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]

Jersey Private Fund Regime Updates: Faster, Flexible, and Inclusive

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On 02 July, the JFSC announced new updates to the Jersey Private Fund (JPF) Guide, with Jersey Finance [1] providing a summary of the key changes to the regime that are designed to further enhance it.

Jersey Private Fund Guide: What’s New?

Carry and Co-Investment Vehicles

The new guidance recognises that co-investment can, in some cases, form part of a fund’s carry or incentive arrangements.

Investor Eligibility
  • General: Investor eligibility is now clarified, ensuring that eligibility criteria are satisfied upon admission and remain valid even if there’s a change in status (e.g., a departing employee, director, partner, or expert consultant).
  • Transfers: In involuntary interest transfer cases, such as death or bankruptcy, the transferee must meet the investor eligibility requirements, albeit not necessarily through the same criteria as the transferor.
  • Service Providers: The ‘professional investor’ category has been broadened, replacing ‘senior employee’ with ‘financially sophisticated employee’ and including ‘expert consultant’ for greater inclusivity and flexibility.
Governing Body

The JFSC now expects at least one Jersey resident director to be appointed to a JPF board or its governing body. The 2024 JPF annual compliance return will collect data on board compositions, including how many Jersey or non-Jersey resident directors and how many of those directors are employees of the Jersey-based designated service provider (DSP) on the board.

Non-JPF Arrangements

Guidelines for arrangements not classified as JPFs, including family and incentive arrangements like carry and co-investment vehicles, have also been updated. The definitions for employees and family connections now encompass trusts established for individuals meeting the expanded definition of ‘family connection.’

Additional Key Changes
  • Money Laundering and Outsourcing: References to the Money Laundering (Jersey) Order 2008 and the JFSC’s Outsourcing Policy have been included.
  • DSP Regulation: From July 2024, regulated persons registered solely for investment business under the Financial Services (Jersey) Law 1998 will no longer be able to apply as the DSP for a ‘very private’ JPF (with 15 or fewer offers/investors).

Benefits of Using a Jersey Private Fund

The JPF regime offers fund promoters a cost-effective, fast-track (48-hour) regulatory approval process for private funds, allowing up to 50 eligible investors to participate. This streamlined approach has made Jersey an increasingly attractive domicile for private capital funds and JPFs remain a very popular solution for our fund clients.

The benefits of using a JPF include:

  • Reputation: Jersey’s robust legal and regulatory framework and commitment to high standards of compliance add a layer of trust and security for investors. This has been recently recognised in the Jersey MONEYVAL Mutal Evaluation report[1] which confirms that Jersey’s effectiveness in preventing financial crime is among the highest level found around the world.
  • Appropriate regulation: The JPF regime has been designed for professional or other eligible investors and is light touch from a regulatory perspective with checks and balances built in to ensure investor protection.
  • Efficiency: The 48-hour fast-track regulatory approval process significantly reduces time-to-market for funds.
  • Cost-Effectiveness: Lower setup and operational costs make JPFs a financially attractive option.
  • Flexibility: The regime accommodates a variety of investment structures, including carry and co-investment vehicles.
  • Investor inclusivity: Broad and clarified investor eligibility criteria enhance the attractiveness for a wider range of investors.

The enhancements to the JPF regime further solidify Jersey’s position as a leading jurisdiction for private funds, providing an optimal blend of efficiency, flexibility, and regulatory integrity.

Belasko are a next-generation fund administrator and in Jersey, our expert team provide full-scope, tailored fund administration services across all types of Jersey fund vehicles. We offer a stable tech-enabled solution, built on robust processes and procedures, that allows our clients to focus on enhancing performance and long-term growth. Further detail of the comprehensive changes can be found in the consolidated redline version of the updated guide.

Get in touch if you’d like to discuss how we can support you with your fund administration in Jersey:

Scott Nelson, Client Services Director ([email protected])

[1] https://www.jerseyfinance.je/news/updated-jersey-private-fund-guide/

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

 

Outsourced Models are Changing: Executive Summary

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Nick McHardy, our Head of Funds, recently shared his insights on enhancing performance by developing and improving operating models in our ‘Outsourced Models are Changing’ series. As a refresh, you can read back over those articles here:

  1. A response to marketing conditions
  2. Four value drivers that underpin an operating model review
  3. Considerations when changing your operating model
  4. Same scope of services, different outcome

Across the four articles, we covered the evolving nature of outsourced models in the private capital fund industry, emphasising the current need for fund managers and general partners (GPs) to reassess their outsourcing arrangements due to market conditions, technological advancements, and changing investor expectations.

Historically, significant adjustments to outsourcing models have coincided with market downturns, such as the post-Global Financial Crisis era. Today, challenging fundraising conditions and the emergence of alternative service providers with advanced technology and tailored services are prompting another wave of operating model reviews.

Key value drivers for reviewing and potentially changing operating models include cost reduction, operational effectiveness, risk management, and enhancing the investor experience. Fund managers have two main routes: insourcing activities previously outsourced or increasing their existing level of outsourcing.

Critical considerations in this process include regulatory permissions, expertise and resourcing, opportunity costs, systems and data strategy, risk management, relationship dynamics with service providers, contractual obligations, and the timeframe for onboarding additional services.

As we conclude the series, it’s clear that even without changing the scope of outsourced services, fund managers can achieve improved outcomes through tender processes, feedback mechanisms, and technology solutions. Ultimately, adapting outsourced models can enhance performance, reduce costs, and improve service quality, making it potentially beneficial to switch to a new fund administrator in order to achieve long-term growth.

Belasko offer tailored, full scope fund administration, focused on delivering the highest quality solutions across the entire fund lifecycle and across multiple asset classes. We’ve worked closely with our clients on developing and improving their operating models to enhance their performance. If you’d like to discuss further, get in touch with Nick McHardy, Group Head of Funds at [email protected].

Is now the time to consider upgrading from your existing fund administrator?

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In today’s evolving financial landscape, private capital fund managers and general partners (GPs) face increasing pressures to enhance performance, reduce costs, and manage risks effectively.

Outsourced models have long been a cornerstone of the private capital fund industry, offering solutions to these challenges. However, market dynamics, technological advancements, and changing investor expectations are driving a need to re-evaluate existing outsourcing arrangements.

Download our new whitepaper which addresses the pressing question: Is now the time to upgrade from your existing fund administrator?

Here, we delve into:

  • Responding to marketing conditions
  • The four value drivers that underpin an operating model review
  • Considerations when changing your outsourced model
  • Key benefits of changing your fund administrator – it’s easier than you think!

You’ll also discover why clients of ours, including Syntaxis, Riverside Capital, RTP, RCapital and Apera, have all made the seamless transition to Belasko – and why they’ve never looked back…

If you’d like to discuss how we can simplify administration solutions for your business, get in touch.

Belasko proud to sponsor the BVCA Annual Summit 2024

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We’re delighted to be sponsoring the BVCA Annual Summit, taking place in London on the 11-12 September 2024.

The Summit 2024 continues to be the must-attend event for the private capital community, attracting over 1000 delegates ranging from private capital fund managers, institutional investors, pension funds and family offices.

The Summit this year will explore the strategies and trends transforming our industry, covering the latest thinking on the geopolitical economy, cutting-edge technology, diversity, ESG and more. It’s also an excellent opportunity to meet and network with key industry professionals and peers.

If you plan to attend the event and would like to meet our team, get in touch with our Chief Commercial Officer, Ross Youngs, to set up a meeting.

Contact Ross via email: [email protected].

Find out more about the conference here: https://www.bvca.co.uk/Calendar/Event-Details/DateId/2650