Navigating the future: end of year reflections and expectations for the private capital markets in 2025

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As 2024 comes to a close, the private capital fund industry stands as a cornerstone of the global economy, having grown exponentially over the past decade. Today, private markets account for a significant portion of global financial activity, and in 2025, their AUM is projected to reach up to $15 trillion[1].

This growth trajectory underscores the critical role private markets play in financing businesses, driving innovation, and generating returns for investors across the globe. The sector’s ability to raise and deploy capital efficiently, even amidst volatile market conditions, demonstrates its resilience. In 2024, despite macroeconomic challenges and geopolitical uncertainties, private capital provided essential liquidity and investment across a spectrum of opportunities, including secondary markets, private credit, and venture-backed start-ups.

However, regulatory reforms, ESG priorities, liquidity pressures, and geopolitical developments have redefined the operating environment. As we reflect on 2024, we see a year of transformation that has set the stage for private markets to adapt, innovate, and remain a vital force in the global economy heading into 2025.

A year of political turbulence

Leadership transitions

The political environment in 2024 was defined by seismic changes. In the UK, the Labour government’s ascent marked a shift toward fiscal tightening and tax reforms aimed at addressing public sector deficits. Across the Atlantic, Donald Trump’s re-election as U.S. President introduced uncertainties around trade and foreign policy. These leadership transitions underscore the interplay between politics and private markets, as fund managers and investors brace for policy decisions with global implications.

Goldman Sachs predicts that the U.S. administration’s proposed tariffs will weigh heavily on Eurozone growth, particularly as trade policy uncertainty disrupts cross-border flows[2]. Combined with the Labour government’s reformist agenda in the UK, private markets must remain vigilant and flexible as they navigate a time of change.

Carried interest: A new taxation era in the UK

Under the Labour government, the carried interest regime will transition from being taxed as capital gains to trading income, a move designed to align taxation norms with global benchmarks. The capital gains tax hike to 32% adds another layer of complexity, particularly for non-UK residents providing services to UK-based funds. The regime change will place the UK with one of the highest tax rates in respect of carried interest across the global and will require careful consideration by private capital managers.

Liquidity and fundraising: evolving strategies in challenging conditions

Challenges in fundraising

The fundraising environment remained difficult throughout 2024. The number of new funds dropped by 24% to 189 form the second quarter to the third quarter – but deals and exits are starting to show some stability[3] as we point toward 2025. Demand for credit funds, particularly those offering evergreen structures with predictable cash yield, have continued to grow, driven by investors seeking safe havens amid volatile equity markets.

Secondary markets and liquidity tools

Secondary markets gained unprecedented traction, supported by an expanding suite of liquidity platforms. The market now boasts over 25 platforms, enabling fund managers to provide enhanced liquidity options to investors. These tools are particularly valuable in navigating constrained capital conditions, offering fund managers greater flexibility while aligning with investors’ liquidity needs.

In the first half of 2024, GP-led transactions accounted for $31 billion, making up 43% of the total secondary market volume[4]. This reflects a 94% increase compared to the same period in 2023, driven by strong demand for continuation funds and the adoption of GP-led structures by sponsors seeking liquidity for LPs and extended holding periods for valuable assets​.

Unlocking pension fund capital

Pension fund reforms remain a hot topic, particularly in the UK. Defined contribution (DC) schemes face structural barriers in allocating to private capital due to liquidity constraints and valuation complexities. However, innovative managers aligning their strategies with these requirements stand to unlock significant capital flows and solving these issues may be critical to maintaining the UK’s competitiveness in private markets.

Geopolitical spotlight: regional dynamics in private capital

All of the key European fund domiciles offers excellent coverage across all investment strategies however we have highlighted some of the key themes specific to each jurisdiction that we have observed this year.

Jersey: a gateway for global investment

Jersey’s reputation as a strategic hub for cross-border fund structuring continues to grow. The island has positioned itself as a key conduit for Asian investment into Europe, supported by strong regulatory frameworks and a global connectivity strategy. Jersey continues to apply a focus towards U.S. managers for launching funds aimed at European markets, underscoring its importance as a gateway jurisdiction.

In addition, investor demand for tokenisation is increasing as investors seek more control and transparency over their assets. Tokenisation allows for the fractionalisation of assets, enabling investors to access opportunities traditionally reserved for larger institutional players. In 2021, the sector stood at around US$1.9bn, growing to US$2.8bn in 2023 and US$3.45in 2024 so far. Aggregated, assets currently stand at around US$13bn with the expectation that the sector will rise into the trillions (USD) by 2030[5].

Guernsey: innovation for venture and buyouts strategies

Guernsey remains the premier jurisdiction for European venture capital (VC) funds, with twice as many funds raised in Guernsey during 2022-2023 as compared to the next most-popular jurisdiction[6]. Leveraging its broad diversity of experience and skills, whilst offering familiarity to managers and investors, Guernsey is an ideal jurisdiction for new managers looking to launch a first-time, spin-out or buyout venture fund. Its appeal lies in a responsive regulatory environment, a deep talent pool, and an ecosystem that fosters innovation. Similarly to Jersey, Guernsey recognises the role that tokenisation could play in improving efficiency with capital markets[7].

Luxembourg: growth through private debt

Luxembourg solidified its role as a hub for private debt funds in 2024, with credit sublines playing a pivotal role in optimising IRRs and portfolio management flexibility. As borrowing costs rise, fund managers are leveraging these facilities to balance NAV growth with capital efficiency. Looking ahead, private debt strategies remain critical, offering resilience in a high-rate environment.

ESG: A rebounding priority

Despite a cooling in ESG fundraising during 2023, 2024 has seen a resurgence globally, with $55 billion raised by April alone[8], signalling renewed investor interest. ESG strategies are increasingly viewed as a means of balancing returns with risk mitigation, given their lower performance variance compared to non-ESG funds.

With ESG AUM projected to reach $33.9 trillion globally by 2026[9], fund managers must continue integrating sustainable practices to attract investor capital and align with regulatory expectations.

