This "lighter touch" regulated fund product was, in response to market demand, introduced by the Guernsey Financial Services Commission (the "GFSC") as an efficient route to market for private funds, seeking to strike the right balance between regulation and flexibility for structures where there is a close relationship between management and investors.
The PIF regime is governed principally by the Private Investment Fund Rules and Guidance, 2021 (as amended). The GFSC relies on the role performed by the regulated Guernsey administrator (the "designated administrator") of the PIF, requiring that the designated administrator assesses the suitability and track record of a fund promoter and keeps the GFSC notified of any changes to the fund over its lifespan. Guernsey has a wealth of regulated administrators with experience in all asset classes who can fulfil this role.
This note covers the key advantages of the PIF and why it is a suitable vehicle for managers seeking to raise capital in the sophisticated or professional investor space.
For further information on the different types of PIF, the simple process for establishment, and relevant documentation, please contact us and we will be happy to provide this to you.
Key advantages and features of a PIF
- Simplified regulation. Investors and managers benefit from a robust yet pragmatic regulatory classification which is lighter touch in comparison to other fund regimes. Being within the ambit of the GFSC as an internationally respected regulator, investor confidence is enhanced.
- Speed to market. A PIF benefits from a fast-track approval process (24 hours from the submission of a fully completed PIF application and the requisite application fee). This is particularly beneficial for fund managers looking to launch rapidly and where speed to market is paramount.
- Flexibility - investor type. Whilst PIFs are aimed at sophisticated or professional investors, they remain sufficiently flexible to cater for families and related groups.
- Flexibility - structure type. A PIF may be established in the form of a company (including a limited company, a protected cell company, and an incorporated cell company), a limited partnership (including an incorporated limited partnership), or a unit trust.
- No investment restrictions. A PIF may be open or closed-ended with no investment or borrowing restrictions, and no PIF-specific restrictions apply in respect of asset classes, geographical focus or otherwise.
- No requirement for a prospectus or private placement memorandum. The Rules do not require a PIF to issue an offer document. If it does choose to produce one, that document must contain all material information required by investors and their professional advisers for the purposes of making an investment in the PIF.
- Reliance on Guernsey administrator. The designated administrator (who is required to be appointed under the Rules) may take responsibility for conducting due diligence on investors such that the compliance burden on fund managers will be reduced. The designated administrator's expertise and established processes streamline the investor onboarding process, enabling fund managers to focus on fund management rather than time and money being spent on navigating complex regulatory requirements.
- Maximum of 50 investors. The PIF allows for up to 50 investors but with no restriction on the number of offers which may be made to potential investors (subject to any local marketing restrictions), meaning a substantial number of investors may invest.
- Track record. The PIF promoter does not need to demonstrate track record to the GFSC in the same manner as for other regulated Guernsey funds.
- Marketing. Interests in a PIF may be marketed through relevant National Private Placement Regimes. The marketing requirements of each jurisdiction where the PIF will be marketed should be considered to ensure compliance with local rules.
- Efficient governance. PIFs allow for streamlined governance. There is flexibility to build governance, reporting and other processes which reflect investor needs, provide for simpler administration and, potentially, cost efficiencies.
- Tax neutrality. PIFs benefit from the island's tax neutral status. There is no corporate tax on investment income, capital gains or withholding tax on dividends, making it highly tax-efficient for investors.
- Expert and stable jurisdiction. Guernsey is home to experienced legal, administrative and other service providers and provides a highly regarded and politically and economically stable jurisdiction for the benefit of investors.
- Investor privacy. Details of investors and their investments are not available to the public.
- Cost efficiency. Due to the reduced regulatory requirements for a PIF and the absence of the need for a full offering document, a PIF may have lower establishment and ongoing operational costs over other fund regimes.
The information contained in this guide is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.
