Guernsey: fund domicile
Guernsey’s growth shows no sign of abating
Guernsey’s reputation as a major fund domicile continues to grow. Figures from Guernsey Finance testify to this with funds under management and administration in Guernsey standing at £218.7 billion at December 2014. These funds cover multiple asset classes and types including closed-ended and openended fund structures. Guernsey is also the favoured jurisdiction for limited companies to list on the London Stock Exchange. Guernsey’s strength has historically been with private equity, having serviced the asset class since the 1980s. Brand names including Terra Firma, Permira and Apollo all have promoters in Guernsey. But that is not to say Guernsey cannot service other asset classes such as hedge funds, real estate or infrastructure, given its broad expertise, service provider credentials and solid regulations.
Guernsey’s reputation as a major fund domicile continues to grow.
Flexibility
Guernsey’s flexible regime towards openended funds and close ended fund makes the jurisdiction very attractive to set up a vast array of alternative asset managers including hedge and private equity funds. The regulator has a quick response time enabling firms to register in good time and has a sensible approach to investment restrictions enabling a diverse range of fund products to establish themselves in the jurisdiction. Guernsey’s expertise make it well suited to service a number of investment vehicles including limited partnerships, unit trusts, protected cell companies (PCC) and incorporated cell companies (ICCs). Guernsey is also home to some of the leading global service providers covering law, corporate governance, administration, accounting, valuation and registrar services. These organisations, including Mourant Ozannes, have a long history on the island and are well-placed to meet the challenging requirements of financial institutions.
Regulation
The Guernsey Financial Services Commission (GFSC) is an experienced, pragmatic and rigorous regulator. It sets high standards but ensures firms remain competitive, a feat that is not always achieved by other regulatory bodies. The regime’s response to the Alternative Investment Fund Managers Directive (AIFMD) is testament to this pragmatism. Guernsey was one of the first offshore jurisdiction’s to attain equivalence with the EU Directive, and has adopted a dual-sided approach towards AIFMD. Firms are permitted to utilise the national private placement regimes on offer in the 28 EU member states and adhere to the rules laid down by AIFMD. Alternatively, they can simply solicit non-EU investments and absolve themselves from the onerous compliance obligations laid down in the Directive. The European Commission is going to determine whether national private placement can continue, or whether the passport will be extended to non-EU managers of non-EU funds. The European Commission could potentially shut out non-EU managers of non-EU funds although this option would precipitate condemnation and accusations of protectionism. Guernsey is a strong candidate to be a beneficiary of the pan-EU marketing passport, which allows unimpeded distribution rights across the EU. Our regulatory regime has been at the forefront of attaining compliance and equivalence with the AIFMD, and as such is well-placed to benefit from the passport.
Taxation
Guernsey (and other offshore jurisdictions) is much maligned in the popular press for being a tax haven. Such criticism is misguided. Guernsey was one of the first offshore jurisdictions to sign an Intergovernmental Agreement (IGA) with the US enabling the exchange of information on US accountholders with the US authorities as mandated under the Foreign Account Tax Compliance Act (FATCA). The UK launched its own variant of FATCA with the Crown Dependencies and Overseas Territories, again, something Guernsey has been fully cooperating with. This determination to attain tax compliance makes Guernsey exceptionally well-placed to adhere to the rules laid out by the Organisation for Economic Cooperation and Development’s (OECD) Common Reporting Standard (CRS). Even the yetto-be-determined Base Erosion and Profit Shifting (BEPS), another OECD initiative, should not overly concern Guernsey. At the heart of BEPS is the requirement that firms using lower tax jurisdictions have a substantive presence in those jurisdictions. This is already a requirement in Guernsey.
Going forward
Guernsey has demonstrated that it is a competitive, well-regulated and experienced fund domicile. Its regulator is market-friendly and pragmatic, while its service provider community is world-leading. Guernsey, which has repeatedly demonstrated its robustness, continues to grow and attract best of breed talent.
