Proposed amendments to Guernsey's Private Investment Fund (PIF) regime are being welcomed as a way of enhancing an already-successful investment product. In this article Matt Sanders, Managing Partner of law firm Walkers in Guernsey, explores how the PIF is bringing Guernsey into play when US managers are looking to target European capital.
Since the launch of the Private Investment Fund product in Guernsey in 2016, the regime has 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 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 Guernsey to wider markets – the use by US-based managers and promoters of PIFs, or alternatively, a Guernsey-domiciled single investor vehicle ("SIV") as a feeder structure established specifically and solely for the established European investor base of managers and promoters.
Where no formal fund raise or promotion is required, both PIFs and SIVs offer an extremely effective and efficient solution.
In the current politically-driven regulatory climate, managers and 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, Guernsey structures are striking a chord:
- Regulatory – PIFs 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 Guernsey; both products thereby obviating the higher regulatory oversight (and therefore cost) demanded by some European jurisdictions.
- Flexibility – PIFs and SIVs can be structured as companies (including cell companies), limited partnerships, or unit trusts.
- Promoter/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 PIFs 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, PIFs can be converted to publicly-offered funds products. Where fund raising does occur within the EU, Guernsey products can be offered under national private placement regimes.
Proposed amendments to the regime being put forward by the Guernsey Financial Services Commission, following discussions with industry, are welcomed, and should only enhance the reputation and use of the product.
There are more than 60 PIFs 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 Guernsey's reputation and product ranges spreads into new international markets.
By using a PIF 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.
Matt Sanders is the managing partner of Walkers' Guernsey office, and the co-head of the firm's Guernsey Investment Funds and Corporate Practice Group. He has more than a decade's experience offshore, advising international and local clients on the full range of funds and corporate matters, with a particular focus on the establishment of Guernsey Private Funds, and complex M&A deals.
For more information about Guernsey's finance industry please visit www.weareguernsey.com.
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