Head of Alternative Investments, Simon Burgess considers the effects of regulations introduced in Jersey and Guernsey in the summer that enable inbound migration of foreign limited partnerships, and how outsourcing administrative functions can help fund managers mitigate the challenges of both fund migration and rising external pressures.
The introduction of the Limited Partnerships (Continuance) (Jersey) Regulations (the "Regulations") in July 2020 was welcomed by the island's funds community after making it significantly easier for fund managers to migrate limited partnership (LP) fund structures to Jersey. The Regulations come at a time when managers continue to evaluate their fund structuring options in light of an increasingly complex global funds environment and greater investor scrutiny as to the choice of jurisdiction.
The move will undoubtedly increase interest in the jurisdiction from alternative fund managers wanting to restructure their funds, aligning Jersey with the laws of other jurisdictions by formalising a continuance pathway for non-Jersey LPs wishing to continue into the jurisdiction. As a result, LPs will be able to migrate their fund structures seamlessly and more efficiently than before.
Guernsey adopted similar regulations in July, the Limited Partnerships (Guernsey) (Migration) Regulations, 2020. They also permit the migration of limited partnerships registered overseas into Guernsey and further simplify the procedure for moving existing overseas funds onto the island. This closely followed the introduction of a fast track application process for the migration of fund managers of overseas collective investment schemes in June 2020, by the Guernsey Financial Services Commission.
Both sets of regulations are expected to precipitate a rise in interest from real estate, private equity, infrastructure, debt and other alternative managers wanting to restructure their funds. They will be looking to domicile their funds in a jurisdiction that can offer political and fiscal stability with a limited change outlook from a regulatory, political and legal perspective. Jersey and Guernsey are both attractive options in this regard and critically, exhibit high-levels of sector-specific expertise and are strongly committed to international substance laws and corporate governance. The swift introduction of the regulations in both islands is testimony to their dynamic approach to fund industry opportunities and pragmatism in a time of volatility.
The rise of private funds
Considerations surrounding domiciliation, structuring and marketing combined with investor needs can be difficult and time-consuming to navigate. However, the Jersey Private Fund (JPF) regime enables LPs to establish operations in Jersey quickly and efficiently and continues to be a popular solution with fund managers.
For many of the foreign LPs that migrate to Jersey and continue as an investment fund, they are likely to seek approval to become JPFs and utilise the JPF regime's flexible, lower-cost and lightly-regulated solution for firms launching funds targeting under 50 investors. The Regulations stipulate that for those pursuing this route, a number of additional consents and approvals are required from the relevant general partner and the Jersey Financial Services Commission (JFSC). The application process for a JPF is straightforward and local Jersey fund administrators (who act as the designated service provider for the JPF) and lawyers should be engaged to facilitate the application process and advise on the continuance, respectively.
In Guernsey, any non-Guernsey LP will be able to apply to the Guernsey Financial Services Commission for regulatory consents in order to continue as a fund in Guernsey. Similar to the JPF regime, LPs will be able to continue as a Guernsey Private Investor Fund if they are marketing to 50 or less investors and take advantage of the fast, light-touch regime.
Case study: fund migration
Our client was a real estate fund manager who wanted to transfer some 30 separate legal entities (including companies and unit trusts with assets worth in excess of £300 million). The client transferred the fund to gain access to our end-to-end service offering and our specialist real estate team. In this case we offered chartered surveyors who joined the boards, providing valued support to the manager in dealing with a number of challenging assets. We oversaw and administered the migration of the underlying entities quickly and efficiently.
Streamlining the migration process
Engaging with a specialist fund administrator experienced in successfully administering funds and underlying entities with operations in the Channel Islands is essential. It enables managers to take advantage of the quicker and more cost-effective migration process. At Ocorian, we support fund managers migrating their fund structures to:
- Guide them through the migration from their existing structure and provider and drive this process to ensure a smooth and timely transition using tried and tested project management specialists.
- Establish an operationally effective model through specialist technology and a dedicated team to provide a seamless service to both fund managers and investors alike.
We have significant experience in the transition of existing platforms and work with fund managers to build out a bespoke migration plan outlining all necessary steps against an agreed timeframe to ensure the smooth transition from their existing administration provider.
One of the biggest challenges managers face whilst migrating is the transfer of vast amounts of historical investment data for which Ocorian offers a proprietary data automation service, RobertTM.
We harness cutting-edge process automation tools to assist with the fast-tracking of data transfer as well as conducting automatic reconciliations to expedite the process. With each migration supported by a dedicated technology support team, project team and steering committee, this enables us to provide a robust administration and accounting fund solution.
Migrate your fund seamlessly
The Regulations are a significant step forward for Jersey and Guernsey's fund ecosystems and the expectation is that there will be a rise in fund relocations. In Jersey alone, there are now over 300 JPFs.
With expertise across all investment structures and with particular specialisms in private markets, we are well placed to support fund managers migrating their structures under the new migration Regulations so they can focus on adding value for their investors.