Operational excellence: scaling for success

Fund managers face increasing pressure to scale their operations without sacrificing efficiency. Collaboration with third-party fund administrators has become essential, allowing managers to streamline compliance, reporting, and deal execution processes. This approach enables fund managers to focus on value creation while mitigating operational bottlenecks—a critical consideration for scaling venture and private equity funds.

This year, we released a whitepaper which addressed how outsourced models are changing.  Whilst managers face increasing pressures to enhance performance, reduce costs and manage risks effectively, we share how partnering with expert providers, like us, you can simplify administration solutions for your business. Read the whitepaper here.

A bearish outlook for 2025

While modest growth is expected for the private capital industry in 2025, the path ahead isn’t expected to be without challenge despite interest rate cuts, particularly in the U.K. and U.S., could provide much-needed relief to fund managers and investors. According to Goldman Sachs[10], the U.S. economy is expected to see a 2.5% growth in GDP, beating expectations. However, this positive growth is likely to be offset by geopolitical tensions, such as the ongoing effects of trade policy uncertainty linked to U.S.

Changes in tax regimes are likely to influence investor behaviour and could impact deal flow and fund strategies. This combined with global economic uncertainties, will require private capital fund managers to adjust quickly and embrace a more agile operational model.

For fund managers, adaptability will be key. Embracing technology, integrating ESG considerations, and refining operational models will position firms for success in an environment that demands innovation and resilience. As private capital markets evolve, opportunities will emerge for those who can navigate the complexities of 2025 with flexibility and foresight.

As a leading fund administrator, Belasko remains committed to supporting our clients in navigating any change or uncertainty that 2025 may bring, as well as offer tailored solutions to help fund managers thrive and avail of new opportunities on the horizon. To discuss in more detail, please reach out to Nick McHardy, our head of funds, at: [email protected].

[1] https://www.spglobal.com/en/research-insights/market-insights/private-markets

[2] https://www.goldmansachs.com/insights/goldman-sachs-research/macro-outlook-2025–tailwinds–probably–trump-tariffs

[3] https://www.preqin.com/insights/research/quarterly-updates/q3-2024-private-equity#:~:text=Q3%20proves%20we%20are%20in,and%20exits%20are%20showing%20stability.&text=Download%20PDF-,Q3%20proves%20we%20are%20in%20a%20more%20challenging%20fundraising%20environment,and%20exits%20are%20showing%20stability.

[4] https://www.blackrock.com/institutions/en-us/insights/market-update-h2-2024

[5] https://www.jerseyfinance.je/news/investor-demand-for-control-will-drive-tokenisation-agenda-but-education-and-collaboration-are-key/

[6] https://www.guernseyfinance.com/industry-resources/news/2024/venture-capital-trends-guernsey-takes-the-lead/

[7] https://www.guernseyfinance.com/industry-resources/news/2024/gfsc-policy-statement-approach-to-fund-tokenisation/

[8] https://www.preqin.com/esg/esg-in-alternatives

[9] https://www.pwc.com/gx/en/news-room/press-releases/2022/awm-revolution-2022-report.html

[10] https://www.goldmansachs.com/insights/goldman-sachs-research/2025-us-economic-outlook-new-policies-similar-path

Why Managers Should Consider Jersey for Their Next Fund

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If you are considering setting up a private, closed-ended fund, Jersey offers a robust and attractive environment for fund managers. With over 60 years of experience, Jersey is a leading player in the global finance sector, providing a range of benefits for those looking to domicile their funds. This article explores why you should give Jersey serious consideration for your next private closed-ended fund and how partnering with experienced providers can support you with your fund’s growth and achieve your launch objectives.

Why choose Jersey for your next fund?

Jersey offers a highly attractive taxation environment for funds, which is a significant advantage for managers. There is no capital gains tax, and funds are typically not subject to Jersey income tax, provided they meet certain criteria. Additionally, there is no withholding tax on interest payments and distributions, and no stamp duty is levied on the transfer of shares. This favourable tax regime enhances the overall return on investment for fund managers and investors alike, making setting up a Jersey fund particularly appealing.

Funds domiciled in Jersey can be marketed into the European Economic Area (EEA) under the National Private Placement Regime (NPPR). This regime simplifies access to European investors without the complexities and significant costs associated with the EU’s Alternative Investment Fund Managers Directive (AIFMD). Additionally, Jersey offers unrestricted marketing into North America, the Middle East, and the Asia-Pacific (APAC) regions, providing easy and broad market access for fund managers.

Jersey is particularly known for its expertise in alternative investments, such as private equity, real estate, private credit and infrastructure. The Jersey fund industry has developed deep legal, tax, accounting, administration, and governance expertise to support these investments, making Jersey a preferred jurisdiction for fund managers specialising in alternatives.

As of the latest reports, Jersey’s funds industry manages an impressive £452 billion[1] in assets (as at March 2024). This substantial figure reflects the strength and capability of Jersey funds to support large and complex investment structures, and is a significant vote of confidence from managers, large or small.

The Jersey funds industry is internationally recognised for its strong legal and regulatory framework, which has been developed over decades to meet the needs of global investors. The recent Jersey MONEYVAL Mutual Evaluation report[2] highlights Jersey’s effectiveness in preventing financial crime, showcasing its commitment to high compliance standards and reinforcing the trust and security that investors seek.  The resultant ‘white-listing’ by the Financial Action Task Force (FATF), underscores its commitment to anti-money laundering and counter-terrorist financing. This robust reputation makes Jersey a secure choice for fund managers seeking a reliable and well-regulated domicile.

Collectively, these characteristics reinforce Jersey’s status as a leading finance centre.

Regulatory options in Jersey

One of the major advantages of setting up a Jersey fund is the flexibility of regulatory options available. Jersey’s regulatory regime is divided into three main categories:

  • Notification Only Fund: This option provides a middle ground with moderate regulatory oversight, suitable for certain types of investment strategies and where “Eligible Investor” criteria can be met.
  • Jersey Private Fund (JPF): Offers a faster route to market, ideal for managers who value speed to market or want to limit the number of offers and admitted investors and for Family Offices looking to manage inter-generational wealth succession.
  • Collective Investment Fund: A fully regulated option by the Jersey Financial Services Commission (JFSC) that allows for unrestricted marketing and no cap on investor numbers provided they meet the criteria for an “Expert Investor”.

