Comment: Future-proofing operational models key to supporting global GP ambitions

by Contributor 19 June 2023

By Elliot Refson, head of funds at Jersey Finance

Against the backdrop of an ever-changing regulatory arena, banking sector disruption and a challenging fundraising environment, the need to future-proof operational models has taken on even greater resonance in 2023 among private equity managers with an international investor base.

It’s telling that, according to S&P’s Global Market Intelligence 2023 Private Equity Outlook Survey, 45% of private equity executives expect fundraising conditions to deteriorate this year, with 34% saying conditions will remain the same.

Such an evolving playing field can lead to greater complexity, with associated costly changes such as relocating domicile or implementing new compliance frameworks, which in turn can disrupt fundraising and capital flows. Non-EU managers wishing to market into Europe will be particularly attuned to these intricacies, having had to navigate the AIFMD during the past decade.

Mitigating uncertainty
Against this backdrop, stability and familiarity have become hugely significant, with GPs increasingly veering towards operational models that can go some way towards mitigating regulatory uncertainty.

The mantra of stability, certainty and delivering a no-change outlook has served Jersey well as a fund domicile in recent years – a flight to quality has seen the value of funds business serviced through the jurisdiction grow to more than $600bn, which continues to rise.

At the same time however, there is a need to continue driving forward to maintain a leading position in a sector increasingly influenced by technology, shifting investor attitudes, market sentiment, geopolitics and regulation – and that drive is often manifested through legislative and structural innovation.

Last year, for instance, marked the fifth anniversary of the Jersey Private Fund (JPF) structure, which offers a cost-effective, flexible and swift-to-market option. Launched in 2017, 638 JPFs have now been registered, an increase of 20% during the last year alone. It has become the go-to choice for private capital co-investment and cross-border institutional fund structuring.

Meanwhile, earlier this year new Limited Liability Company (LLC) legislation was approved. Benefiting from a simple registration process and flexible governance requirements, the Jersey LLC, which has a separate legal personality and can be classed as a ‘body corporate’, offers a number of key opportunities, including being used for issuing securities, as a manager vehicle, and as a fund entity in conjunction with the hugely successful JPF regime.

Being pari passu with the LLC regimes of Delaware and Cayman, the Jersey LLC provides GPs with much-needed familiarity from a structuring point of view, combined with the well-established stability and certainty of the Jersey private equity ecosystem – crucially, from a European location not within the EU.

The LLC complements existing structures to offer a future-proofed alternative to marketing under full compliance with the AIFMD and other European directives via Jersey’s National Private Placement Regimes.

It is Jersey’s experience that innovation on the one hand and stability and certainty on the other are not opposing forces – in fact, they can be complementary.

Targeted innovation, evidenced through the JPF and the Jersey LLC, have brought fresh options to the market to support GPs with their cross-border ambitions, while at the same time maintaining the same stability and certainty Jersey has long been synonymous with.

This combination should prove to be a potent mix and offer the sort of future-proofed operational model needed in this new era of international private equity structuring.

This article was produced in association with Jersey Finance

Categories: The ExpertFundraising & fund structuringDomicilesFund financeOutsourcingFund administrationLegal & compliance advisoryTax advisorsRegs & ComplianceAIFMDDomicileTax

27 November 2023

Profile: Martim Avillez, Limerston Capital

The COO and founding partner discusses setting up the firm’s operations, combining them with his investment duties and navigating difficult times

28 November 2023

Luxembourg’s private debt industry expands

According to a KPMG survey, AUM grew by 51% during the last year; changes in fund vehicles but LP base largely unchanged

28 November 2023

Bite Investments launches wealth management feature

Company’s platform to connect asset managers with wealth managers to facilitate fundraising

28 November 2023

Carbon Accounting Alliance launches

Group of 35 organisations represents emissions of 24,000 companies

28 November 2023

Moving surety from obscurity

Surety could be an overlooked, low cost liquidity solution in a time of portfolio optimisation

27 November 2023

Home game Sweden

A change in tax legislation and ethical considerations are leading Swedish PE firms to onshore their funds