Knowledge

The Jersey Private Fund ("JPF") offers a fast, flexible and cost-effective solution for investment managers or investors looking to establish a fund or other investment structure in a reputable and well-regulated jurisdiction. This briefing summarises the principal features and advantages of JPFs and reviews the success of JPFs to date.

Overview of the JPF

The JPF was introduced to offer a flexible vehicle within a proportionate regulatory environment.  The JPF is designed specifically for private funds and other co-investment structures with a focus on flexibility, speed to market, and cost efficiency.  A JPF must meet certain regulatory requirements set out by the Jersey Financial Services Commission ("JFSC"), but the regulatory framework provides flexibility so as to accommodate different types of funds, structures and investment strategies.

JPFs can have a maximum of 50 investors, who must be either professional or otherwise eligible investors. The JPF can be open-ended or closed-ended and can be established as a company, a unit trust, or a limited partnership.  JPFs can be used to invest in any type of asset class, including private equity, real estate, infrastructure and hedge.

One of the main benefits of the JPF is the streamlined regulatory process. Establishment involves the submission of a single application to the JFSC, with consent usually granted within 48 hours. Once the JPF is authorised, there is no ongoing requirement to seek regulatory approval for changes to the structure or investment strategy, provided that the JPF remains compliant with the published JPF guide.

Benefits of the JPF

There are many benefits of using a JPF.

Reputation and credibility

Jersey is a highly respected and long-established international finance centre, which provides reassurance and credibility for structures established in the island.  This can be particularly important for private fund managers who are seeking to attract institutional investors or other international investors.  Jersey's reliable legal system also provides investors with a high degree of legal certainty and predictability.

Strong but proportionate regulation

Jersey maintains a well-established regulatory framework, which is compliant with international standards.  Designed for professional or other eligible investors, JPFs are themselves subject to relatively light touch regulation.  At the same time, each JPF must have a designated service provider (administrator) in Jersey, which must comply with ongoing best practice requirements, meaning that investors can have confidence in the integrity of the JPF structure and its management and administration.           

Tax neutrality

Jersey has tax-neutral status, meaning that there are no taxes on a JPF's income or gains. This can allow the pooling of capital without the addition of a further layer of taxation, can provide tax efficiencies for investors and can make Jersey an attractive location for fund and other investment structures.

Access to expertise and substance

There is a well-established financial services industry in Jersey, with a range of service providers offering expertise in fund and corporate administration, legal and regulatory compliance, and accounting. This means that investment managers and investors can access a depth of knowledge and experience to support the establishment and management of the JPF structure, in a cost-effective manner.  Jersey has a depth of infrastructure and resources which enables the provision of appropriate substance for structures managed in the island.

Efficient set-up process

Another benefit of the JPF regime is speed to market.  A new JPF can be launched within a matter of days, compared to the weeks or even months it can take to establish a fund in other jurisdictions.  This can reduce the time and cost involved in establishing a structure and can allow managers to focus on their core activity of investment selection and management.  This can also be particularly advantageous in situations where time is of the essence, such as when a manager wants to take advantage of a specific investment opportunity, or if bespoke structures are required.

Access to global markets and Europe

Jersey is strategically located between the UK and Europe, providing easy access to global markets.

A benefit of the JPF regime is its ability to provide access to European investors via the National Private Placement Regime ("NPPR").  NPPR allows investment managers to market their funds to investors in the European Union ("EU") without having to comply with the onerous requirements of the Alternative Investment Fund Managers Directive ("AIFMD").

Compliance with the AIFMD can be time-consuming and expensive, and many managers have found it difficult to navigate the complex regulatory landscape.  In contrast, under NPPR, managers can market and sell their funds to professional investors in EU member states by complying with a simplified set of regulatory requirements, enabling access to a large pool of potential investors without having to invest significant time and resources in complying with the AIFMD.

The Success of JPFs

Since its launch in 2017, the JPF has become a widely recognised and respected investment structure, reflecting the range of benefits available to investment managers and investors.

The success of the JPF regime can be seen in its rapid growth. Since launch, nearly 650 JPFs have been established, an increasingly significant element of Jersey's funds industry alongside the US$559 billion regulated fund segment.  The JPF regime has attracted a range of investment managers and investors, from small start-ups to established global firms, across a range of asset classes.

Since their introduction, JPFs have been widely praised for their simplicity and flexibility and providing an attractive and secure platform for the establishment and management of private funds and other investment vehicles.  Jersey is recognised as a leading centre for the establishment and management of funds and investment vehicles, and the JPF has contributed to Jersey's strong record of providing effective vehicles for international investment managers and investors.

Conclusion

The JPF offers an efficient and cost-effective solution for investment managers and investors looking to establish a fund or other investment structure in a reputable and well-regulated jurisdiction.  JPFs are flexible, with the ability to structure matters so as to accommodate the preferences of managers, investors and the investment strategy of the fund.  The benefits of using a JPF include the strong but proportionate regulatory framework, the reputation and credibility of Jersey as a financial centre, tax neutrality, access to expertise, and a fast and cost-effective set-up process.

Overall, the JPF regime has been a major success, encouraging a wide range of investment managers and investors to establish structures in Jersey.