Wed, 08/02/2017 - 13:29
Last year the number of hedge fund launches globally fell by an estimated 40 per cent, but despite this there have been a number of positive developments for the funds industry in the BVI.
One is the creation of an AIFMD opt-in regime for the BVI, called the Securities and Investment Business (AIFMD) Regulations, as the BVI looks to seek approval from the European regulator, ESMA, for third country equivalence and introduces into the BVI an AIFMD equivalent regime.
"Secondly, there is fairly advanced work on updating the BVI's Partnership Act. This statute is due a refresh and expected to be finalised during 2017. It will enhance the BVI's partnership regime at a time when other jurisdictions are also looking at updating their equivalent regimes," says Jersey-based Simon Schilder (pictured), Partner at Ogier and head of the firm's BVI Investment Funds Practice.
He continues: "There are also enhancements in the pipelines which are being made to the BVI's Segregated Portfolio Company Regulations, the main change being to open up the product to accommodate a broader range of opportunities than currently exist. At present, one is only able to use SPCs for open-ended funds and for insurance companies. The new enhancements will expand the types of structures that can utilise a segregated portfolio company ("SPC") structure, significantly to enable closed-ended funds to utilise SPC structures. This is good news as we are continuing to see interest from managers to utilise SPC structures, as managers like the legal ring fencing capability that they offer".
"If someone is pursuing a closed-ended strategy but can't do something because the right legal vehicle isn't available to implement that strategy in the BVI, it will prompt them to look at other jurisdictions where they can", says Schilder.
"In this marketplace you have to be nimble with your regulation and look to improve your competitiveness wherever possible."
A good example of this in recent years has been the introduction of the BVI Approved Fund and BVI Incubator Fund, which have steadily gained traction over the last 18 months. The Incubator Fund gives start-up managers a two-year easier ride (from a regulatory perspective) where they can test their investment strategy and gain a track record, which can be extended to a third year with regulatory consent.
"We are six months away from seeing the first wave of Incubator Funds needing to convert to a BVI Professional Funds or extend their Incubator Fund status for a further twelve month period (or shut down). The whole point of the Incubator Fund in the first place was to get people through the door in the BVI and give them a platform with which to test their investment strategy and develop a track record, which they could then market to investors upon conversion into a Professional Fund" explains Schilder.
He thinks that updating the BVI's Partnership Act, which is 21 years old, is the latest example of the BVI moving forward:
"The way businesses are run has changed and you need to have legislation that is in tune with the current marketplace and industry standards. The BVI has a relatively modern set of statutes across the board but at the moment the one that sticks out as being in need of an update is the Partnership Act. Once updated, this will leave the BVI with a suite of modern statutes."
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