A revolutionary new fund structure for Jersey has been devised by Jersey-based law firm Crill Canavan and fund administrator Herald Fund Services Limited, and is set to accelerate growth in the island’s fund sector.
The Standard Form Expert Fund (SFEF), the first fund of which has been approved by the Jersey Financial Services Commission (JFSC), is already proving extremely popular because it cuts the time and cost involved in setting up funds domiciled in Jersey by about 70%, whilst complying fully with the island’s regulatory regime for expert funds.
The new structure makes use of Jersey’s innovative Incorporated Cell Company (ICC) legislation and works in a similar way to an umbrella fund. Individual investment funds are established as separate incorporated cells and an investment manager is appointed to each fund. Crucially, different investment managers can be appointed to each of the separate cells within the ICC.
Having one structure encompassing a number of funds makes it possible to create standard documentation for all the funds and appoint standard functionaries (legal advisor, administrator, custodian, banker and auditor), thereby saving further on costs. Importantly, the standardisation of documents makes it easier for fund service providers to develop a strong familiarity with all the funds held by the ICC.
“The key advantage of standard documentation is that it has the potential to reduce the cost and time involved in setting up a Jersey regulated or unregulated fund by approximately 70% when compared to more orthodox or bespoke fund structures,” says Adrian Odell, Head of Funds at Crill Canavan. “This provides an incentive to investment managers to incur the initial cost of fund formation and take new investment strategies to market, and reduces the upfront risk associated with establishing a fund and assessing investor appetite. By offering a standard form product, Jersey can compete with and beat any offshore jurisdiction with reference to the full bouquet of factors considered in choosing a fund domicile.”
The funds themselves may have differing aims and strategies, and operational terms, which cannot be standardised. However, standard documentation copes with this by placing the variable elements of the funds into an appendix, enabling each fund to retain its individuality.
“The beauty of this new fund structure is that it maintains the regulatory oversight which clients are looking for in the current market but at the same time makes it extremely cost-effective,“ says Mike Capraro, Managing Director of Herald Fund Services Limited (which is regulated by the JFSC). “Perhaps the primary detractor to the Jersey funds market has been the costs associated with establishing funds here which can be higher than other jurisdictions. By working with Crill Canavan, we’ve found a solution that has attracted a positive response from London fund lawyers and is already bringing new energy to the marketplace.”
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