Fund set-up

The needs of potential investors will influence a number of decisions to be made in relation to the setting – up of a fund, for example:

• Where the fund should be domiciled;

[listitemWhere the fund administrator should be located and what services it can provide;

The primary consideration for where to domicile the fund tends to be the level of regulation. In most jurisdictions the more sophisticated investors are (institutions/high net worth individuals) the lower the requirement for regulation.

Choosing an Administrator

Location

The first question to ask in deciding where the fund administrator should be located is whether there is any regulatory requirement for the fund administration to be carried out in the same jurisdiction as that in which the fund is domiciled. Indeed, this may be an important consideration in deciding on the fund domicile. It may also be considered whether the administrator needs to be in the same time zone as the majority of the fund’s investors. If the investors are mainly European, and the manager is UK based, then Jersey may be the obvious choice.

Other key factors in choosing an administrator are:

Competence/support/ancillary services

As an “emerging” manager, the services which the fund administrator can provide will be important. Such services include information which can be provided on-line, the reports which the administrator can provide to investors and the extent to which the administrator can deal with compliance matters in relation to the fund.

Money laundering regulations

All of the major offshore jurisdictions have introduced regulations for the prevention of money laundering which either comply with those which apply in the EU or are broadly equivalent to them.

Fund Structure and Domicile

The requirements of potential investors will have an influence on the structure of the fund. Those of European investors will differ in some respects from those of US investors. For example, do the investors want a corporate or partnership structure? Non-US investors generally favour a corporate structure.

Generally, US investors do not require a fund in which they invest to have a stock exchange listing, whereas European institutional investors do.

Jersey as a domicile for investment funds

Tax considerations

The key objective is to ensure that the tax treatment for investors is at least as favourable as that in respect of a direct investment, or an investment in another vehicle with the same investment strategy. There are 3 main points of taxation to consider:

• The direct taxation impact on the fund itself (ie taxation in its country of residence and taxation on its underlying portfolio)
• Taxes in relation to distributions made by the fund (eg withholding taxes)
• The direct taxation impact on the investor in his country of residence (eg whether he is taxed on the unrealised value of his investment)

Taxation of Jersey funds