Simon Burgess (pictured), Head of Alternative Investments at Ocorian, considers the effects of new regulations in Jersey and Guernsey enabling inbound migration of foreign limited partnerships, and how outsourcing administration functions can help mitigate the challenges of fund migration and rising external pressures
The introduction of the Limited Partnerships (Continuance) (Jersey) Regulations 2020 in July was welcomed by the island’s funds community after making it significantly easier for fund managers to migrate limited partnership (LP) fund structures to Jersey.
The regulations come at a time when managers continue to evaluate their fund structuring options in light of an increasingly complex global funds environment and greater investor scrutiny as to the choice of jurisdiction.
The move will undoubtedly increase interest in the jurisdiction from alternative fund managers wanting to restructure their funds. It aligns Jersey with the laws of other jurisdictions by formalising a continuance pathway for non-Jersey LPs wishing to continue into the jurisdiction.
As a result, LPs will be able to migrate their fund structures seamlessly and more efficiently than before.
Guernsey adopted similar regulations in July, the Limited Partnerships (Guernsey) (Migration) Regulations 2020. They also permit the migration of limited partnerships registered overseas into Guernsey and further simplify the procedure for moving existing overseas funds into Guernsey.
This follows the introduction of a fast-track application process for the migration of fund managers of overseas collective investment schemes in June by the Guernsey Financial Services Commission.
Both sets of regulations are expected to precipitate a rise in interest from real estate, private equity, infrastructure, debt and other alternative managers wanting to restructure their funds.
They will be looking to domicile their funds in a jurisdiction that can offer political and fiscal stability with a limited change outlook from a regulatory, political and legal perspective.
Jersey and Guernsey are both attractive options in this regard and, critically, exhibit high levels of sector-specific expertise, as well as being strongly committed to international substance laws and corporate governance.
The speedy introduction of the regulations in both islands is testimony to their dynamic approach to funds industry opportunities and pragmatism in a time of volatility.
The rise of private funds
Considerations surrounding domiciliation, structuring and marketing, combined with investor needs, can be difficult and time-consuming to navigate.
However, the Jersey Private Fund (JPF) regime enables LPs to establish operations in Jersey quickly and efficiently and continues to be a popular solution with fund managers.
Many foreign LPs that migrate to Jersey and continue as investment funds are likely to seek approval to become JPFs and utilise the JPF regime’s flexible, lower-cost and lightly regulated solution for firms launching funds targeting fewer than 50 investors.
The regulations stipulate that for those pursuing this route, a number of additional consents and approvals are required from the relevant general partner and the Jersey Financial Services Commission.
However, the application process for a JPF is straightforward. Local Jersey fund administrators (who act as the designated service provider for the JPF) and lawyers should be engaged to facilitate the application process and advise on the continuance, respectively.
In Guernsey, any non-Guernsey LP will be able to apply to the Guernsey Financial Services Commission for regulatory consents in order to continue as a fund.
Similar to the JPF regime, LPs will be able to continue as a Guernsey Private Investor Fund if they are marketing to 50 or fewer investors and take advantage of the fast, light-touch regime.
Streamlining the migration process
Engaging with a specialist fund administrator experienced in successfully administering funds and underlying entities with operations in the Channel Islands is essential and will enable managers to take advantage of the quicker and more cost-effective migration process.
At Ocorian, we support fund managers migrating their fund structures to:
• Guide them through the migration from their existing structure and provider and drive this process to ensure a smooth and timely transition, using tried and tested project management specialists
• Establish an operationally effective model through specialist technology and a dedicated team, to provide a seamless service to fund managers and investors alike.
We have significant experience in the transition of existing platforms and work with fund managers to build out a bespoke migration plan outlining all necessary steps against an agreed timeframe to ensure the smooth transition from their existing administration provider.
One of the biggest challenges managers face while migrating is the transfer of vast amounts of historical investment data for which Ocorian offers a proprietary data automation service, Robert.
Tech-enabled solutions
We harness cutting-edge process automation tools to assist with the fast-tracking of data transfer, as well as conducting automatic reconciliations to expedite the process.
With each migration supported by a dedicated technology support team, project team and steering committee, this enables us to provide a robust administration and accounting fund solution.
Migrate your fund seamlessly
The regulations are a significant step forward for Guernsey and Jersey’s funds ecosystem and the expectation is that there will be a rise in fund relocations. In Jersey alone, there are now more than 300 JPFs.
With expertise across all investment structures and with particular specialisms in private markets, we are well placed to support fund managers migrating their structures under the new migration regulations, so they can focus on adding value for their investors.
• This advertising feature was first published in the October/November 2020 edition of Businesslife magazine
Why are funds outsourcing administration?
As the demands on in-house fund managers become ever heavier from a regulatory and compliance perspective, and investors demand more streamlined or bespoke approaches, fund managers are increasingly outsourcing fund administration and associated services.
Investors are also demanding certain functions to be managed independently of the fund manager.
Investment fund accounting, the production of financial statements, NAV calculations and compliance and regulatory oversight are just a few of the main services that are increasingly being outsourced to specialist third-party administrators. But what are the key motivations driving fund managers to outsource these functions?
The decision to outsource is not a straightforward one and can be driven by many factors. However, a need for cost-efficiency and a focus on core competence, underpinned by constrained in-house expertise or capacity, makes outsourcing a priority for many.
The scale of investment of both time and money required to build and maintain an administration platform is significant and outsourcing frees up a significant amount of bandwidth for the manager. Other benefits include:
• Access to specialist expertise and systems
• Asset-class-experienced boards of directors
• Investor reassurance (no conflict of interest)
• Reduced risk (regulatory compliance)
• Stability (no need to scale back office).
Case study: fund migration
Our client was a real estate fund manager who wanted to transfer some 30 separate legal entities (including companies and unit trusts with assets worth in excess of £300m). The client transferred the fund to gain access to our end-to-end service offering and to our specialist real estate team. In this case, we offered chartered surveyors, who joined the boards, providing valued support to the manager in dealing with a number of challenging assets. We oversaw and administered the migration of the underlying entities quickly and efficiently.