Private Fund Regimes in Guernsey and Jersey

Over recent years both Guernsey and Jersey have updated their respective private fund regimes, both of which have generated significant interest from fund promoters who are looking to launch new funds in the Channel Islands. We have summarised the key features of the regimes below.

GUERNSEY PRIVATE INVESTMENT FUNDS (PIFs)

The Guernsey Financial Services Commission (GFSC) introduced the Private Investment Fund Rules 2016 (PIF Rules) which created a new class of private fund under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) (POI Law).
PIFs may be open-ended or closed-ended, and are targeted at managers with a relatively small investor base who are looking for a more flexible regime.

The key features of the PIF Rules are:

there should be no more than 50 investors (or persons holding an ultimate economic interest) in a PIF;
for open-ended PIFs the manager must apply a continuous rolling test whereby in the previous twelve months no more than 30 new ultimate investors may be added to the PIF;
there is no requirement to produce an offering document or prospectus for a PIF;
a licensee domiciled in Guernsey (other than the locally licensed administrator) must take responsibility for the management of the PIF (Manager) and confirm that it has assessed that the investors are able to sustain any loss of investment in the PIF;
a Guernsey licensed administrator must be appointed by the PIF;
PIFs may be established as companies, limited partnerships or unit trusts; and
a PIF is not required to appoint a custodian, although if open- ended, custodial arrangements will need to be approved as part of the application process.

JERSEY PRIVATE FUNDS (JPFs)

JPFs were introduced in 2017 and effectively replaced three existing Jersey products: Very Private Funds, Private Placement Funds and COBO Only Funds. JPFs are required to obtain a consent from the Jersey Financial Services Commission (JFSC) issued under the Control of Borrowing (Jersey) Order 1958, which sets out certain conditions with which a JPF must comply.

The key features of a JPF are:

can only be marketed to 50 or fewer “professional investors” or eligible investors (i.e. investors with a minimum investment value of £250,000);
can be open-ended or closed-ended;
has no requirements for promoter policy/approval;
has no requirement for Jersey-resident directors (but the JFSC have stated that they would generally expect a JPF to have Jersey-resident directors);
is not required to issue an offering document;
must appoint a designated service provider (DSP), which is registered pursuant to the Financial Services (Jersey) Law 1998 – in practice the fund’s administrator will generally fulfill this role;
must communicate an investment warning and disclosure statement to its potential investors ahead of them making an investment into the JPF;
is not required to appoint an auditor, but any qualified audit must be reported; and
must make a JPF return which is signed by the DSP.

FEATURE

GUERNSEY - PIF

JERSEY - JPF

Number of investors

No limit on the number of investors that may be marketed to, but there is a cap on the number of investors that may be admitted to the fund (no more than 50, subject to an exemption for managers acting as agent for investors in a collective investment scheme)

The fund can admit up to 50 investors, and can make up to 50 offers to potential investors

Open-ended / closed-ended

Can be either

Promoter approval

No requirement

Resident directors

No strict requirement (but the GFSC would generally expect a Guernsey resident director to be appointed)

No strict requirement (but the JFSC have stated that they would generally expect a Jersey resident director to be appointed)

Offering document

No requirement to issue

Risk warnings

No requirement, but similar warnings are generally included in fund documents as a matter of commercial prudence

Requirement for investment warning and disclosure statement, which can be included in the subscription agreement.

Audited accounts

Yes this is a requirement

No requirement

Local service provider appointments

Must appoint a Guernsey licensed administrator. PIF also needs a Guernsey Manager (application can be made for this entity at the same time as the fund)

Must appoint a DSP regulated under Jersey law

Minimum investment

No minimum, but Manager needs to be able to confirm that investors can bear the loss of their investment

£250,000 (unless the investor meets the definition of “professional investor”, as set out in the JPF Guide)

Notification requirements

Limited notification requirements – generally imposed on the administrator

DSP must notify the JFSC of material changes to the information that was provided to the JFSC upon authorisation, and make an annual filing

Fees

Application: £5,757
Annual: £5,096
(includes application and annual fees for the Manager)

Application: £1,070
Annual: £500

GUERNSEY PRIVATE INVESTMENT FUNDS (PIFs)	JERSEY PRIVATE FUNDS (JPFs)
The Guernsey Financial Services Commission (GFSC) introduced the Private Investment Fund Rules 2016 (PIF Rules) which created a new class of private fund under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) (POI Law). PIFs may be open-ended or closed-ended, and are targeted at managers with a relatively small investor base who are looking for a more flexible regime.	JPFs were introduced in 2017 and effectively replaced three existing Jersey products: Very Private Funds, Private Placement Funds and COBO Only Funds. JPFs are required to obtain a consent from the Jersey Financial Services Commission (JFSC) issued under the Control of Borrowing (Jersey) Order 1958, which sets out certain conditions with which a JPF must comply.
The key features of the PIF Rules are: • there should be no more than 50 investors (or persons holding an ultimate economic interest) in a PIF; • for open-ended PIFs the manager must apply a continuous rolling test whereby in the previous twelve months no more than 30 new ultimate investors may be added to the PIF; • there is no requirement to produce an offering document or prospectus for a PIF; • a licensee domiciled in Guernsey (other than the locally licensed administrator) must take responsibility for the management of the PIF (Manager) and confirm that it has assessed that the investors are able to sustain any loss of investment in the PIF; • a Guernsey licensed administrator must be appointed by the PIF; • PIFs may be established as companies, limited partnerships or unit trusts; and • a PIF is not required to appoint a custodian, although if open- ended, custodial arrangements will need to be approved as part of the application process.	The key features of a JPF are: • can only be marketed to 50 or fewer “professional investors” or eligible investors (i.e. investors with a minimum investment value of £250,000); • can be open-ended or closed-ended; • has no requirements for promoter policy/approval; • has no requirement for Jersey-resident directors (but the JFSC have stated that they would generally expect a JPF to have Jersey-resident directors); • is not required to issue an offering document; • must appoint a designated service provider (DSP), which is registered pursuant to the Financial Services (Jersey) Law 1998 – in practice the fund’s administrator will generally fulfill this role; • must communicate an investment warning and disclosure statement to its potential investors ahead of them making an investment into the JPF; • is not required to appoint an auditor, but any qualified audit must be reported; and • must make a JPF return which is signed by the DSP.

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