These options give fund managers the flexibility to choose a regime that aligns with their specific needs and strategies, making Jersey a versatile choice for domiciling your next fund.

Delve a little deeper into the regulatory options in Jersey by checking out our regulatory options comparison (Jersey Regulatory Options Comparison).

Key considerations for fund managers

With Jersey presenting a wealth of benefits, there are some key considerations that fund managers should keep in mind to ensure a successful experience. Jersey has a comprehensive legal and regulatory environment that can accommodate differing needs of managers, including a range of legal entity options for their fund structure. By far the most common choice is a Limited Partnership and Jersey has adopted modern Limited Partnership legislation to meet the needs of private capital fund managers and their investors. This can accommodate a traditional limited partnership structure or Separate and/or Incorporated Limited Partnerships.  In addition, Jersey can offer Unit Trust vehicles and corporate entities, either limited liability or protected / incorporated cell companies.

Additionally, Jersey encourages investment management and oversight activities to be sufficiently supported by a suitable fund promoter. This collaborative approach not only ensures effective local management and control but also enhances the fund’s operational integrity. Developing close partnerships with Jersey service providers, will help facilitate smoother operations and stronger connections and many private capital fund managers might therefore seek an appointment to the board of the fund’s governing entity. Depending on the regulatory option chosen for your fund, this may require the pre-approval of the JFSC.

Cost will be a key factor in the decision of where to establish your next fund. Focusing on the specific needs of your fund, how many investors you are targeting, where they are based and what reporting requirements you want to be tied to will have material impact on the potential costs. Jersey offers the right balance of available expertise, balanced compliance and regulatory requirements and choice of partner to ensure that you can achieve the right value for money outcome.

By embracing these considerations, fund managers can strategically position themselves to leverage Jersey’s strengths and contribute to its continued growth as a leading fund jurisdiction.

Belasko in Jersey

Jersey offers a mix of regulatory flexibility, market access, and specialised expertise, making it an attractive jurisdiction for fund managers. However, managers should collaborate closely with legal counsel and local administrators, like Belasko, so you can leverage Jersey’s advantages and realise your objectives for your next fund.

We have a team of experts based in Jersey who provide responsive, accurate and consistent support to global fund managers. We offer a full-scope, tailored fund administration solution, designed to drive performance throughout the fund lifecycle. Our tech-enabled solution is built on processes and procedures, led by experienced teams, that free you up to focus on what you do best.

With a deep understanding of the Jersey regulatory landscape and strong relationships with local law firms and advisers, we’re ideally positioned to help clients navigate the complexities of private capital investments with confidence.

If you’d like to speak to our team about setting up your fund in Jersey, please get in touch with Paul Lawrence at [email protected].

 

[1] https://www.jerseyfinance.je/jersey-the-finance-centre/sectors/funds/

[2] https://www.jerseyfsc.org/industry/international-co-operation/international-assessments/moneyval/2024-moneyval-evaluation/

Fund manager scale-ups: balancing growth with efficiency

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Private capital fund managers, particularly in VC, often operate within a lean model which affords them dynamism and agility in pursuit of exceptional investment return. However, this can present challenges as they scale-up and grow.

It demands a strategic operational approach which will generally require taking a partnership approach with a third-party fund administrator to streamline processes and maintain robust control and oversight. Effective collaboration with fund administrators supports fund managers to focus on value creation, ensuring seamless deal execution, reporting, and compliance while avoiding operational bottlenecks.

This article aims to provide actionable insights for fund managers to effectively navigate the scale-up pathway and achieve growth without proportional cost expansion.

Integrate, don’t replicate

A streamlined relationship with your fund administrator can be transformative. This partnership hinges on integrating processes and responsibilities rather than duplicating efforts, ensuring efficiency and clarity at every stage:

  • A clear deal process: Establish a robust process for your deal cycle—from due diligence, deal execution through to facility drawdown, capital call issuance and deal settlement. Ensure the full end to end deal process is clear, well-documented and accepted and well understood by both your internal deal team and your administrator.
  • Structured communication: Support a transparent and structured communication framework. This ensures clarity on deliverables, pipeline activities, and priorities between your team and proactively driven by your administrator.
  • Reliance on controls: Develop/request an in-depth understanding of the controls performed by your fund administrator. This allows you to rely on their processes rather than re-performing tasks, saving time and reducing redundancy.

Oversight and control

Scaling doesn’t mean relinquishing control. Effective oversight ensures that operational standards and strategic goals are met as your fund grows:

  • Key Performance Indicators (KPIs): Agree on KPIs that reflect both parties’ expectations. Fund administrators should provide proactive reporting against these metrics to ensure alignment and accountability.
  • Proactive Deadline Management: Administrators should proactively highlight upcoming deadlines and critical workstreams, enabling fund managers to plan, scrutinise and respond effectively.

Leverage technology

In today’s tech-driven market, fund administrators invest significantly in advanced systems and reporting platforms, aiming to deliver cutting-edge tools that enhance efficiency, accuracy, and scalability. Fund managers can unlock substantial value by maximising the potential of these investments rather than duplicating efforts or maintaining costly third-party systems.

  • Utilising existing tools: fund administrators have spent significant time developing and refining their technology solutions, incorporating automation, data visualization, and compliance tools designed specifically for fund management needs. By leveraging these platforms, fund managers can:
    • Enhance reporting: Access real-time, detailed financial and operational reports tailored to their requirements, providing transparency and insights.
    • Streamline operations: Automate routine tasks such as NAV calculations, investor reporting, and compliance monitoring, reducing manual effort and minimising errors.
    • Ensure compliance: Rely on integrated systems designed to keep pace with evolving regulatory requirements, ensuring seamless adherence to global standards.
  • Collaborating on custom solutions: While standard platforms address most fund manager needs, unique challenges often arise during scaling. Engaging in open dialogue with your fund administrator allows for tailored adaptations or co-developed solutions.

