Guernsey has over 50 years’ experience of servicing global cross-border fund structures. Its open-ended funds sector includes approximately £90 billion of hedge funds and funds of hedge funds business as well as more traditional equity, bond and money market products. The infrastructure for open-ended funds is supported by: experienced administrators, custodians and support services; modern legislation; flexible regulation by the Guernsey Financial Services Commission; access to major stock exchanges; proximity to the UK; and a competitive tax environment.
Self-certification Qualifying Investor Funds (QIFs) enable very short authorisation times. The QIF approval process is only available to funds limited to qualified investors, who are professional investors, experienced investors and/or knowledgeable employees. An individual investor investing US$100,000 or more is a qualified investor. A parallel streamlined consent process for registered funds has also been introduced.
Although not in the EU, Guernsey has embraced the EU’s Alternative Investment Fund Managers Directive (AIFMD) and offers a dual regulatory regime whereby it is possible to continue to distribute Guernsey domiciled funds into both EU and non-EU countries:
- The existing regime which will remain for those investors and managers not requiring an AIFMD fund including:
(a) Those using EU national private placement regimes; and
(b)Those marketing to non-EU investors.
- An opt-in regime, which is fully AIFMD compliant.
For those managers with elements of EU and non-EU business, who require a single domicile for their products, it will be possible to place non-EU business in a parallel or feeder structure for which AIFMD compliance and the associated costs would not be required.
Guernsey’s regulatory framework provides a modern statutory structure for appropriate investor protection whilst retaining the ability to adapt quickly to market conditions. Rules are relatively non-prescriptive (e.g. flexible investment or leverage parameters), relying instead on disclosure, with lighter touch regulation for experienced investors. Prime brokers can be located either in Guernsey or elsewhere. Single investor funds are also available in certain circumstances.