There are two types of retail funds, namely open-ended and close-ended retail funds, whereby the Guernsey fund is focused on closed-ended funds.
As the Guernsey Financial Services Commission (GFSC) announced, the Guernsey Fund stood at GB£274.4 billion in 2012, a period when open-ended funds declined. The Guernsey Fund keeps appealing to non-Guernsey funds which accounted for GB£92.6 billion in the Guernsey overall fund in 2012. Closed-ended Guernsey retail fund amounted to GB£130.3 billion in the same period.
The new funds which have been launched in recent years are mostly aimed at the closed-ended sector, private equities, and investment companies. After the global crisis, new investment opportunities emerged, especially in private equity and under performing companies which had the potential to grow in value under active management. Infrastructure and renewables are also targeted by the Guernsey Fund.
The Fund has also been active in seeking international access by applying for the AIFMD passport which would open the door to the EU markets and companies.
Who is Authorized to Market Retail Funds?
Any legal or natural person marketing a fund in Guernsey has to be approved and licensed by the GFSC. The same goes for both, open-ended and closed-ended retail funds, except for those who have a UK, Irish, Jersey, or Isle of Man license.
Licenses from these countries are recognized and acknowledged in Guernsey. Retail fund can be marketed unrestricted in almost all categories, except for some which can only be offered to regulated entities or qualifying professional investors, depending on the fund category.
Who Operates the Fund?
The Guernsey Retail Fund has to have a promoter and designated manager, regardless if the fund is open-ended or closed-ended. The promoter is responsible for the success of the fund. Usually, the investment manager assumes the role of the promoter. The promoter and their application are both being closely observed by the GFSC prior to hiring.
Their track record is revised when the GFSC considers approving a fund. Applicants have to provide proof of their eligibility by submitting a track record from the jurisdiction they come from, preferably from a successful business. The GFSC also gives an advantage to licensed promoters and makes its decision on the basis of the potential promoter’s reputation, success, and ownership.
Every registered Guernsey Fund has to appoint a designated manager. He/she also has to be GFSC approved. A local company usually assumes the role of the designated manager. Nevertheless, the work can also be outsourced to other countries. Even if out of the country, the designated manager has to work according to the GFSC rulebook which includes employee training and monitoring, record keeping, timely execution, conflict of interest settlements, etc.
Taxes and Retail Funds
Again, open-ended and closed-ended retail funds are subject to the same tax policy, and what applies to one, applies to the other as well.
Funds can be exempt from taxes. They qualify through an annual payment fee of GB£600. Funds which are exempt from taxes are not classified as tax resident funds. Resident funds have to submit detailed information to tax authorities on the distributions made to investors residing in Guernsey or companies registered there. All other tax requirements are the same as for non-resident investors and include no deduction on income tax from dividends or interest.