My thoughts on ESMA’s AIFMD announcement
As has been reported widely elsewhere, the European Securities and Markets Authority (ESMA) has recommended that the passport under the Alternative Investment Fund Managers Directive (AIFMD) should be extended to fund managers based in Switzerland (upon the adoption of certain pending legislation), Jersey and Guernsey.
The fact that the Cayman Islands and the British Virgin Islands were not included in this list has come as a shock to a number of commentators, but frankly we here at Harneys were anticipating this very approach being taken by ESMA for a wide variety of reasons.
I think it is very telling that as part of ESMA’s statement, they mentioned that the European Commission, Parliament and Council may wish to consider whether to wait until ESMA has delivered positive advice on a sufficient number of non-EU countries, before introducing the passport in order to avoid any adverse market impact that a decision to extend the passport to only a few non-EU countries might have.
I had the pleasure this morning of headlining (which makes me sound far more like a rock star than a funds lawyer which, just to be clear, is very far from the truth) at the BVI Investment Funds Association breakfast forum, speaking about the new BVI fund products. Whilst I think on occasions I may have expressed a little too much enthusiasm (probably due to the espresso immediately before taking the podium), there was a generally accepted acknowledgement in the room that these vehicles do allow the BVI to properly and actively market itself as the very genuine next best alternative to Cayman to house an offshore fund.
The questions I received from the floor were varied; one interesting discussion point was the KYC obligations of the fund and whose ultimate responsibility it would be to collect identification documents on the investors if the fund does not appoint an administrator. The consensus was that this is likely to fall upon the directors, adding weight and responsibility to the fiduciary duties they already owe to the fund.
Overall, there was a real sense of optimism and when coupled with the fact that the approved manager product is gathering more and more momentum (evidenced by the vast increase in licenses issued in Q1 2015), there is no doubt that the BVI is moving in the right direction.
One of the first things in my inbox this morning was an interesting new paper Financing the Economy: The role of alternative asset managers in the non-bank lending environment published today by AIMA, the Alternative Investment Management Association.
The paper looks at the use of financing from hedge funds in sectors such as social housing, health, renewable energy and shipbuilding, as well as the more traditional support the hedge fund industry provides small and medium-sized enterprises who badly need access to capital to grow but have found it increasingly difficult to obtain since the banking crisis.
Well done for tracking us down and thanks for checking us out.
We are a diverse group of funds lawyers that have come from far and wide and now happen to be all under the global roof of one of the leading offshore law firms, Harney Westwood & Riegels. This blog was born from wanting to try and address everyday questions we receive from our clients such as “Why do I need an offshore fund?”, “How do I go about setting one up?” and “Why are you lawyers so damn expensive?” (a common misconception).
Wanting to be good Samaritans (and hopefully remove the common misconception), Lewis Chong and I started looking around online and were surprised to see that there was not a lot of helpful information for people with these types of questions. So, after a couple of cold Heinekens one evening, we decided to create this blog.
The term “offshore” is colloquially used in a very wide ranging number of sectors, including the mining industry, the sailing community and more frequently in the increasing hunt for renewable energy. But in relation to the world of funds, where exactly are we referring to when we say “offshore” and why are funds established there?
Where is “offshore”
The funds industry uses the term “Offshore” to mean a tax-neutral jurisdiction with a sophisticated financial services infrastructure which provides a wide ranging number of products and services to non-residents. The majority of the established offshore jurisdictions globally are either British Crown Dependencies (Jersey, Guernsey and the Isle of Man) or British Overseas Territories (such as the British Virgin Islands, Cayman Islands and Bermuda). Our focus in this blog is on the two leading offshore fund jurisdictions, the British Virgin Islands and the Cayman Islands.