The appetite for liquidity in troubled and uncertain global markets is leading to an interesting trend that we are seeing in our Jersey funds practice. Enquiries for new fund establishments over the past 6-9 months are spread across multiple asset classes, from RE to PE and financial instruments to film finance. They are not restricted by the scale of the investment – our experience since September has been with funds ranging from £10 million to £1 billion in commitments – and they are marketed to investors both inside and outside the EU. The common feature amongst these new fund structures is that a large proportion are to be established as open-ended investment funds.
This new trend is something that is worthy of exploration further in a funds market that has traditionally been focused on RE and PE investments via closed-ended fund vehicles. Uncertainty about the spread and scale of the impact of coronavirus is undoubtedly one of the causes, but we first picked up on this emerging trend in September 2019, long before the virus came to prominence.
In almost all cases, the versatility of the Jersey Private Fund has meant that it has been the preferred structuring option spanning the different asset classes, values and geographic spread. That speaks not just to the flexibility of the JPF, but also to the wider appetite for a funds product that offers a lighter-touch regulatory regime in return for a limit of marketing to up to 50 investors, all of whom must meet criteria as professional investors, or make a minimum investment of £250,000.
Historically the Cayman Islands has been the obvious choice for open-ended investment funds, and in particular hedge funds, and being able to draw on the wealth of knowledge that our dominant Cayman practices across our other jurisdictions have puts us in prime position to advise these funds in Jersey.
There are a number of administrators in Jersey who have the knowledge and expertise to service these structures. In the majority of cases, the open-ended funds that we have worked on this year have allowed subscriptions and redemptions on a monthly or quarterly basis, which from an administration perspective still fits nicely within the valuation and reporting model that most administrators provide to their closed-ended fund clients.
In these uncertain times the appetite for liquidity is unlikely to diminish in the near future, and so open-ended funds are likely to become ever more popular.
Originally published by Walkers, July 2020
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