Fiona Le Poidevin (pictured), Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry, looks at what Guernsey offers as a domicile for property funds in a post-crisis world.
It is no great secret that the global financial crisis has had a severe negative impact on the property market. In Guernsey we have seen the value of our property funds decline. This is not surprising considering that it is largely correlated to the performance of the wider market. However we have also seen values recover during the last three years.
A notable development last year was when the Cubic Property Fund Limited migrated from Jersey to Guernsey. It has been authorised as an open-ended scheme and has maintained its listing on the Channel Islands Stock Exchange (CISX).
This highlights the way in which Guernsey remains a jurisdiction of choice for domiciling property funds. Guernsey’s heritage as an investment funds centre stretches back around half a century. This experience means that the Island has built a wealth of expertise and first class infrastructure for the structuring and servicing of not just traditional funds but also alternatives, including property.
Another example of a property fund domiciled in Guernsey is the Standard Life Investments Property Income Trust Limited, which was launched in November 2003 as a closed-ended scheme investing in UK commercial property. It is listed on both the Main Market of the London Stock Exchange (LSE), as well as the CISX, with a value of £84m (€104m). The Guernsey administrator is Northern Trust, the auditor is Ernst & Young in Guernsey and Guernsey legal advice is provided by Mourant Ozannes.
The total value of funds under management and administration in Guernsey stands at £271bn (€336bn), with property funds comprising more than £13bn (€16bn).There are around 50 fund administrators in the Island, ranging from independent, boutique property specialists to globally renowned names who can also act as custodians. They do service non-Guernsey funds but a large proportion of their business relates to Guernsey domiciled open and closed-ended funds, which are now promoted and sponsored by leading institutions in more than 55 financial centres globally.
These can be established through a range of flexible investment vehicles such as unit trusts, limited companies, Protected Cell Companies (PCCs), Incorporated Cell Companies (ICCs) and limited partnerships. Entities incorporated in the Island can be listed a wide range of exchanges, including the London Stock Exchange (LSE), where there are more entities from Guernsey than any other non-UK jurisdiction globally. Guernsey structures can also be listed on the exchanges in Dublin, Frankfurt, Amsterdam and Hong Kong, among others, as well as the locally-based CISX, where there are more than 4,300 listings.
We have also grown a reputation for a robust yet pragmatic approach to regulation. For example, all Guernsey schemes remain regulated but ‘fast track’ routes have been introduced which allow for the speedy launch of funds, where appropriate.
Guernsey’s international standing has been underlined by the fact that the IMF has commended the Island’s financial regulation and Guernsey was among the first set of jurisdictions placed on the OECD’s ‘white list’ for tax transparency and exchange of information. Guernsey has signed Tax Information Exchange Agreements (TIEAs) with 37 jurisdictions and the Island is in the process of extending its network of Double Taxation Arrangements (DTAs).
In addition, the EU has recently given a clean bill of health to the Island’s zero-10 corporate tax regime. This means that all financial products will continue to be taxed a zero rate, although there was already a tax exempt regime for collective investment schemes and this will remain in place.
Guernsey is also fully engaged regarding the EU’s AIFMD. It is anticipated that in both the immediate and long-term, Guernsey will continue to be able to service structures with a connection to Europe, while the Island’s position outside the EU will enable it to offer an appropriate regime for funds not touching that marketplace.
Guernsey is an ideal home for property funds. Our experience in the asset class means that we are also able to provide debt restructuring services to property funds. It is an extra layer of comfort for managers to know that we will be able to help when times are difficult but principally Guernsey is chosen due to the infrastructure and expertise being available to help launch successful property funds.
This article was originally published in Property Investor Europe, Offshore Feature, Edition 274, October 2012