HFL’s Private Client lead Marina Mauger explains the advantages of Guernsey’s Private Investment Fund structure.

This structure was introduced back in 2016 and was intended to be a simple and cost-effective structure for funds suitable for a small number of investors. Since its introduction it has been a popular and well-utilised option for first-time and emerging fund managers, but some recent rule changes have made PIFs, in our opinion, even more attractive for our private clients.

There are three routes to establishing a PIF, the first two of which focus on more traditional fund models, however it is “Route Three” that we believe is a game changer for private clients.

“Route Three” is open to investors who all have a family relationship. This means that families and family offices can enhance their family and corporate governance with a regulated fund structure that requires a third-party audit and offers a great degree of flexibility and, if required, control.

The PIF is highly flexible and fast to set up, and offers a great alternative or complementary vehicle to more traditional trust structures for long-term, multi-generational wealth management. In addition to being a regulated investment product, PIFs can also provide a more cost-effective governance model for clients seeking to have a higher degree of control over their assets, which can be important for some of our entrepreneurial family clients.

For example, we recently set up a PIF as a long-term succession planning vehicle where family trusts are investing in a PIF. Estate planning using a centralised regulated vehicle which will drive growth is a smart approach. This is typical thinking for HFL, because our fiduciary and fund teams work so closely together.

PIFs are flexible; for example, the structure can be open- or closed-ended and be established as:

1. A traditional limited company or limited partnership fund

2. A unit trust

3. In a cell company format (protected cell company or incorporated cell company)

Speed can be a huge consideration for our clients. They often need to be able to close a deal quickly, so a single-page application form and the typical one-day authorisation for a PIF are hugely attractive. Without question, the Guernsey PIF is nimble and delivers a straightforward, cost-efficient and speedy route to establishing funds for fund managers, sophisticated investors and families alike.

All in all, we expect to launch more family PIFs over the coming months as our private clients seek to take advantage of new and innovative approaches to family governance and succession planning challenges.