By leveraging the administrator’s existing infrastructure, fund managers can achieve cost-effective innovations that align with their objectives, avoiding the expense and complexity of developing systems in-house.

The Belasko advantage

At Belasko, we understand the unique challenges fund managers face when scaling up. Our partnership-driven approach offers end-to-end fund administration solutions tailored to support your optimal operating model. By integrating our services into your operations, we help fund managers achieve growth without compromising on oversight, control, or efficiency.

If you’re looking to scale up effectively, contact Nick McHardy, Head of Funds ([email protected]), to learn how Belasko can support your journey.

Resilience and innovation in private markets amid economic shifts

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What are the pressing issues and emerging trends across the private markets as we fast approach the end of the year?

At an event last week, Greg McKenzie, our Luxembourg Country Head, shares insights into the latest trends shaping the Luxembourg funds market and his observations of the sector’s strong resilience and its ability to innovate amid ongoing economic changes and uncertainty.

The Luxembourg market continues to lead in responding to challenges such as rising borrowing costs, real estate pressures, and evolving LP demands. In this article, he reveals how fund managers and investors are leveraging new strategies to navigate these hurdles while positioning themselves for growth in 2025.

Credit sublines: adapting to rising costs with strategic value

Credit sublines have cemented their role as a critical tool for fund managers, even as borrowing costs rise. These facilities help funds grow net asset value (NAV) without frequent capital calls, optimising internal rate of return (IRR) and providing greater flexibility in portfolio management.

Looking ahead, there is cautious optimism for 2025 as credit strategies remain vital despite rising borrowing costs. Fund managers are adapting by renegotiating terms, exploring alternative structures, and leveraging data to optimise cash flow and returns.

Credit lines continue to provide liquidity and flexibility, allowing managers to focus on long-term goals while delaying capital calls to enhance IRR metrics. Anticipated interest rate easing further bolsters confidence, positioning credit strategies for growth in a shifting market.

Fundraising and LP engagement: still tough times

The fundraising environment remains challenging, with institutional investors favouring established relationships over new partnerships. LPs are consolidating commitments with known GPs, reflecting a cautious approach in the face of ongoing economic uncertainty.

Another dynamic impacting the market is the retention of assets post-COVID. Many assets remain held within portfolios, delaying returns of capital to LPs and reducing their ability to redeploy into new opportunities.

Despite these challenges, LPs are shifting toward more global mandates, seeking to diversify their portfolios across broader geographies rather than sticking to regional allocations. This pivot is creating new opportunities for GPs to align their strategies with a more global investment thesis.

Real estate: navigating change and seizing opportunities

The real estate sector continues to face disruption, with letting issues in commercial real estate weighing on valuations and investor confidence. However, some challenges are also creating opportunities:

  • Fixed-term maturities: Assets with maturing fixed-term debt may push reluctant sellers into the market, creating potential for opportunistic buyers.
  • Closing the buyer-seller gap: The valuation mismatches seen post-COVID are narrowing, paving the way for increased transaction activity and exits.
  • Impact of rate drops: Anticipated reductions in interest rates could drive value increases across certain real estate assets, boosting market momentum.

Notably, credit within real estate is gaining clarity as a distinct allocation bucket for LPs, separating it from traditional real estate or equity classifications. This evolution is helping investors make more informed decisions about their portfolios.

Innovations in NAV lending

The NAV lending market is evolving rapidly, with new structures and strategies enhancing its appeal. Traditional SPV lines remain prevalent, offering mechanisms for funds and lenders to manage default events effectively.

Segmentation is also becoming more pronounced, with lenders aligning their expertise to specific asset classes, such as buyouts, private equity, infrastructure, and credit. This targeted approach is improving due diligence and aligning financing strategies with sector-specific risks.

In addition, a more entrepreneurial attitude is emerging in fund lending. High-net-worth individuals (HNWIs) are increasingly being engaged as part of broader investor pools, signalling a shift toward diversification in funding sources.

Looking ahead: optimism for 2025

Despite a tough fundraising environment and ongoing pressures in real estate, there is cautious optimism for 2025. Anticipated rate reductions, narrowing valuation gaps, and the ongoing evolution of credit strategies are likely to drive momentum across private markets.

With approximately 90% of funds now using call facilities, the Luxembourg market is maturing and adapting to a more complex environment. The industry is seeing increased competition and participation, underscoring the importance of robust due diligence and innovative approaches to capital deployment.

As private markets continue to evolve, collaboration between fund managers, LPs, and lenders will be key to navigating the challenges and seizing the opportunities that lie ahead.

For more insights or to discuss these topics further, please get in touch with Greg McKenzie ([email protected]).

Adapting to Change: Key Policy Developments Shaping Private Markets

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The UK funds industry is at a pivotal moment. Over recent years, it has faced a challenging environment shaped by economic headwinds, political shifts, and heightened regulatory scrutiny. The introduction of a new government and a president in the United States marks a time of change, where policy decisions on both sides of the Atlantic will inevitably influence the private markets landscape.

At the same time, private markets are contending with complex global challenges—from tax reforms and sustainability mandates to evolving valuation and reporting standards. These changes are poised to redefine how fund managers operate, interact with investors, and deliver returns.

As the UK seeks to maintain its position as a global hub for private capital, managers are navigating a delicate balance: responding to regulatory demands while preserving competitiveness in a rapidly evolving market. This article delves into the latest policy and regulatory developments, offering insights on their implications and how private market participants can prepare for the road ahead.

Carried interest: Changes in the UK tax landscape

The UK’s carried interest regime is set for significant change following the Autumn Budget. Rachel Reeves, under the new Labour government, outlined sweeping tax reforms aimed at addressing fiscal challenges and aligning the UK with global taxation norms. These measures mark a decisive shift in policy and are expected to have far-reaching implications for private markets.

