Guernsey has introduced a Private Investment Fund (PIF) regime designed to provide fund managers with greater flexibility and simplicity.
The PIF, which was developed in response to market demand by the Guernsey Financial Services Commission (GFSC) in consultation with the island’s GBP247 billion funds industry, recognises that certain investment funds are characterised by a relationship between management and investors that is closer than that of a typical agent.
The PIF dispenses with the formal requirement for information particulars such as a prospectus in recognition of that relationship, significantly reducing the cost and processing time of launching of a fund.
The PIF, which can be either closed or open-ended, should contain no more than 50 legal or natural persons holding an economic interest in the fund. Where an appropriate agent is acting for a wider group of stakeholders such as a discretionary investment manager or a trustee or manager of an occupational pension scheme, that agent may be considered as one investor. While there is a limit imposed on the number of investors in the PIF, no attempt has been made to limit the number of investors to whom the PIF might be marketed.
The development of the PIF follows closely on the heels of the launch of Guernsey’s Manager Led Product (MLP), a regime designed in light of the Alternative Investment Fund Managers Directive (AIFMD), which places the regulatory burden on the manager and not the fund.
Funds lawyer and Carey Olsen partner Ben Morgan says: “The MLP regime, recently introduced by the GFSC, will be tremendously useful once the third country passport is extended to Guernsey. In the meantime, this new PIF regime will be a fantastic boost for the Guernsey funds industry across all asset classes for the institutional investor fund market. The one-day fund registration turnaround by the GFSC will be a draw as will the absence of specific disclosure requirements.
“Institutional funds domiciled in Guernsey have enjoyed extraordinary growth, with tens of billions of pounds being raised by Guernsey funds over the course of the last six months. The PIF regime will undoubtedly generate further excitement and interest in Guernsey from a whole range of new and existing fund managers. It sends out a clear message that Guernsey is well and truly open for business.”
Guernsey Finance chief executive Dominic Wheatley (pictured) says: “For the second time in a year, the island’s regulator has shown that it is responsive to the needs of industry and the market. The difference an effective regulator makes to a business environment such as ours cannot be underestimated.”
The PIF is predicated on a close relationship between investors and the licensed manager, who will be responsible for providing warranties on the ability of the investors to assume loss. Under the new rules, both the PIF and its manager benefit from an application process that can be completed in one business day. The two processes may be completed in tandem by the GFSC, ensuring a short regulatory timescale.
Guernsey Investment Fund Association (GIFA) chairman Andrew Whittaker, who is also managing director of Ipes Guernsey, says: “The PIF is a fantastic addition to the Guernsey funds suite, which alongside the MLP allows a quick regulatory turnaround. It ensures fund managers have a choice of products to meet theirs and their investor’s needs in the ever-changing global landscape. This product should prove particularly attractive to sub threshold managers under the AIFMD.”