What a PIF can do for me
05 January 2018
Just over a year ago, the Guernsey Financial Services Commission (GFSC) announced the launch of the Private Investment Fund (PIF).
The smart and simple PIF recognises that certain investment funds are characterised by a relationship between management and investors that is closer than that of a typical agent. Where such a relationship exists, the PIF regime provides fund managers with greater flexibility and simplicity.
In the regime’s first full year, the regime was used to launch multiple private equity funds, building on the island’s expertise in alternative investments. A local managed futures fund became the first open-ended PIF when it converted to avail of the regime’s unique features (link to flyer).
To illustrate how the PIF regime may be of use to you or your clients, we have prepared two stylised case studies:
Case study 1
Mr. X runs the X family office. Over the years, the X family have invested in a number of club deals where they have coordinated and managed the transactions. Each club deal involves five to 10 investors from their network of contacts, and invests in a wide range of assets (e.g. a real estate portfolio or a series of private equity-like investments).
With this track record, Mr X would like to establish a flexible, regulated platform for similar club deals where they can be recognised (and remunerated) as the coordinating and managing party.
Mr X establishes X Investments PCC Limited as a PIF. Each cell (sub-fund) of the PCC will be used to house the assets and investors of each club deal. X Investment Management Limited (a newly formed Guernsey company wholly owned by the X family) is established in Guernsey as the manager of the PCC and each of its cells (sub funds).
The application for the registration of the PCC (the fund) and licensing of the manager are submitted to the island’s regulator and approval is granted the next day.
Case study 2
XYZ Capital is an investment house targeting institutional investors. It has come across an investment opportunity in the private equity space which must be acted on quickly. The issue is that certain institutional investors are insisting that the fund vehicle (and its manager) are regulated.
XYZ Capital establishes XYZ Limited Partnership LP as a PIF. The general partner, XYZ GP Limited, appoints a newly formed Guernsey company, XYZ Investment Management Limited, as its investment manager.
The application for the registration of the limited partnership (the fund) and licensing of the investment manager are submitted to the island’s regulator and approval is granted the next day.
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