  1. Capital Gains Tax increase: Effective from April 6, 2025, the Capital Gains Tax (CGT) rate on carried interest will rise from 28% to 32%. This move places the UK among the highest-taxed jurisdictions for carried interest, on par with France and New York.
  1. Shift to trading income: In a dramatic overhaul of the current framework, carried interest will be treated as trading income rather than capital gains, fundamentally changing its taxation basis.

Additional measures include the extension of Income-Based Carried Interest (IBCI) rules to employees alongside LLP members and the introduction of taxes on non-UK residents’ carry related to UK-based services, subject to double tax treaties.

These reforms, while aimed at addressing perceived inequities in the taxation of private capital, risk diminishing the UK’s competitive edge unless counterbalanced by broader incentives or strategic industry support. Private markets participants will need to act swiftly to navigate this evolving landscape and mitigate the potential disruption caused by these policy shifts.

Key tax risks in due diligence for private equity investments

Tax due diligence is a critical component of private equity transactions, ensuring compliance, mitigating risks, and preserving value throughout the investment lifecycle. Private equity managers must prioritise four key areas where tax risks often arise:

  • Restructuring: Many private equity investments require significant restructuring to streamline operations, improve efficiency, or position the business for growth.
  • Refinancing: Leveraging debt is a common strategy in private equity transactions, but refinancing activities can give rise to tax concerns. Thorough tax analysis helps structure debt efficiently while mitigating regulatory exposure.
  • Tax action plans: During due diligence, managers often uncover tax risks at purchase. Developing and executing a robust tax action plan ensures identified risks are addressed proactively. This safeguards the investment and builds confidence among stakeholders.
  • Management Incentive Plans (MIPs): MIPs are vital for aligning the interests of management teams with investors, but they also present complex tax challenges. MIPs and employee loans require extra scrutiny to ensure compliance and avoid adverse tax consequences.

Private equity owned businesses often face distinct tax challenges due to their ownership structure. Additionally, insurers may exclude certain risks from coverage, necessitating proactive strategies to address these gaps well in advance of a sale process.

By focusing on these areas and implementing robust tax governance frameworks, private equity managers can navigate risks effectively, better protecting their investments.

Unlocking UK defined contribution pension capital

Private capital structures often clash with the liquidity needs of UK defined contribution (DC) pension schemes. While government and industry are seeking solutions, hurdles remain in areas like liquidity, valuations, and the treatment of carried interest. For managers able to align with these needs, the opportunity to unlock significant capital flows is immense.

AIFMD II and UK-EU divergence

The EU’s AIFMD II introduces stricter rules, including higher regulatory capital requirements, tighter delegation standards, and limitations on non-core activities. These changes aim to enhance transparency and investor protection but may increase costs and operational burdens, particularly for smaller managers.

In contrast, the UK is charting a more flexible path, focusing on competitiveness. Proposed measures include raising the €500m small AIFM threshold and avoiding sharp increases in regulatory capital requirements. This divergence seeks to attract global fund managers by fostering innovation and reducing compliance barriers.

For fund managers operating across jurisdictions, dual compliance will add complexity, but the UK’s approach may position it as a more attractive destination for private capital, offering a competitive edge in the global market.

The FCA agenda

The FCA is intensifying its focus on how private capital managers approach asset valuations, with a live consultation concluding in Q1 2025. Independence is becoming a cornerstone of valuation practices, with portfolio monitoring teams playing a more prominent role in scrutiny alongside formal governance processes.

The FCA also emphasise speed, clarity, and certainty to build confidence in private markets. Key initiatives include expanding access to capital, fostering diversity, and enhancing data-driven regulation, particularly in ESG.

Regulatory reporting changes 

ILPA’s updated quarterly reporting templates, effective January 1, 2026, aim to improve transparency, particularly around leverage and debt, providing investors with deeper insight into portfolio risks. However, feedback from the BVCA highlights that these templates may not be suitable for all investment strategies, especially those with complex structures or heavy debt exposure.

Fund managers will need to adapt their reporting processes to meet these new standards while maintaining flexibility for unique strategies. Collaborating with service providers will be key to ensuring efficient, compliant reporting that meets regulatory demands and supports investor confidence through enhanced transparency.

Retailisation of private markets

The push to retailise private markets, driven by ELTIF reforms, offers fund managers access to a vast new capital pool, particularly through defined contribution (DC) pension schemes. However, this shift comes with challenges including liquidity management and enhanced transparency in valuations.

While opening private markets to retail investors could drive significant growth, fund managers must adapt operationally to handle increased reporting, investor communication, and governance. Successfully navigating these challenges will position managers to benefit from a democratised private markets landscape for long-term growth.

Thriving amidst regulatory and market shifts

The UK’s private markets face a dual challenge: balancing regulatory demands with global competitiveness. The interplay between tax changes, evolving valuation standards, ESG mandates, and expanded reporting requirements demands a proactive approach. Managers that adapt swiftly will position themselves to thrive amidst this dynamic regulatory environment.

For tailored insights into navigating these changes, get in touch with Nick McHardy, Head of Funds ([email protected]) or Ross Youngs, CCO ([email protected]).

     

Considering Guernsey for your next private capital fund

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Guernsey is well known as a premier host jurisdiction for the administration of private capital funds, offering a host of advantages that make it an attractive domicile for fund managers and investors alike. In this article, Hannah Dunnell (Guernsey Managing Director) explores the appeal of Guernsey as an alternative’s destination, typical fund structures the regulatory regime and how the use of a trusted third-party partner can complement the journey.

Why choose Guernsey as a fund destination?

Guernsey’s reputation as a leading financial centre is well established, with decades of experience in the international finance sector. The island’s robust tax, legal and regulatory framework, combined with its innovative approach to financial services, has made it a preferred location for alternative investment funds that ensures investor protection and stability. With track record and experience in hosting a wide variety of international alternative funds, both Guernsey and Belasko boast decades of experience in the real estate, venture capital and private equity sectors.

