Since the launch of the Private Funds ("PFs") products in Guernsey and Jersey in 2016 and 2017 respectively, the regimes have been used for a wide variety of different purposes and fund product ranges - club-deals, family/private investment structures and the much larger mega-funds (eg SoftBank Vision Fund) have all availed themselves of this highly flexible and appropriately regulated fund product.
In recent months an interesting but growing trend is beginning to emerge which further demonstrates the attractiveness of Jersey and Guernsey to wider markets - the use by US based managers/promoters of the PFs, or alternatively, a Jersey or Guernsey domiciled single investor vehicle ("SIV") as a feeder structure established specifically and solely for such managers'/promoters' established European investor base. Where no formal fund raise or promotion is required, both PFs and SIVs offer an extremely effective and efficient solution.
In the current politically driven regulatory climate, managers/promoters in the major US fund centres are increasingly looking for alternative ways to structure investment vehicles suitable for and acceptable to their European domiciled investor base. For various reasons, Channel Islands structures are striking a chord:
- Regulatory - The PFs offer a light touch investment fund product suitable for sophisticated investors. Similarly, structured appropriately, a SIV is not subject to any form of regulation under applicable funds legislation in Jersey or Guernsey; both products thereby obviating the higher regulatory oversight (and therefore cost) demanded by some European jurisdictions.
- Flexibility - PFs and SIVs can be structured as companies (including cell companies), limited partnerships, unit trusts, (or, with effect from 1 December 2020 in Jersey, LLCs).
- Promotor/Investor Familiarity - Both regimes (including the regulatory treatment and the underlying legal constructs) are similar to offshore regimes with which US managers and their advisers are already familiar.
- Speed- Where all criteria are met, the PFs can be authorised by the regulators within just 24 hours. SIVs require no prior regulatory approval
- Upscale potential - if fund managers are looking to broaden the investor base, PFs can be converted to publicly offered funds products. Where fund raising does occur within the EU, Jersey and Guernsey products can be offered under national private placement regimes.
There are well over 400 PFs in existence (stats on SIVs are not kept), serving a variety of different purposes, but this recent US trend has the potential to increase those numbers much further, as Jersey and Guernsey's reputation and product ranges spread into new international markets.
By using a PF or a SIV, US managers are effectively able to access an easy and cost effective solution to the question of how to secure and grow their European capital sources.
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.