Fund re-domiciliation has become increasingly popular recently as fund managers look for ways to adapt to and comply with changing regulations and investor preferences.
Alex Di Santo, group head of private equity for Crestbridge, discusses the phenomenon along with popular domiciles managers are registering in, noting that fund managers should seek skilled advisors to help navigate what can be a complex and expensive process.
Fund re-domiciliation is the process of transferring the registered office of a fund to another jurisdiction while maintaining its legal identity. This process has become increasingly popular recently as fund managers look for ways to adapt to and comply with changing regulations. Investor perception and preference for domicile also change, so managers need to ensure the domicile remains fit for purpose.
There are two forms of fund re-domiciliation. The first form involves transferring the registered office of an offshore fund to another jurisdiction while maintaining its legal identity. The alternative involves creating a new fund in the new jurisdiction while transferring the assets and liabilities of the old fund to the new one.
These two methods of re-domiciliation allow fund managers to be flexible and adaptable in their choice of domicile, allowing them to change the legal jurisdiction of incorporation without dissolving the fund or liquidating its assets. This allows managers to better respond to changes in the market and the needs of their investors.
An improved regulatory environment is one of the key benefits of re-domiciliation, as it can provide a more advanced or beneficial framework for a fund. This can make it easier for the fund to meet the standards expected by its investors or provide access to new markets, allowing a fund to expand its reach and grow more quickly.
Re-domiciliation also enables fund managers to move a fund to a jurisdiction with stronger investor protections and, therefore, potentially attract more investors. Benefits here can include more investor security and greater investors' rights, such as strict rules around fund management, reporting and transparency.
By redomiciling a fund to a jurisdiction with stronger investor protections, investors can have more confidence that their investment is being managed with their best interests in mind.
The "right option" for domicile depends on the fund manager, the strategy involved and the investor base's composition. When weighing up the opportunity to redomicile and what's right for their fund, fund managers should remember that the process can be complex and expensive. However, a skilled fund administrator can help managers come to these decisions. Importantly, fund administrators can also advise on the likely ongoing administrative costs of each structure – some are more expensive to run than others.
As a fund administrator, Crestbridge supports re-domiciliation projects in four key European fund locations: Ireland, the UK, Luxembourg and Jersey.
Luxembourg is one of the world's most popular fund domiciles and the largest in Europe. It offers a stable and well-regulated environment for alternative investment funds and has evolved its fund offering with improvements and new products to remain at the front of the pack.
Ireland is a prime destination for investment funds because of its transparent and well-regulated funds environment, track record in alternative investments and deep talent pool that has experience setting up and running alternative funds. Ireland is a compelling alternative to Luxembourg, given its position in the EU.
The UK is also an attractive destination, offering a well-established framework for alternative fund managers. Post-Brexit, the UK has worked extremely hard to make the UK a more attractive location to manage alternative investment funds and relatively new Long Term Asset Fund and Qualifying Asset Holding Company regimes are examples of this.
Jersey is another well-regarded domicile for alternative investment funds. The Island's political and economic stability and wide range of fund structuring options make it very attractive for managers and investors alike. In addition, whilst Jersey is not part of the EU, it offers easy and cost-effective marketing into the EU through National Private Placement Regimes.
In all, re-domiciliation has recently become a much more popular course of action amongst fund managers looking to adapt to changing regulations. If this is something you are considering, Ireland, the UK, Jersey and Luxembourg all offer favourable conditions for fund managers seeking to redomicile and are options to be considered In consultation with your trusted advisors and administrators.
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