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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.
Solution
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.
Solution
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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