Philip Graham, partner and head of the investment funds and regulatory team, Harneys (BVI), explains why the British Virgin Islands is a domicile of choice for many fund managers.
While last year was a fascinating period on a wide variety of global macro levels, for the British Virgin Islands (BVI) funds industry, it was largely business as usual. With the approved manager regime increasingly becoming a huge success story, the BVI began to make its voice heard once again in the funds sector, and with well over 2,100 regulated funds domiciled in the territory (making it the second largest funds jurisdiction in the world), it is a voice that deserves to be heard loud and clear.
The approved manager vehicle deserves a great deal of credit for the recent resurgence in the popularity of the BVI. Launched in 2012, it was a perfect collaboration between the public and private sector to create a product that seemingly filled a void in the global funds space. It is a management vehicle regulated by the Financial Services Commission, but as lightly and pragmatically as possible, allowing the approved manager to not only be one of the quickest to launch, but also one of the most cost-effective, two factors that are absolutely critical to an emerging manager.
The popularity of this product was apparent from the outset, but it picked up some serious pace once the regulations were extended to allow an approved manager to not only manage funds domiciled in the BVI, but also fund vehicles in 40 other jurisdictions and counting. This incredible flexibility has seen interest in the approved manager rapidly spread right across the globe. Therefore, fast-forwarding to the end of 2014, when the success story of the approved manager had been acknowledged and accepted by the public and private sector alike, the logical next step was to look at the fund products available in the BVI and determine whether they too could be upgraded to address the concerns of the modern emerging manager.
While the traditional types of fund vehicles formed in the jurisdiction remain as valid today as they did upon their introduction in 1996, there is no doubting that members of the BVI funds industry have long held the view that introducing some new types of licences may actively assist with taking the BVI to the next level. It is on that basis that the members of the Investment Funds Association sat down together at the end of 2015 and began to write down their views on how we could grow the industry. One of the primary focuses, given the cost-effective and highly flexible nature of the BVI as compared to some of its competitors, is to ensure that we can attract new entrants into the global funds market, who will be keen to ensure that their fund vehicle is domiciled in a jurisdiction that meets all of their requirements and offers them the best possible opportunity to get it off the ground and develop a marketable track record.
On that basis, the paper we presented to the Financial Services Commission contained a recommendation that two new types of fund vehicles be introduced in the BVI in 2015. The first would be an incubator fund, aimed solely at those looking to launch with the absolute minimum amount of cost and regulatory hurdles to jump over. The second would be a lightly regulated fund vehicle that would sit hand in hand with the approved manager and be the perfect combination for an emerging manager who wanted to get the whole framework established that would not only meet all of the requirements of an investor due diligence questionnaire, but would be available quickly and efficiently in accordance with their specific timetable.
I am very happy to report that the paper was well received by the Commission and we understand that both products will indeed be launched in the global market this year.
We are therefore very optimistic that these new fund vehicles really could be the catalyst for a bright and highly active 2015 for everyone involved in the BVI funds industry. If you are an emerging manager wanting to develop a track record or indeed an existing manager looking to minimise your cost base and/or maximise regulatory flexibility, the BVI has put out its welcome mat and would very much like you to call it home.
This article appeared in the 5-11 March 2015 issue of HFM Week.
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