Guernsey funds benefit from unrestricted marketing into North America, the Middle East, and the Asia-Pacific region. Within Europe, Guernsey-based funds can access the European Economic Area (EEA) through the National Private Placement Regime (NPPR). With a total net asset value of Guernsey Funds at nearly £286 billion[1], Guernsey has built a solid reputation for private capital fund administration.

The total net asset value of Guernsey funds at the end of the quarter was £295.7 billion, an increase over the quarter of £3.2 billion (+1.1%).  Over the past year, total net asset values have increased by £9.7 billon (+3.4%).

Whilst Guernsey has traditionally been the home of the alternatives administration sector and continues to service a large proportion of the world’s top alternatives houses, Guernsey has emerged as a top-class destination to new managers looking to launch a first, spin out or buy out venture, leveraging the broad diversity of experience and skills available in the island whilst offering familiarity to managers and investors alike. With an innovative, responsive and engaged regulator and industry, Guernsey remains the ideal destination for alternatives.

Typical fund structure

Fund managers have a plethora of options to choose from in Guernsey to suit their specific structuring needs, below we explore some of the most commonly utilised structures:

Limited Partnerships

Whilst Guernsey offers the ability to establish both incorporated (creating separate legal personality for the partnership), and unincorporated limited partnerships under the Limited Partnerships (Guernsey) Law of 1995, non-Guernsey partnerships are often administered from Guernsey.

Non-Guernsey partnerships, such as English or Scottish partnerships are often utilised to take advantage of the benefits of the law under which they are established, but which form part of a larger fund structure to facilitate say, carry allocations or co-investment opportunities.

Commonly referred to as a GP / LP structure, a limited partnership will appoint a general partner who manages its affairs, with a separate Investment Manager or Advisor often being appointed by the general partner. Typically, the general partner will be a Guernsey company, which can accept appointments from multiple partnerships, and which will often bring any non-Guernsey partnerships into tax residence in Guernsey by way of management and control being exercised in Guernsey. The rate of corporate tax in Guernsey for entities with no physical presence is currently set at 0%, notwithstanding any bodies that form part of a larger group that may be subject to Pillar II legislation.

Company and Trusts

Guernsey companies and trusts are widely utilised as ancillary vehicles in a larger fund structure for management and control purposes or as special purpose vehicles to facilitate asset ownership, financing or provision of management incentive plans. strategies. The use of Protected and Incorporated Cell Companies has become increasingly popular as an alternative to a more traditional GP / LP fund, allowing asset and investor segregation, without the need for additional vehicles that often add cost and complexity to a structure.

Guernsey law has its roots in common law and offers both practical ease and flexibility across all aspects of its framework.

Regulatory Categories and Fund Types in Guernsey

Most fund structures will require some sort of regulation, and Guernsey offers a flexible regulatory environment tailored to meet the diverse needs of the alternatives industry. If meeting the definition of a Collective Investment Vehicle (CIV), ie a diversification of both investments / assets and investors, then direct regulation will be required; if the definition of a CIV is not met then what is referred to as a ‘Fiduciary Exemption’ may be required to be obtained. Should your structure not require regulation, or require a ‘Fiduciary Exemption’, a GFSC regulated corporate service provider will be required to provide services to your structure.

The regulatory regime for closed-ended funds is divided into three primary categories: private investment funds (PIFs) registered funds (RCIS) and authorised funds (ACIS).

PIFs and registered funds offer the fastest route to market in Guernsey, with the local administrator (often referred to as the Designated Administrator) undertaking to the regulator that the fund promoter meets the criteria for licensing, known locally as the fit and proper test. The reliance by the regulator on the Designated Administrator to perform such checks, allows the utilisation of what is known as the ‘fast track’ regime, allowing achievement of regulatory status in as little as three days.

Subject to meeting the specific route 1, 2 or 3 criteria, PIFs also offer a convenient way to expedite timetable to market and offer a ‘light touch’ regulatory regime on the basis that the investor base does not contain retail investors, only those who are considered professional or institutional investors.

In contrast, authorised funds undergo a more rigorous review process. These funds receive their authorisation directly from the GFSC after a substantive suitability review. This category provides an additional layer of investor protection and may be preferred by managers looking to attract institutional investors.

Onshore and offshore counsel and advisors are typically appointed to advise on constitutional documents (e.g. LPA, Side Letters), marketing and wider tax considerations (i.e. fund formation), as well as on local regulatory compliance and supporting tax considerations.

Belasko in Guernsey

Guernsey offers a compelling combination of regulatory flexibility, robust infrastructure, and global market access, making it an attractive destination for private capital funds. By understanding the available fund structures and regulatory categories fund managers can make an informed decision about whether Guernsey is the right domicile for their first or next fund. Engaging in early discussions with advisors is crucial in navigating this process.

Our group headquarters are based in Guernsey, and our team on the ground have extensive experience in servicing global fund managers. We provide tailored end-to-end fund administration and corporate services that seamlessly support you with streamlining your back-office operations.

With a deep understanding of the Guernsey regulatory landscape and strong relationships with local law firms and advisors, we provide a personalised, reliable, and proactive service, helping clients navigate the complexities of private capital investments with confidence.

If you’d like to speak to our team about setting up your fund in Guernsey, please get in touch with Hannah Dunnell (Managing Director) at: [email protected]

[1] GFSC Statistics at the end of Second Quarter 2024, https://www.gfsc.gg/industry-sectors/investment/statistics

Proud to be sponsoring the BVCA Tax Policy conference 2024

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Belasko is proud to sponsor the BVCA Tax Policy Conference on Tuesday 19 November in London. This is a key event in the funds diary, attracting senior tax, legal, and regulatory experts from the private equity and venture capital sectors. The conference will delve into the latest developments and policies shaping the private markets industry, providing essential updates on UK and international tax law, legal frameworks, and regulations that impact fund structuring, transactions, and compliance.

Topics covered will include:

– The latest UK tax policies affecting private markets
– Cross-border tax and regulatory challenges
– Evolving legal frameworks for fund management and investment structures
– Compliance updates and best practices

Our team attending are:

([email protected])
([email protected])
([email protected])
([email protected])
([email protected])
([email protected])

We look forward to engaging with industry peers. If you’re attending, get in touch to meet with our team, or visit us at our stand at the event.

