Since their launch in 2016, Jersey Private Funds have been put to a variety of uses as a flexible tool for investment fund managers. The JPF was one of the first offshore private fund regimes to substantially simplify the Jersey offering for a funds product that resets the regulatory demands for fund managers that are not raising money from a huge number of investors, instead targeting only sophisticated investors and, in some cases, without publicly raising money at all.
Our team of Jersey funds lawyers have advised on many JPF launches for established managers, start-up managers, and most recently, for family offices or otherwise on behalf of wealthy individuals and families.
Typical uses for Family Offices
In the last 12 months we have seen increased use of JPFs by family offices created by high net-worth and ultra high net-worth families. These tend to fulfil one or more of the following four objectives:
- to bring the next generation of a family on to company boards to give them exposure to the management and governance of family assets and investment strategy;
- as vehicles for club deals or joint ventures for investment with others from outside of the immediate family – for example, in the Middle East it is relatively common for members of different families to club together;
- to introduce professional expertise so as to future-proof the management and oversight of family assets where the next generation are not interested in playing a more active role; or
- to enable families with a wealth of knowledge in private investment to build a track record in the investment fund space.
Jersey's key advantage is that many family offices – including multi-family offices – are already based in the Island, and are staffed by professionals with a clear picture of the jurisdiction's regulatory and legal framework, including the funds regime as well as the regime for more traditional private wealth products such as trusts and foundations.
The JPF offers time zone adjacency for London and European markets, not to mention the familiar London-style service culture and the Jersey kite mark of quality regulation and a deep bench of service providers.
Key features of the JPF
The key features of the JPF include:
- 50 or fewer offers/investors – marketing can only be to 50 or fewer "professional" or "eligible" investors (generally investors who invest or commit to invest a minimum of £250,000 or currency equivalent) and a JPF may only have a maximum of 50 investors at any one time;
- a JPF can be formed as any type of company, partnership or unit trust;
- a JPF can be open or closed-ended and investment objectives can be limited or purposely broad;
- a JPF can be self-managed by its board of directors or may appoint a separate (Jersey or non-Jersey) manager or advisor;
- there is no requirement to have a promoter that has been approved by the Jersey Financial Services Commission, although there must be a "Designated Service Provider" regulated by the JFSC (typically this would be the fund administrator);
- JPFs can be marketed into the UK and EU/EEA using national private placements routes; and
- if the JPF is particularly successful and the family wish to broaden the offer to more than 50 potential investors, it may be possible to convert the JPF to a more widely offered Jersey Expert Fund at a later date.
Global markets continue to see an increase in the deployment of capital from private sources, not just institutional ones, and the JPF is a product that specifically caters to that trend. More than 400 JPFs have been registered with the regulator, including almost 100 during 2020. We expect to see the use of JPFs continue, and for their use as a wealth-structuring tool to become more prevalent because the Jersey offering combines speed, flexibility and an appropriate light-touch regulatory regime that is clearly resonating with wealth managers and private client lawyers.
Walkers Investment Funds & Corporate and Private Capital & Trusts teams are experienced in the structuring, launch and use of JPFs and we are well placed to advise on any queries regarding JPFs as a wealth structuring tool, or their wider use by fund managers.
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.