Jersey: A Gateway to Europe for Asia Fund Managers

Jersey-based fund managers are located in a ‘third country’ from a European Union (EU) perspective and therefore the full scope of The Alternative Investment Fund Managers Directive (AIFMD) need not apply. This means that they may not be required to comply with certain more onerous elements. Importantly, the benefits of a Jersey manager can apply wherever the funds themselves are domiciled, be it in Jersey or elsewhere.

Put simply, access to Europe through the National Private Placement Regimes (NPPR) using a Jersey manager is a well-established model offering clear advantages. NPPR is a recognised path and a model that has worked, and continues to work extremely well. As at December 2024, a total of 608 funds were being marketed into the EU by 213 alternative investment fund managers through Jersey.

NPPR is a recognised path and a model that has worked, and continues to work extremely well. As at 30 June 2024, a total of 386 funds were being marketed into the EU through Jersey by 240 alternative investment fund managers.

Jersey feeder funds up to €100m open-ended (and also applies to closed-ended funds up to €500m if no leverage at fund level)

An Asia-based fund manager directly manages a successful open-ended fund domiciled in a Caribbean jurisdiction (“the Caribbean Fund”).

There has been input from the Investor Relations team that there is significant demand from European investors, particularly in the UK and the Netherlands, but i) certain European investors are unable to invest through Caribbean structures and ii) they are aware that the EU AIFMD restricts the marketing that can be done to those investors and potentially imposes ongoing compliance obligations on the fund manager (AIFM).

It was suggested that a feeder fund (the “Feeder Fund”) for investors in the European Economic Area (EEA) would be a possible solution. The Feeder Fund would be expected to raise up to €100m and fewer than fifty offers to investors (meaning the provision of a final private placement memorandum, PPM, plus subscription pack) were expected to be made. It was therefore vital that the Feeder Fund be set up as economically as possible and did not impose significant additional compliance or other requirements on the existing Asia manager.

Given Jersey’s unique location and regulatory regime, Jersey is a jurisdiction of choice for setting up feeder funds that are marketed into the EEA.

Setting up the Feeder Fund and manager structure in Jersey is very straightforward.  A Jersey limited partnership or company can act as the Feeder Fund vehicle. This can be established on a same-day basis with a private limited company acting as the general partner/manager (the “Jersey Manager”) and AIFM. An administrator will provide all accounting, director and administration services to the Jersey entities.

Once the limited partnership and the company are set up, the lawyer will apply to the JFSC for the licences/consents in order for the Feeder Fund to be regulated as a Jersey Private Fund that is eligible to be marketed into the EEA and for the Jersey Manager to be regulated to act as AIFM. The lawyer will also draft a brief wrapper for the PPM of the Caribbean Fund containing additional information on the Feeder Fund. The Feeder Fund can then be registered and marketed in each relevant EEA jurisdiction under their NPPRs.

• Keeps the existing funds manager out of scope of AIFMD.
• Having the AIFM in Jersey ensures easy and inexpensive access to the EEA through NPPR.
• Jersey’s access to both EU and UK investors is not affected now that the UK has left the EU.
• The Jersey regulator is a respected regulator and meets international standards set by the IMF, ISOCO, ESMA and FATF – all positive from an investor relations perspective. There is also an element of future-proofing as ESMA has already approved Jersey’s regulatory regime for when a third country passport is introduced.

• A local administrator, as the provider of manager services, will carry out all compliance and reporting obligations for the Jersey Manager – this will greatly reduce the operating costs. Further, the Jersey Manager will be subject to light-touch regulation and will only have to comply with the most basic elements of AIFMD. However, this will not affect the portfolio management function, which will continue to be fulfilled by the Asia manager.
• The Jersey Manager will not be subject to the full remuneration reporting requirements of AIFMD.
• The Jersey Manager will be tax neutral regarding the services it performs and in respect of any fees it receives, with no VAT, goods and services tax, CGT or corporation tax chargeable. It will be subject to the 0% rate of Jersey income tax. The Feeder Fund will also be tax-neutral.