Mon, 30/06/2014 - 13:19
Fiona Le Poidevin of Guernsey Finance explains how Guernsey remains the ‘go-to’ jurisdiction for domiciling private equity funds.
As a jurisdiction, Guernsey has become synonymous with private equity.
There are in the region of 850 Guernsey domiciled investment funds which are used for cross-border distribution to all corners of the globe and there is recognition that there is a wealth of expertise and infrastructure in the Island for the structuring, management and administration of private equity funds.
Apax, BC Partners, Mid-Europa, Permira and Terra Firma amongst others have established operations in Guernsey which is a testament to the infrastructure that is available. In addition, Ashmore, Better Capital, Cinven, Coller Capital, HarbourVest, Neuberger Berman and Pantheon utilise Guernsey investment structures.
Investors and promoters are reassured by the position Guernsey has taken regarding AIFMD.
Guernsey is not in the EU (or wider EEA) and therefore, as a third country, is not required to implement the AIFMD. However, a large proportion of our funds business relates to Europe in some form, while we also have a substantial amount of business which originates outside Europe.
As such, the Island has put in place a dual regulatory regime so that it is possible to continue to distribute funds into both European and non-European countries: the existing regime remains for those investors and managers not requiring an AIFMD fund, including those using National Private Placement (NPP) regimes and those marketing to non-EU investors; as well as an opt-in regime which is fully AIFMD compliant.
Guernsey managers who want to access Europe continue to use NPP regimes, which are expected to remain until 2018. The NPP route will likely be favoured by many given that the requirements to satisfy AIFMD will be over and beyond what is required under NPP.
It remains that Guernsey has an existing base of clients for whom Europe is an important market and the opt-in equivalent regime which has been in place since January 2014 will be appropriate for such funds. For those with a growing non-European focus, it will be possible to place this business in parallel or feeder structures for which AIMFD compliance and the associated costs would not be required. Commercial decisions should dictate the most suitable approach.
Full passporting for non-EU AIFMs is expected from July 2015. Guernsey managers will be ideally placed to take advantage of being able to market on a pan-European basis with a single authorisation, as passporting is currently envisaged to operate.
Guernsey’s funds sector has enjoyed considerable growth in recent years and at the end of 2013, the total net asset value of funds business stood at £266 billion, with the net asset value of private equity funds under management and administration reaching more than £86 billion – a rise of 6.2% over the course of the year.
Growth is aided by the ability of Guernsey entities to access a range of international stock exchanges including the London Stock Exchange (LSE), Euronext, Ireland, Australia, Toronto, Frankfurt, Hong Kong and the local Channel Islands Securities Exchange (CISE), as well as many others. LSE figures to the end of December 2013 show that there are more Guernsey entities, 115, listed on its markets than from any other jurisdiction globally (ex-UK).
Guernsey’s rise as a leading centre for private equity has been consistent and with its thirst for innovation and adherence to high standards. There is confidence that it will continue to remain the premier European centre for private equity business well into the future.
This article is written by Fiona Le Poidevin is Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry. For more information call +44 (0) 1481 720071, email [email protected] or visit www.guernseyfinance.com.
An original version of this article was published in BVCA Journal, Summer 2014.
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