Learn more about the conference here: https://www.bvca.co.uk/Calendar/Event-Details/DateId/2712.

Private markets in transition: Fundraising, ESG, and tech trends from ALFI 2024

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The ALFI Private Assets Conference in Luxembourg brought together industry experts to discuss the latest trends and challenges in private assets. Greg McKenzie, Country Head of Luxembourg, and John Russell, Director, share some of their key takeaways from the event.

  1. Market trends:

The fundraising environment remains challenging, with asset managers tightening strategies as they navigate market uncertainty. Whether launching their seventh or first fund, asset managers are dealing with a more concentrated market and a global decline in IPO activity.

Europe remains cautious, particularly due to the potential impact of the upcoming U.S. elections. Despite these challenges, the CSSF continues to support a pro-business and pragmatic approach, modernising regulations to adapt to market needs. Luxembourg’s clear regulatory framework, combined with its strong interconnected funds ecosystem, continues to cement its position as a favoured jurisdiction, with practical tax structures like no VAT on management fees.

  1. NAV financing:

NAV (Net Asset Value) financing is gaining traction in the private equity space, providing flexibility for managers with the capacity to underwrite credit and assess underlying performance. NAV financing enables quicker access to liquidity at the fund level and is a useful tool for deleveraging portfolio companies and freeing up liquidity for operational and capital expenditures.

  1. Fundraising insights:

The fundraising landscape is undergoing several shifts:

  • Secondaries and private debt are becoming more prominent, fuelled by rising interest rates and changing investor preferences.
  • A shift toward retail investors is evident, albeit still quite slow, with products like ELTIFs and UCI Part IIs becoming more popular, though UCI Part II is restricted to semi-professional investors. Family offices are also very active in this space.
  • Listings are increasingly important, enabling asset managers to target a broader investor base. This supports the movement toward “deretailisation,” focusing on high-net-worth individuals and institutional capital over retail investors.

Preqin’s “Alternative 2029” report predicts a slowdown in the growth of alternative assets under management (AUM) until 2029, but private equity, infrastructure, and private debt are expected to grow significantly. European private capital fundraising is also expected to rise by 2026.

  1. ESG and greenwashing:

The discussion around ESG evolved from greenwashing (overstating sustainability claims) to greenhushing (downplaying ESG initiatives to avoid scrutiny). This shift reflects a growing focus on delivering real accountability rather than ticking boxes.  According to a 2022 report by PwC, nearly 90% of investors believe that corporate sustainability reports contain greenwashing.

Greenwashing concerns have been a focus of regulatory action, with firms like Deutsche Bank’s DWS agreeing to pay the SEC $19million to settle charges of greenwashing. As a result, sustainable assessments need to be embedded from the outset, capturing the right data to meet material risk requirements.

The biggest challenge lies in collecting and integrating reliable, complete data to support ESG initiatives. Private markets have a key advantage over public markets in this area, as private investors can directly influence data requirements by sitting on boards and defining the parameters for sustainability reporting.

  1. The role of technology and data in private assets:

Technology is playing an ever-larger role in asset management. The rise of Artificial Intelligence (AI) in analysing data, alongside the global push for regulatory convergence, is expected to shape future developments. There is growing pressure on fund administrators to meet investor demands for transparency and scalability, with fund of funds investors particularly focused on look-through reporting.

  1. Digital assets and Luxembourg’s regulatory flexibility:

Luxembourg’s regulator has demonstrated flexibility and bravery in supporting digital assets, providing clear regulatory frameworks that allow this asset class to flourish. This proactiveness aligns with Luxembourg’s interconnected funds ecosystem, ensuring that digital assets can integrate into traditional financial structures with ease.

  1. Future outlook:

As the private markets sector continues to evolve, we can expect significant advancements in AI-driven data analysis and regulatory alignment on a global scale. Product innovations are likely to follow in the coming years, with enhanced tools for capturing and managing sustainable investments.

This year’s conference underscored the importance of adaptability, particularly in navigating a challenging fundraising landscape, leveraging technology for growth, and integrating ESG considerations into long-term strategies. Asset managers will need to embrace innovation and remain proactive in meeting evolving investor demands.

Belasko in Luxembourg provides tailored, personalised fund services and our team has extensive experience in servicing global private capital firms. We excel in managing complex AIFs and holding structures, offering comprehensive end-to-end fund administration and corporate services.

With a deep understanding of the Luxembourg regulatory landscape, we offer a reliable and proactive service, underpinned by leading technology, to help clients navigate the complexities of private capital investments with confidence.

Get in touch with Greg McKenzie ([email protected]) or John Russell ([email protected]) to discuss how we can support setting up your next fund in Luxembourg.

     

Partners for Growth: Key Takeaways from the BVCA Summit 2024

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Last week, Belasko were proud sponsors of the BVCA Annual Summit, the flagship event for the private capital industry, attracting over 1,000 attendees from across the ecosystem.

This year’s theme, “Partners for Growth,” emphasised the evolving role of private capital in driving innovation, partnerships, and investment in people as the industry moves into its next phase. Ross Youngs, our Chief Commercial Officer, shares the key highlights from this year’s summit.

