The PIF is a cost-effective, fast to launch and flexible fund structure used by asset managers and family offices with a professional, sophisticated or family investor base of up to 50 investors. As a regulated entity, it must meet the definitions of a Collective Investment Scheme under the Protection of Investors (Guernsey) Law, 2020 (POI Law).
THE Private Investment Fund BENEFITS
A straightforward application process with the regulator, the Guernsey Financial Services Commission (GFSC). Regulatory approval in just one business day.
Flexibility on structure - the fund can be open or closedended suitable for GP/LP structures as well as limited and protected cell companies.
Supports public and private investments as well as innovative and emerging asset classes and mandates.
No prescribed minimum or maximum size of the fund or underlying investments.
Can attract global capital and may be marketed internationally, including into the EU under AIFMD and NPPR provisions. Low set-up and ongoing management costs.
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THREE ROUTES TO MARKET
This is suited to fund managers with a close relationship with their investors.
The fund may be marketed to up to 200 potential investors, however there is a limit of up to 50 investors in the fund, with no more than 30 new investors investing over a single 12-month period following registration.
A Route 1 PIF must appoint a Guernsey licensed manager to make regulatory declarations.
The Guernsey licensed manager may also be established and managed by the administration service provider of the fund.
ROUTE 2 – Using Qualifying Private Investors
Available for managers seeking investors who are able to properly evaluate and bear the relevant investment risk. The investment manager is not required to be licensed in Guernsey.
There is a 50 investor limit, marketing can take place to 200 people.
Investors must be provided with a disclosure statement that includes necessary information for a professional investor to make an informed judgement on the investments in the PIF.
An administrator must make regulatory declarations, including the disclosure statement.
ROUTE 1 – Using a POI Licensed ManagerTHREE ROUTES TO MARKET
ROUTE 3 – Investors who share a Familial Relationship
Suitable for families and family offices.
Investors must share a familial relationship or be an eligible employee of the family. A common sense approach is applied to defining this.
The PIF cannot be marketed outside of the family.
No requirements for a Guernsey licensed manager, although the fund’s administrator must demonstrate that all investors are family members.
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Case Studies
Using the PIF to Enable Generational Wealth Flows Within a Family
Whilst ultimately owned by the primary family structure, a family utilised the PIF to segregate assets into vehicles that enable different investment strategies in addition to varied control mandates to be implemented.
For example, some offering full control, whereas others under a discretionary mandate, involving advisors for key decisions. This enabled the smooth transition of wealth, from one generation to the next.
Using the PIF to Enable PE Investment into European Businesses
A UK-resident non-domiciled individual was advised to establish a Guernsey Trust, prior to becoming UK-domicile for IHT. The individual also wanted to launch a private equity fund to invest into European businesses.
As part of this, he wanted to also establish an incentivisation structure for the professionals running the PE fund. A Private Investment Fund was chosen to structure a Limited Partnership, utilising Route 2. The LP was in one trust, and the GP was in another trust.
After running the operation successfully for 2 years initially, the client then invited members of his family to join the structure, via Route 3.
Using the PIF to Streamline Pooled Investments
The Route 2 PIF was recently selected by a small group of experienced investors who had for many years invested personally as an investment club.
Seeking to capitalise on their strong long term returns, they opted for a Guernsey Private Investment Fund due to Guernsey’s strong regulatory regime and reputation.
Through forming the fund structure they were able to formalise the investment processes and better manage a single pool of investments.
Kerrie Le Tissier, Client Director at Highvern James Tracey, Managing Director at Oak Group Ltd Greg McKenzie, Managing Director at Belasko (Guernsey) Limitedweareguernsey.com
