Guernsey offers depth and quality for investment funds

12 November 2020

Written by Justin Hallett BDO

Justin Hallett, Director, BDO Guernsey, outlines why Guernsey’s economic substance makes it a particularly appealing choice as an investment funds jurisdiction.

Despite Covid-19, there has been a large amount of activity this year in relation to establishing new funds. Some of this is to assist with the deployment of the high levels of undeployed capital that existed prior to Covid-19, but the activity also encompasses the establishment of new funds, including those aiming to take advantage of the suppressed valuations in the market due to the pandemic.

So, where should you establish your fund? Why would you look to anywhere other than Guernsey? As a quick recap, Guernsey has been an International Finance Centre for more than 50 years, is politically stable (outside the EU with third country rights already in place), is on the EU’s and OECD’s “whitelist”, offers real economic substance, has high regulatory standards (meeting 48 out of 49 of FATF recommendations), has experienced service providers, and has a regulator who is both flexible and pragmatic.

The depth and quality of Guernsey’s offering has led to more than 1,000 funds being domiciled in the island, in addition to making Guernsey the home to more non-UK listed entities on the London Stock Exchange than any other jurisdiction.

Of Guernsey’s many strengths, the one in focus at present is the real economic substance offering, which has led to Guernsey’s inclusion on the EU’s and OECD’s whitelist. The direction of travel is for fund managers to utilise jurisdictions which can and have met the new global substance standards. Guernsey’s substance proposition, which has been established and embedded for years, not just to meet new standards, has become a real differentiator and a significant advantage over many competitor jurisdictions.

The importance of substance was supported by BDO’s 2019 substance survey, with many Asian fund manager respondents reconsidering both fund structures (67%) and fund jurisdictions (83%) in line with the new standards. In addition to economic substance, the survey results showed that when considering a fund jurisdiction, the other principal considerations were cost, tax neutrality, reputation, speed and simplicity of set up, distribution of funds to investors, regulatory standards, experienced service providers and an experienced bank of non-executive directors. Guernsey meets all of these requirements and more, so there really is no reason to look elsewhere.

From this summer it has been made easier than ever to migrate a fund to Guernsey. Guernsey has introduced a fast-track system for migrations of investment funds and their managers to Guernsey. The regime is aimed at managers of Overseas Collective Investment Schemes to make it simpler for them to apply for a Guernsey licence. The regime makes it fast and efficient to obtain a Guernsey licence, enabling consent to migrate and completing the licensing process within a 10-day review period.

This is just one of a suite of fast-track application regimes introduced by the Guernsey regulator, which also include registered funds and private investment funds, with applications based on declarations from a licensed administrator.

Guernsey is not only a great place to establish and manage your funds and do business, but it is also a great place to live thanks to its beautiful environment, high standards of health and education provision, great beaches and its strong community spirit.

Back to News
Download Find a related practitioner