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An emerging trend: Jersey Private Funds and venture capital

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An emerging trend: Jersey Private Funds and venture capital

Combining flexibility with cost and time efficiencies, Lauren Salkeld, Client Director - Alternative Investments examines the rising popularity of the Jersey Private Fund (JPF) product and its suitability for venture capital and start-up promoters.

Introduced in April 2017 to provide institutional and professional investors with a more streamlined funds regime, the JPF product has steadily grown in popularity as fund promoters and managers search for a flexible solution for structuring private funds. As at 31 March 2019, there were 215 JPFs registered in Jersey, totalling an estimated £19.4 billion.

Although the JPF product is attracting attention from a wide range of fund promoters due to its simplifying of the go to market process, we have witnessed an emerging trend of venture capital and start-up firms choosing the JPF structure. This is supported by strong and sustained venture capital investment in Europe - 2018 witnessed funding surpass €20 billion for the first time.

What is a Jersey Private Fund?

A JPF is a private investment fund that can be offered to 50 investors or less. Through the national private placement regime, a JPF can be marketed in the European Union for those promoters targeting a European investor base.

Supporting growth: JPFs and venture capital

Providing a low-cost and streamlined solution with light-touch regulation, the JPF product suits the venture capital strategy of establishing fast, cost-effective funds to pool capital and invest in a number of assets. Whether launching their first fund or indeed a successor fund, choosing a JPF allows managers to focus on core value-adding activities such as their investments and fundraising.

Considerations surrounding domiciliation, structuring and marketing combined with investor needs can be difficult and time-consuming to navigate for start-up managers. The simplification and flexibility of the JPF is therefore proving to be an emerging, popular solution and the upward trajectory is expected to continue.

Key features of the JPF desirable for venture capital and start-up promoters are:

  • Light touch regulation
  • Simplified application form
  • Fast-track 48 hour approval process
  • Open-ended or closed-ended
  • No obligation to appoint an auditor
  • Investors must be 'professional investors' or 'eligible investors'
  • Minimum investor commitment of £250,000
  • Flexibility in terms of jurisdiction of establishment  and structure (a JPF can be a partnership, company or unit trust)

Other key benefits for promoters include:

  • Each JPF must appoint a Designated Service Provider (DSP) and reliance is placed on the regulation of the DSP, rather than on the JPF
  • Subject to certain criteria, there is no requirement for the promoter to be approved by the Jersey Financial Services Commission (JFSC)
  • No requirement for directors and shareholders to submit personal questionnaires to the JFSC
  • No requirement for an offering document

A foundation for success: Jersey

The introduction of the JPF product has further enhanced Jersey's reputation as an innovative and efficient destination in which to launch a fund, epitomised by  the world's largest ever venture capital fund - the $100 billion Vision Fund - basing itself there. From the five year period 2013-18, Jersey's funds business grew 66 per cent, reflecting the confidence and long-term appeal that managers are finding with the Island's regulatory standards, expertise and international market access it provides.

To find out more about the JPF product and to clarify any terminology, you can access the Jersey Financial Services Commission Jersey Private Fund Guide here.

Venture capital managers are amongst some of the most innovative in the market. Supported by leading technology and trusted expertise across the full range of investment structures, we partner with managers to provide continuous support throughout their lifecycle. To find out how we can help you, please get in touch.

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