This article was first published in Funds Europe in June 2022.
There are four main reasons why the Jersey private fund structure has become an Island success story, says Tatiana Collins, senior counsel at law firm Walkers’ Jersey investment funds and corporate practice group.
Launched five years ago, the Jersey Private Fund (JPF) substantially simplified the Jersey offering for funds products, resetting regulatory demands for fund managers who are not raising money from a large number of investors (i.e. fewer than 50 investors) and are targeting only sophisticated investors.
The reforms have been a huge success – more than 530 JPFs have now been registered since the introduction of the regime in April 2017, part of the island success story that has seen the net asset value of alternative investment funds reach US$555.7 billion in Q4 2021 (boosted by growth in private equity and venture capital of 27% over the previous 12 months).
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In our experience of pitching the JPF with managers and law firms, here are four reasons it works.
- Access to Europe: European Commission statistics show that 97% of funds that market into Europe raised money from three or fewer jurisdictions in the EU, which means in practical terms that the National Private Placement Regime (NPPR) route that Jersey funds follow to market into member states is a valid alternative to the more costly, onerous and complex passport route under the Alternative Investment Managers Directive (AIFMD). Also relevant to this point is that 62% of European investors into private equity funds come from the UK, Switzerland or the Netherlands. Two of those countries are not in the EU and have (or will have) their own rules for the distribution of fund products within their territories.
- Regulation: NPPR offers a tried-and-tested route that will almost certainly be quicker and cheaper than an onshore full-AIFMD model. The Jersey regime is built around the Jersey AIF – or ‘alternative investment fund’ – code of practice which incorporates some of the key AIFMD provisions but which does not require wholesale compliance with it. In particular, a Jersey AIF with a Jersey alternative investment fund manager only needs to comply with the relevant sections of the AIF code, namely in relation to disclosure, reporting, transparency and (where relevant) asset stripping.
- A well-trodden path: In the past few years, managers including Softbank, CVC, Triton, and Nordic Capital have established private funds in Jersey. It remains the jurisdiction of choice for a number of big-name private equity houses.
- Proximity to major hubs: Being 45 minutes away from the City of London does not hurt the funds offering of Jersey. Time-zone adjacency, shared language, work attitude, and company laws based on the English model that onshore counsels are familiar with, are all positive factors.
This combination of selling points has made the JPF work, not just for Jersey’s existing base of experienced fund managers, but also as an option for club deals, family offices and as part of the private wealth structuring toolkit, blurring the lines between funds and private capital. And if fund managers are looking at new opportunities, there is also the option to convert a JPF to a more publicly offered Jersey fund product, including the ‘Expert Fund’, at a later date.
From the perspective of a Jersey funds lawyer, the JPF has made the last five years more varied, more exciting and more productive – there is no reason to see that changing in the years to come.