Jersey and Guernsey simplify migration of fund structures

The moves represent an ongoing blurring of distinctions between off-shore domiciles used by private funds, says one industry lawyer.

The Channel Islands have issued new regulations facilitating the migration of fund structures to Jersey and Guernsey.

In July, Jersey adopted a new amendment to its Limited Partnership Law 1994 that makes it easier for lawyers to give a legal opinion as to the validity of the migration of limited partnership fund structures to the jurisdiction.

In a separate announcement in June, the Guernsey Financial Services Commission introduced a new fast-track licensing regime for managers of overseas collective investment schemes to simplify applications for a license in the island.

The simplifications come only a few months after another popular jurisdiction with private equity investors, Cayman Islands, was placed on the EU blacklist of non-cooperative tax jurisdictions in February.

“This really was purely coincidental that this happened at this time,” said Philip Pirecki, head of business development for the Americas at Jersey Finance. “It’s something that had been in discussion for a while.“

Craig Cordle

The announcements by Jersey and Guernsey are signs of a much broader trend as different jurisdictions have aimed in recent years to be more global and more diversified in their offerings.

“Over the past couple of years, there seems to be a kind of equalization happening across jurisdictions,” said Craig Cordle, a partner in Ogier’s investment funds team in Guernsey. “Things have moved closer in terms of the requirements for fund managers to be licensed or to be regulated and for vehicles to be regulated.”

Traditionally, certain jurisdictions would attract investors for specific reasons, usually linked either to geographies or asset classes, but increasingly, jurisdictions around the world are trying to be a one-stop shop for fund managers and their investors.

“In terms of asset classes, typically you see hedge funds going to Cayman, private equity coming to the Channel Islands,” said Emily Haithwaite, a partner at Ogier in Jersey. “Those distinctions are getting to be fewer and fewer and have become less apparent. Cayman sees some private equity as well now. It’s more to do with what your investors are demanding and where they’re based and how easy it is to market to them. Fund structuring has certainly become far more complex.”

Emily Haithwaite

The main beneficiaries of these amendments in the Channel Islands will be managers based in the UK and in Europe looking to migrate their fund structures.

“This really will make a difference on the EU side for EU managers that were seeing a real problem with using Cayman for a number of reasons, regulatory in nature,” Pirecki said. “Where you can solve a fairly simple problem, and migrating your fund out of Cayman into Jersey…solves that problem, it’s a non-disruptive way to do that.”

It’s too soon to tell whether the new rules from Jersey and Guernsey coupled with Cayman being put on the EU blacklist will redirect business to the Channel Islands and translate into an actual uptick in relocations, but Pirecki has already noted an increase in interest and inquiries in recent months.

The EU finance ministers may remove Cayman from the blacklist if its review of the jurisdiction in October finds that the revised private funds law meets its concerns.