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Pre-eminent in private equity

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Since 2000 Guernsey has been growing its reputation as a leading private equity domicile.

Since 2000 Guernsey has been growing its reputation as a leading private equity domicile. There is strong competition between jurisdictions for this business, but the events of the past few weeks and months have crystallised the fact that the island now heads the pack.

What really set the ball rolling was the launch of a Guernsey-domiciled fund, KKR Private Equity Investors, by Kohlberg Kravis Roberts, raising more than USD5bn before being listed on Euronext Amsterdam. The transaction was honoured as Equity Deal of the Year at last year’s International Financial Law Review European Awards.

Other notable Guernsey private equity funds have followed the example of KKR, including Mid Europa III, the largest central European buyout fund with more than EUR1bn; Valdivia Private Equity Fund; Energy Ventures III; AA Development Capital India Fund, a joint venture between Ashmore and Alchemy; and EQT V (Clifford Chance) which raised EUR4.25bn.

According to the Guernsey Financial Services Commission, overall fund business in Guernsey grew by GBP13.7bn (8.3 per cent) in the last three months of 2007 despite continuing market turbulence during the quarter. That took the total value of funds under management and administration to a new high of GBP178.2bn – an increase of GBP48bn (37 per cent) during the year.

The value of private equity funds trebled between the end of 2002 and December 2006, and by the end of last year they had a total value of GBP34bn – up GBP13.6bn (66 per cent) over the year and by GBP5.5bn (19 per cent) in the fourth quarter alone.

These impressive figures have been backed up by the opening of an office in the island by Guy Hands’ private equity firm Terra Firma at the start of this year. There has also been significant third-party endorsement by experts such as London lawyer Bridget Barker, a partner at Macfarlanes, who describes Guernsey as ‘the jurisdiction of choice for private equity’.

Jon Moulton, the founder and managing partner of Alchemy Partners who now lives in Guernsey, says the island is ‘a terrific place in which to do business’. He will be the keynote speaker at a masterclass entitled Guernsey – Leading the Way in Private Equity, which will be held in central London at the start of May in conjunction with the Guernsey Investment Funds Association.

I agree with senior GIFA figure Mike de Haaff when he says: ‘Even putting aside the tax neutrality of the island, our success in private equity is down to the intellectual property that has been built up, the experience and infrastructure now on the island in setting up and administering these products. Guernsey has a long-established expertise in this area.

‘The majority of business still comes through lawyers in London, and it is a known fact that people come to Guernsey for private equity. Word of mouth is a big factor in the relatively small private equity community. It’s recognition that we have everything in place and are well placed to set up these products.

‘In private equity as with many other products now, management control issues and corporate governance are more to the fore, and Guernsey is very conveniently located for directors to get on an aircraft for board meetings.’

This body of evidence is just the tip of the iceberg but it clearly illustrates Guernsey’s credentials as the pre-eminent jurisdiction for private equity.

Peter Niven is chief executive of GuernseyFinance, the promotional agency for the island’s finance industry

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