This article was originally published in Corporate INTL, July 2010
Guernsey's status as a triple A-rated offshore jurisdiction offering innovative and high quality regulation, has put it in the top tier of offshore jurisdictions, offering a blue-chip service to fund managers looking to domicile and administer funds there.
It's innovative regulatory environment has also been a major draw for many promoters looking for a good blend of flexible structures and credible oversight and regulation.
Praxis Fund Services has a presence in Guernsey, as well as offices in Malta and Luxembourg. The spread of coverage means this fund specialist can offer a broader range of products and services to clients.
Prior to the economic downturn, Praxis participated in the establishment of several qualifying investor funds for a number of clients. Director Stephen Cuddihee believes their appeal to fund promoter's stems from the fact that they could be established as open-ended or closed-ended funds under the regulatory regime in force at that time via a streamlined authorisation process.
He said: "With the introduction of the new regime of investment fund regulation by the GFSC in December 2008, all Guernsey funds (whether open or closed-ended) are now categorised as either authorised or registered funds. The introduction of the registered fund regime could have an impact on the popularity of qualifying investor funds once global markets recover, as the authorisation process for registered funds allows any application to be processed by the GFSC within a three working-day timeframe."
Fund dynamics
The economic downturn has been a turbulent time for investment funds, particularly open-ended funds with many suffering from falling asset values and increased redemptions levels.
Praxis has been fortunate that its open-ended funds did not experience any significant increase in redemption levels.
"We were aware that a number of open-ended funds administered elsewhere imposed redemption restrictions or fund suspensions and terminations. A number of our funds have undertaken "exceptional activities" in the last 18 months which have resulted in an increase in board meetings and investor communication, which in turn has significantly increased the demands on our corporate secretarial department," says Mr Cuddihee.
He added: "While such events have provided a challenging environment the combined experience of the senior management team within Praxis has enabled us to deal with each issue in a professional and competent manner in spite of the sheer quantity of those issues."
Fund launches have also been affected because of the volatile environment, with a real slowdown during the past 18 months. Despite this, it appears that requests have increased recently albeit slowly and with some caution. Praxis reports that the majority of new funds set up recently are a mixture of alternative asset classes such as distressed lending.
Listing Funds
Listing funds has become more popular because of the perception that it provides greater access to investors and creates greater credibility.
Praxis has considerable expertise in the listing of funds and a number of its funds are listed on the CISX.
In addition the firm also has a number of funds listed on AIM and a further two funds which have sought a full listing on the LSE. As a listing member of the CISX Praxis' listing team has extensive experience in relation to the listing of both closed and open-ended Authorised and Registered Guernsey Funds.
Mr Cuddihee says that the CISX, in particular, has proven popular with funds targeting high net worth individuals or UK approved pension schemes, as it is approved by HMRC as a Recognised Stock Exchange Overseas.
He said: "A CISX listed entity is classed as a qualifying investment for approved UK pensions (SASS/SIPPs), ISAs and PEPs. A CISX listed entity is therefore a flexible, cost-efficient vehicle enabling high net worth individuals and/or UK approved pensions, (SASS/SIPPs), ISAs or PEPs to benefit from tax-free gross roll-up or investment into specialist investment vehicles."
Praxis is a category 2 listing member of the CISX and is responsible for communicating with the exchange in respect of any listed investment fund of which it acts as administrator.
"Becoming a Category 2 Listing Member has been of enormous benefit to Praxis as it has given us the ability to provide a 'one stop' shop for those fund promoters looking to appoint a single administrator/listing sponsor," adds Mr Cuddihee.
Regulatory Issues
The boards of alternate investment funds have become more conscious of the need to be fully appraised with the relevant information in relation to regulatory concerns or issues.
Praxis actively participates in industry forums/consultations regarding all developments involving regulatory issues in Guernsey and, accordingly, is in a position to advise clients of any developments at an early stage.
"In addition to the above, Praxis ensures the board and investment manager/advisor are provided with sufficient information on such matters in the Board Packs provided to them at periodic meetings or on a need to know basis. The provision of this information allows the board and investment manager/advisor to consider the issue at hand and take the appropriate action," says Mr Cuddihee.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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