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Guernsey Doing Significant Funds Business In Europe

by Jason Gorringe, Lowtax.net, London
30 September, 2015

Figures from the European Securities and Markets Authority (ESMA) have underlined the strong relationship between Guernsey's fund industry and the European marketplace, according to Guernsey Finance.

Data contained within ESMA's advice on the granting of third country passports under the Alternative Investment Fund Management Directive (AIFMD) reveals that Guernsey was the third-largest non-EU fund domicile, behind only the US and Cayman Islands, for the number of non-EU Alternative Investment Funds (AIFs) and non-EU Alternative Investment Fund Managers (AIFMs) marketing into the EU member states of the UK, Ireland, Sweden, the Netherlands, Luxembourg, Finland, Denmark, and Belgium for the nine-month period up to March 2015. The Cayman Islands and the US are by far the most active jurisdictions.

The UK remains a key market for Guernsey, with the ESMA figures – based on feedback from the National Competent Authority in the UK – revealing that 25 Guernsey AIFs were being marketed under Article 36 of the AIFMD in the three months up to December 31, 2014, while 57 Guernsey AIFMs and 121 Guernsey AIFs were marketing under Article 42 of the AIFMD for the same period.

Other figures include seven Guernsey AIFs being marketed in Belgium under Article 36 in the three months up to March 31, 2015, as well as two Guernsey AIFMs and eight Guernsey AIFs under Article 42. Four Guernsey AIFs were also being marketed in both the Netherlands and Sweden under Article 36 in the first quarter of 2015.

The Guernsey Financial Services Commission (GFSC) has previously reported that managers have used Guernsey's National Private Placement (NPP) regime to market AIFs into other key markets such as Germany, France, Ireland, the Netherlands, Sweden, Norway, and Finland, as well as Belgium, Denmark, Austria, Luxembourg, Estonia, Portugal, and Romania.

Dominic Wheatley, Chief Executive of Guernsey Finance, said: "What is pleasing about these figures is that Guernsey's NPP regime is clearly working well and proving to be an attractive option for fund managers as they target key markets and countries. As evidenced in KPMG's recent International Capital Flows report, Guernsey's funds sector plays an important role in Europe with more than GBP105bn (USD159.4bn) of assets of Guernsey funds deployed into Europe – funds which are then invested in supporting jobs in businesses of all sizes."

In response to AIFMD, Guernsey introduced a dual regulatory regime through which it is possible to continue to distribute Guernsey funds into both EU and non-EU countries. The existing regime remained for those investors and managers not requiring an AIFMD fund, including those using EU NPP regimes and those marketing to non-EU investors. There is also an opt-in regime that is fully AIFMD compliant.

Guernsey's opt-in equivalent regime, which has been in place since January 2014, is appropriate for funds requiring full AIFMD compliance. However, Guernsey's position as a third country means that managers and funds who want to access Europe can continue to use NPP regimes for the time being.

Wheatley added: "Guernsey's response to AIFMD has been first class and has ensured the island is ideally placed to continue to provide access to Europe. The European Securities and Markets Authority's July recommendation that Guernsey should be granted a 'third country' passport under AIFMD was encouraging and we now eagerly wait to see how the European Parliament, Council of the European Union, and the European Commission will follow this advice. Extending the passport would ensure that Guernsey is able to operate on a level playing field with its European counterparts in the future."

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