advantageously severable from the ISAC core entity. This may prove attractive to members looking to create legally distinct governance for their accounts, but still share back-office functions and costs with the core ISAC, until they are ready to spin off an account into another entity.

Following the banking crisis, many wealthy families and their family offices have retreated from reliance on bank-affiliated advisors and taken greater charge and control. A bespoke SAC provides an efficient tool to hold diverse investment assets with minimal regulation and maximum flexibility for family or close-knit investors to chart their own financial course.

Originally published by

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.

Peter Ch'ng
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions