Aztec Group

Alan Ross, Director at the Aztec Group explores the factors involved in deciding whether to locate a firm's structure locally or offshore.

Friday, January 06, 2012

When raising that next fund the question of where to locate the structure is normally one of the first to be considered and the answer, like most things in life, is never straightforward. In this article we look at the possible locations for a fund and attempt to take an objective look at the key factors to consider in choosing a domicile to suit your circumstances.

The Jurisdictions

Smaller private equity promoters in Europe- in this context those under the €50 million fund size- will almost always establish local structures as the cost and efficiency advantages for funds in this bracket clearly point in this direction, especially where the promoter is establishing a new business. It is only where there is a compelling need, normally related to a cornerstone or dominant investor requirement, that funds of this size should consider the additional expense of taking the fund outside the local jurisdiction. The UK for example, which has the largest number of funds in Europe, has arguably some of the best vehicles for private equity and so an offshore platform should only be considered where it can be demonstrated it provides a real advantage for investors.

In a European context, offshore generally means the Channel Islands. Cayman, Hong Kong, Singapore, Delaware and Mauritius remain very much the exception due in the main to practical considerations such as travel links, direct relationships, time zones and ease of access. As to the relative merits of Jersey vs. Guernsey, despite the not unexpected local bias on both islands, in reality there is almost no discernible difference between the two in terms of private equity fund establishment and administration. The choice of island often comes down to where the fund formation lawyer has contacts, where the last fund went, or indeed even simply which golf courses or restaurants are preferred.  Read more...