Snapshot: why investors are moving back to blind pool funds and using Jersey structures

Although joint ventures and single-asset deals have been abundant across many asset classes in recent years, there is now a marked shift in investor appetite in favour of blind-pool funds. 

This is being driven by a desire to partner with asset managers of the highest calibre and a renewed appreciation of a diversified portfolio.   

This article examines this shift and considers how Jersey structures support different approaches to blind pool investing, depending on regulatory requirements, investor profile and speed to market. 

Why investors are shifting back towards diversification 

When market conditions are stable and on the up, asset allocation may be more straight-forward and the rewards easier to find.  With the current uncertainty in the global economy, value needs to be earned and for that, you need an experienced and talented asset manager, together with a balanced portfolio to manage risk. 

One concern some managers have about straying into the blind fund territory is that you are moving into a more regulated environment. Managing and advising investment funds is regulated in most jurisdictions to some degree, but some jurisdictions make this easier than others. 

Jersey, for example, offers both authorised and regulated fund products, with the authorised product requiring only the light touch regulatory supervision of any Jersey investment adviser or manager of the fund.  

Jersey's authorised fund regime 

The Jersey Private Fund (JPF) regime is the flagship fund product in Jersey's arsenal.  It is an authorised and supervised fund product that is perfectly suited to the scenario where a fund is not widely marketed. 

Quick to market with a 24-hour authorisation timeframe, this fund regime is affordable too – with the fee of £1,895 payable to the JFSC for a JPF consent.   

What's also very handy is that when it comes to a Jersey functionary advising or managing a JPF, an exemption from registration under the Financial Services (Jersey) Law 1998 (FSJL) can usually be relied on. This means that a manager or adviser can build track record ahead of any future application for regulation as the business grows. This is why the JPF has so much appeal to new and first time fund managers. 

There is one small caveat to note if a JPF is also an alternative investment fund (AIF) that will be marketed into the UK or EU, via national private placement regimes (NPPRs). When or if the AuM exceeds the relevant threshold any Jersey AIFM would then need to be regulated by the JFSC under the FSJL in the conduct of AIF services business (and any shareholder controllers and directors approved by the JFSC in advance). However, most first time managers will qualify as small "sub-threshold" AIFMs for which notification to the JFSC is all that's required.   

Jersey's regulated fund regime 

Although there are a number of regulated fund regimes in Jersey, the Expert Fund is the most frequently used in this space.   

Similar to the Jersey Private Fund, the Expert Fund regime offers a fast-track authorisation period (three working days as opposed to 24 hours). Regulatory fees are higher than for a JPF, which is to be expected for a regulated fund product. Also, Jersey functionaries are regulated and need to be registered to conduct fund services business under the FSJL.   

The benefit of being regulated as an Expert Fund is that are no restrictions placed on the marketing from a Jersey perspective. Furthermore, the minimum investment amount is just US$100,000, which means that this type of fund can be accessed by a more sophisticated type of individual investor that may not otherwise meet the high-net worth individual test - providing such investor acknowledges there is an investment risk.   

Expert Funds are not specifically designed for traditional retail investors. However, they may access an Expert Fund if investing via a discretionary investment manager.   

This will be of interest to asset managers looking to widen their funds investor base and ability to raise capital.   

How Ogier can help 

Ogier's Investment Funds team in Jersey advises asset managers, sponsors and investors on structuring blind pool funds using Jersey vehicles. 

We help clients assess which approach best fits their strategy, whether that is a Jersey Private Fund for speed to market and a lighter regulatory footprint, or a regulated structure such as an Expert Fund where broader marketing flexibility is required. 

Ogier brings together legal and regulatory advice with fund administration services, helping clients manage practical considerations involved in moving towards blind pool strategies. Contact the team for more information.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice