If you are considering setting up a mutual fund or collective investment scheme (“CIS”), the amount of legal administration and paperwork that must be prepared and completed can be daunting.
Hiring a “Prime Broker” or major law firm to do the necessary can be a very expensive option. We offer an alternative.
We have offices in Cayman Islands, Bahamas, British Virgin Islands, Gibraltar, Isle of Man, Malta, Cyprus, Mauritius – in fact all the major offshore centres where funds are most commonly established. We can assist with the set up of fund structures in all of these jurisdictions and more besides.
We offer a turn-key solution including:
- incorporation and licensing of fund company;
- incorporation and licensing of fund management company;
- drafting of fund prospectus;
- drafting of agreements between the fund/investment manager and others such as custodian, investment advisor, bankers, registrars and company secretaries;
- introductions to auditors, bankers, brokers etc;
- full fund administration and investment management services.
In Bahamas we are permitted by the Central Bank to licence funds so can have a fund up and running in a matter of days.
Our services in this area would normally cost between US$25,000 and US$50,000. This is a fraction of the fees charged by prime brokers and leading law firms for the same service.
Under a traditional fund structure, both the fund company itself and the fund manager are incorporated offshore. The manager generally charges the fund a fixed annual fee of around 2% as well as an additional performance fee of up to 20%. The investment strategy typically remains in the hands of the promoters of the fund, who are incorporated onshore and formally appointed by the fund manager as investment advisor to the fund. The investment advisor would normally receive a market rate portion of the fees reserved to the manager and any profit will be fully taxable onshore.
In an ideal scenario, therefore, the majority of the management fees would be retained by the managers in a low tax environment offshore. However many onshore countries have enacted rules that enable undistributed profits held offshore to be attributed to onshore shareholders. With care this charge can be planned out.
Depending upon the country of residency of the promoters, Sovereign can advise on how to structure the affairs of the fund, management company and investment advisor so as to achieve maximum tax efficiency and defer or avoid tax on as much of the management fee as possible. We can also advise upon suitable holding vehicles that would allow a sale of the fund to be achieved free of capital gains tax.
Most clients prefer to assign the management and administration of their fund or funds to a professional. Working with a fund administrator allows managers to focus on generating value and avoids the fixed costs of establishing and maintaining an in-house capability.
In addition to its comprehensive fund formation and licensing services, Sovereign can provide ongoing administration, including accounting, registrar and transfer agency services. Our team will ensure that a fund is compliant with relevant laws and regulations, while preserving maximum flexibility.