  1. Recovery expectations and market outlook: There is an important yet subtle shift recognising the worst is behind us.  Panellists cited that the market may not fully recover until 2026 or 2027 however we expect the IPO market to reopen in 2025 and interest rates to continue to decline supporting growth. They also highlighted that whilst the M&A market is subdued, there are deal flow opportunities coming from the mid-market (£50-500million) as well as from family-owned businesses.
  2. Optimism in venture capital: With asset prices low and competition reduced, Managers view this as a prime opportunity to act. As highlighted by Isomer Capital, now is the time to strike, capitalising on lower valuations to fuel growth.
  3. Artificial intelligence (AI) and technology – long-term investment and integration: AI continues to dominate discussions, with the consensus that AI’s investment cycle will span the next 20 years. Investors are increasingly focused on software that connects industries, utilising AI to drive efficiency across verticals and horizontals. However, as AI advances, so does the need for stronger cybersecurity management to protect against sophisticated threats.
  4. Government support and the UK’s venture capital position: Government support for the private capital sector was a key theme, with Tulip Siddiq, Treasury Minister, pledging a stable, low-tax environment to foster investment. Reducing the funding gap for Series B and C is an important priority to enable British business to flourish.  Initiatives include encouraging pension funds to invest in the space and reforming planning to support these industries.
  5. Private credit and stable investment options: Demand for private credit remains strong, offering stability for fundraising and yielding steady returns. Investors continue to seek more evergreen solutions that provide cash yield stability, while the rise of software as a service (SaaS) also presents attractive opportunities.
  6. Liquidity tools on the rise: Liquidity options have expanded significantly in recent years, with access to over 25 different platforms now available, compared to just one a short time ago. This rise in liquidity solutions is helping businesses navigate the challenging market conditions, particularly as more opportunities emerge in the secondaries market.

The 2024 BVCA Summit offered a comprehensive look at the evolving landscape of private capital, providing delegates with valuable insights into the future of the industry. From AI integration to government backing and the continued rise of the secondary market, the next decade promises significant transformation, and the private capital market is well-positioned to drive this growth forward.

If you’d like to discuss how Belasko can support your business with achieving your growth goals and capitalising on new opportunities, get in touch with Ross Youngs ([email protected]) to arrange a meeting.

Sustainable Finance: How ESG is Shaping the Future of Investment

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ESG has fast become one of the better-known acronyms in financial services, continuing to dominate news headlines. As a result of this, buyers of goods and services are now differentiating where they allocate capital and prioritising businesses pushing to make a difference. This has shifted ESG and sustainable finance from just buzzwords to critical components of the financial landscape.

Despite a cooling in ESG fundraising to $91 billion globally in 2023, there has been a notable resurgence in 2024, with $55 billion raised by April alone[1]. This rebound highlights the sustained interest and commitment to ESG principles among investors and fund managers. And, according to PwC, analysts expect ESG AUM to reach c20% of Global AUM or $33.9trn by 2026 ($18.4trn 2021).

Interestingly, while the performance difference between ESG funds (13.5% IRR) and non-ESG funds (15% IRR) is not significant, ESG funds tend to exhibit lower variance. This lower risk profile can be appealing to investors seeking stability. Moreover, six out of ten investors have either rejected an attractive investment opportunity or would do so based on ESG concerns, underscoring the growing importance of these factors in investment decisions[2].

Ross Youngs, Chief Commercial Officer at Belasko, identifies how ESG is shaping the future of investment, the impact on our clients and the business’ proactive approach to lead the way.  

How are our clients impacted? 

Our fund clients experience varying degrees of impact from ESG, largely influenced by their size and marketing strategies. Many clients share our proactive stance and have generally adopted two distinct approaches based on the level of regulation required:

  1. The Sustainable Finance Disclosure Regulation (SFDR): A key regulatory framework in the EU that governs the transparency and reporting of sustainability-related information by financial market participants.
  2. The Principles for Responsible Investing (PRI): Where SFDR has not been relevant, our clients have chosen voluntary compliance with the PRI which provides a set of ESG principles designed to foster a positive, sustainable impact within the global financial system.

Unpacking the SFDR 

There are three levels of regulation applicable to funds marketed in Europe under the SFDR:

  • Article 9: These funds are dedicated to achieving specific sustainable objectives. They have strict requirements on how they achieve their goals. There has been a great deal of focus on this category of fund with rigorous evidential reporting. Due to these high standards, about 40% of Article 9 funds, representing $175 billion, have reclassified to Article 8.
  • Article 8: These funds promote positive environmental, social, and governance characteristics without necessarily having them as their primary objectives.
  • Article 6: This category includes funds that do not integrate sustainability considerations into their investment strategies.

These three levels of regulation serve as stepping stones depending on where the business or fund is on its ESG journey.

How has ESG impacted Belasko?  

At Belasko, we recognise the significant benefits of incorporating ESG into our business strategy. Although we’re not legally required to report on sustainability, we’ve taken a proactive approach in doing so by partnering with Terra Instinct to develop a Responsible Business Policy. This initiative includes forming a group-wide committee, defining relevant sustainable metrics relevant to our business, setting targets, and publishing an annual report on our ESG journey for clients and investors.

We anticipate that mandatory ESG reporting will become a reality for businesses like ours in the coming years. To stay ahead, we’re committed to being leaders in this space, continuously taking proactive steps to lead the way.

How can we help you?  

No matter the complexity of compliance with the PRI or SFDR, there are common challenges that we can support you with.

  1. Defining a policy of responsible investment: The policy must consider the fund’s impact on ESG factors and establishing data points to measure and track positive impact according to the goals set.
  2. Data collection: While it may seem straightforward, data collection is not standardised across markets and countries so the sophistication and resource availability of portfolio companies to stream up the data sets can vary considerably.
  3. Regulation and investor demand: With both evolving rapidly, our clients often lack the internal ESG resources to stay compliant therefore relying on Belasko to keep them informed.

We have developed an end-to-end solution in partnership with Terra Instinct to power auditable data collection. Terra Instinct are specialists when it comes to defining policy and collecting and validating data, as well as providing reasonable industry estimates where data is not available. The expertise of advisory specialists is crucial in ensuring data quality, which, in turn, ensures accurate and reliable reporting for investors.

Moving forward

It’s evident that ESG is here to stay, with a growing market expectation for sustainability considerations in both our personal and business lives. Adopting positive-impact principles is essential for future success.

If you’re looking to prepare for the future of ESG, get in touch with Ross Youngs at [email protected].

[1] Preqin, “ESG in Alternatives 2024” [Source: https://www.preqin.com/insights/research/reports/esg-in-alternatives-2024?chapter=sample]

[2] Preqin, “ESG in Alternatives 2024” [Source: https://www.preqin.com/insights/research/reports/esg-in-alternatives-2024?chapter=sample]