What does the coming year look like for the investment funds industry in Gibraltar?
I’m of the view that things are looking very positive for the sector. There have been a number of recent developments which, coupled with Gibraltar’s current offering, position the jurisdiction as a real contender for one of the top spots from which to launch and operate an investment fund. Some highlights are as follows:
Gibraltar is on the verge of enacting a dual regime whereby locally domiciled in-scope Alternative Investment Fund Managers (or “AIFMs”) – which include self-managed investment funds – may “opt out” of the somewhat onerous obligations imposed by the EU’s Alternative Investment Fund Managers Directive (or “AIFMD”), which were transposed into Gibraltar’s Financial Services (Alternative Investment Fund Managers) Regulations 2020.
In broad terms, this will provide in-scope AIFMs (i.e., those with assets under management of over EUR 100 million acquired through the use of leverage, or those with assets under management of over EUR 500 million without having used leverage) with the ability to dispense with the requirement to engage costly, external and heavily regulated AIFMs and depositories.
One hopes that the introduction of the dual regime will entice the larger investment funds to consider Gibraltar as their choice of domicile. This is especially the case given it is oft considered to be AIFMD’s initial introduction back in 2011 that was the catalyst that led to such investment funds re-domiciling out of Gibraltar and into jurisdictions that fall out of the EU’s regulatory reach.
Last year, PwC and Elwood Asset Management published the 3rd Annual Global Crypto Hedge Fund Report 2021 (the “PwC Report”). In it, Gibraltar was ranked as the top crypto hedge fund domicile in Europe – and third globally – enjoying a position above familiar investment funds jurisdictions such as the BVI, Luxembourg and Singapore. A copy of the PwC Report can be found by clicking here.
In my view, this ranking is the product of the marriage of a robust, yet flexible, regulatory investment funds regime – the only one on this side of the pond to permit investment funds to launch pre-authorisation – and Gibraltar’s open-armed stance towards high-calibre crypto business. The Gibraltar Funds and Investments Association (or “GFIA”) has even released a Corporate Governance Code for Gibraltar Crypto Funds.
As a result, Gibraltar enjoys a full ecosystem of service providers and industry associations that are both well-versed in investment funds and are crypto-savvy – including the “Big Four” and other notable brands.
New Investment Fund Structure
Gibraltar offers prospective investment fund managers a number of structures to choose from. These include a unit trust, a private limited company, a limited partnership, a protected cell company and, most recently, a protected cell limited partnership.
Last year, Gibraltar enacted the Protected Cell Limited Partnerships Act 2021 (the “PCLP Act”). Under the PCLP Act, an investment fund can be established as a protected cell limited partnership affording it the ability to create one of more cells that are statutorily segregated from each other. This means that under the same one investment fund, multiple sub-funds can be launched with their own distinct investment strategies. Moreover, the above can be achieved whilst also benefiting from the traditional advantages of a limited partnership format.
Are there any developing trends in the investment funds space?
Tokenised investment funds are certainly taking the investment funds arena by storm. In essence, this involves tokenising the units of an investment fund (shares in a limited company/protected cell company, or interests in a limited partnership/protected cell limited partnership) such that they are represented digitally as tokens which can be issued, exchanged or traded via distributed ledger technology on a blockchain. The advantages? Accessibility, cost and liquidity.
We have already established a number of tokenised investment funds in Gibraltar. If a further read into tokenised investment funds sounds like your cup of tea, a recent article of mine on the subject can be found by clicking here.