What is a Guernsey private Fund Structure and Why are Family Offices Increasingly Using Them?

Why Guernsey For Private Fund Structures?

Guernsey is a leading domicile for funds, with more than 50 years of experience in the formation, administration and cross-border distribution of investment funds. It also offers a ‘lighter touch’ approach to Private Investment Structures (‘PS’), also known as Private Funds (‘PFs’), which are ‘related party’ investment structures, particularly suitable for family office arrangements.

Private Funds are of particular interest as platforms for wealthy families and small groups of “club” investors to hold a wide variety of assets.

Private Funds are bespoke structures with minimal or no fund regulatory status. There is no legal definition for a PF, and they can be a legal entity with a similar choice of structure; for example, a limited company, limited partnership, trust and/or a cellular company.

Why are Private Fund Structures of so Much Current Interest?

There are several reasons for the current, increased interest in PFs, including:

  • The ability for families and club investors to pool their assets and seek enhanced investment opportunities and greater economies of scale.
  • The ability to ‘unitise’ specific assets to facilitate joint ownership, e.g. an aircraft, paintings, real estate etc.
  • Independent calculation of the Net Asset Value (“NAV”) and external audit of a PF, if required, provides reassurance to investors.
  • A PF may offer a more straightforward concept for some clients, compared to trusts – particularly for clients in civil law countries.
  • The opportunity to undertake basic succession planning, where interests can be gifted to other family members over time.
  • A vehicle to hold a new business venture – with the ability to “lock in” investors, providing certainty and long-term commitment between them.
  • They offer a single platform for family offices to manage wealth – with the ability to hold higher-risk assets (which might otherwise cause fiduciary risk concerns for trustees with duties to beneficiaries).

A PF can also offer potential tax benefits, depending on the investors’ country(s) of tax residence.

Regulatory Position

The regulatory regimes of different international financial centres vary extensively and in Guernsey PFs are not subject to collective investment scheme legislation, as long as the following criteria are met:

  • there is a small, defined and closely-linked group of investors;
  • the investors are “sophisticated” by definition of their wealth and/or expertise;
  • the “spread of assets” (number of holdings in the PF) is limited.

Meeting the above criteria generally means that a PF is considered to be a fiduciary structure, rather than a regulated fund entity. As such, it will only be subject to light or to no fund regulatory requirements in Guernsey.

If the number of investors and spread of assets grows and exceeds Guernsey exemption rules or practice, regulatory consent is likely to then be required. Consent from the Regulator may also be needed in relation to the entity undertaking investment decisions.


Limited Liability Company

The most straightforward structure is probably a Limited Liability Company with a robust shareholder agreement. The management and administration of the investment vehicle would be undertaken by a regulated Trust company with an option to outsource specialist management of more unusual assets to third party providers.

Limited Partnership

In this structure, a General Partner (‘GP’) needs to be appointed to manage the partnership – this might be the client or  family office. As the GP typically has unlimited liability, this function will often be structured as a Special Purpose Vehicle (SPV).

The limited partners will sign ‘Adherence Agreements’ to specify how they will interact with the partnership.

In the case of a family Limited Partnership, the principal client may initially hold 100% of the interests in the Limited Partnership, and then periodically gift further interests to family members.

Protected Cell Company

A Protected Cell company (PCC) consists of one or more cells, each of which may be owned by separate clients. There is no comingling of assets and liabilities between the cells.

The cells are managed by the directors who can choose to contract out the administrative and accounting functions provided to each cell.

Costs are reduced, when compared to SPV vehicles or individual trusts, as overheads can be allocated to cells on a pro-rata basis.


Interest in PFs continue to grow as they offer an efficient tool for private wealth structuring.

Family members and groups of investors can benefit hugely from pooling their assets to maximise benefits. The ability to unitise specific assets, such as real estate, aircraft and artwork is also very useful.

The legal concept of a PF can be more straightforward for clients to understand, compared to a trust and/or a foundation, as the different investors hold specified units and will have agreed voting rights.

Additional Information

For additional information regarding Private Fund Structures in Guernsey please speak to Bruce Watterson or John Nelson at the Dixcart office in Guernsey: advice.guernsey@dixcart.com, or to your usual Dixcart contact.

Why Consider Cyprus as the Location for an Alternative Investment Fund?

An Alternative Investment Fund (AIF) is a collective investment which raises external capital from a number of investors with a view to investing it for the benefit of those investors. It does not need to be licensed as an Undertaking for Collective Investment in Transferable Securities (UCITS).

Alternative investments include hedge funds, managed futures, real estate, commodities and derivative contracts.

Main Characteristics

The main features of a Cyprus AIF are detailed below:

  • Provides multiple investment compartments which allow the management of different pools of assets.
  • Common funds where investors may participate as co-owners of the assets of the AIF, and are only liable for the amount that they have contributed.
  • Funds with different investment policies, investing, for example, in assets other than financial instruments, such as real estate, are Provisions allow for the appointment of a Depositary*, a role which can be undertaken, not only by a credit institution, but also by a legal entity.
  • AIFs can be listed publicly on stock markets.

*A Depositary does not need to be appointed if the total assets of the AIF are less than €5 million and the AIF has 5 or fewer investors.

Why Consider Cyprus for the Establishment of an AIF?

Cyprus has the legislation, appropriate structures and experienced professionals to establish and provide the structuring, legal, audit and custody services to meet the needs of AIF investors. Strong Anti-Money Laundering regulations are also in place in Cyprus, in line with EU and international standards.

In addition, Cyprus has one of the lowest corporate income tax rates in the EU and the Eurozone at 12.5% and a total tax exemption exists on gains from the disposal of shares.

An application to establish an AIF should take approximately 5-6 months from the date of submission to the Cyprus Securities and Exchange Commission (CySEC).

What are the Advantages of Cyprus AIFs?

The key advantages of Cyprus AIFs are:

  • No restriction on the types of investment.
  • No withholding tax on dividend distributions and no capital gains tax.
  • Low establishment and maintenance costs.
  • The corporate form of an AIF can take advantage of Cypriot double tax treaties.
  • AIFs can be set up as umbrella funds with multiple compartments.

Legal Framework

The Alternative Investment Funds Law of 2014 adopts a modern approach and provides the option to establish AIFs with multiple compartments.

Types of AIF:

  • unlimited number of individuals. May be marketed to (a) retail or (b) well-informed and/or professional investors*;
  • limited number of individuals, a maximum of 75. May be marketed to well-informed and/or professional investors*.

*A professional investor is an investor who is considered to be a professional client as defined in the Markets in Financial Instruments Directive.

* A well-informed investor is an investor not considered to be a professional investor.

How Can Dixcart Assist?

The Dixcart office in Cyprus can assist in establishing an AIF, as follows:

  • Preparing the application and liaising with CySEC and the Registrar of Companies (where needed).
  • Providing legal support during the registration and administration processes.
  • Providing administrative services.
  • Fully meeting the compliance obligations and reporting to the Regulator.

Additional Information

Please speak to your usual Dixcart contact or to the professional staff at the Dixcart office in Cyprus for additional information regarding Cyprus AIFs and the advantages that they offer: advice.cyprus@dixcart.com.