Start a Hedge Fund in Jersey
Updated on Friday 12th April 2024
Rate this article based on 3 reviews
Jersey is one of the most reputable destinations for setting up a hedge fund. This type of investment fund enters the non-retail category and it is destined for professional investors. The main regulation it must comply with is the Expert Fund Guide.
Below, you can find out some key takeouts on how to create a hedge fund in Jersey.
Below, you can find out some key takeouts on how to create a hedge fund in Jersey.
What types of funds does the hedge fund enter in Jersey?
Hedge funds alongside private equity and other non-retail funds enter the expert funds category, as they target professional investors. Expert funds must adhere to the Jersey Expert Fund Guide and can be created swiftly and at low costs.
If you want to know how to start a fund in other countries, we have affiliates in other similar offshore jurisdictions.
The main features of hedge funds in Jersey
Investors interested in setting up a hedge fund in Jersey must consider the requirements they need to comply with. As expert funds, these must meet a set of conditions.
Single investors or companies meet any of the following 10 requirements in order to be eligible to invest in a Jersey hedge fund:
- they must be experienced in buying or selling investments;
- they must have a net worth of at least USD 1 million, excluding their primary residence;
- they must be able to invest at least USD 1 million in the assets of the fund;
- they must make an investment commitment of a minimum of USD 100,000 or equivalent in another currency;
- they must be connected to the fund or a fund service provider (carried-interest arrangements are subject to flexibility).
Our local affiliates can offer more information on the requirements to be respected by those interested in setting up a hedge fund startup in this jurisdiction.
Hedge fund creation requirements
Investors who want to establish a hedge fund in Jersey must comply with a set of requirements. Among these:
- the general partner, trustee, or fund company must have at least 2 qualified Jersey resident directors to its board;
- the appointment of a licensed Jersey administrator or manager, which could be a special purpose vehicle, is also necessary (exceptions apply to unit trusts, where the trustee is usually the Jersey service provider);
- funds that are redeemable at the discretion of investors must be assigned to a international large broker;
- all information on the fund must be included in the offer document;
- a form of investment caution, which is usually included in the subscription document, must be signed by investors;
- the fund must also have an auditor appointed, as it will be subject to annual audits.
In compliance with the AIFMD, hedge funds may be marketed into EU/EEA states through national private placement regimes.
Hedge funds are subject to authorization with the Jersey Financial Supervisory Commission. The operating approval can be obtained in just a few days, which makes this jurisdiction quite appealing for those interested in starting a hedge fund in the shortest time. The Commission is not required to examine the promoter, documentation, or structure in order to open a hedge fund in Jersey.
Investment vehicles used to open hedge funds in Jersey
In general, Jersey hedge funds can be established as:
- unit trusts;
- limited partnerships ( there are 3 types of such partnerships in Jersey, with and without legal personality);
- investment companies (including incorporated or protected cell companies).
Jersey protected cell companies resemble the Cayman SPC (segregated portfolio company).
It is possible to create a special purpose vehicle (SPV) to serve as a general partner, trustee, investment manager, manager, or other role for one or more funds established in Jersey. The SPV can also be used when starting a hedge fund that will be used for offshore purposes. In cases when the SPVs serve as general partners, trustees, or agents for hedge funds in Jersey, they are usually exempt from authorization.
Why register a hedge fund in Jersey?
This jurisdiction provides a set of competitive advantages and investors who are interested in how to start a fund in this country must know that the legislation available here protects the interests of a wide category of businessmen, including institutional and sophisticated investors, as well as of those who register investment funds with a minimum investment level. Amongst the main advantages of registering a fund here, we mention the following:
- low taxation scheme – the funds registered in Jersey are taxed only for their income, as there are no capital gains taxes, inheritance of wealth taxes;
- as a general rule, corporate entities are exempt from paying the corporate tax, but this can be imposed at the rate of 10% in the case of specific financial activities, as it is the case of banks or investment managers;
- Jersey funds can be easily marketed in the European Union through the AIFMD regulation;
- the jurisdiction benefits from a strong credit rating, being included in the A++ category.
Rules of law for Jersey hedge funds
Investment vehicles operating as hedge funds are regulated under several rules of law. For example, vehicles operating as public funds are regulated under the Collective Investment Funds Law 1988, while the prospectuses of certified funds fall under the regulations of the Collective Investment Funds Order 2012.
Obtaining an approval for performing investment activities on the local market depends on whether the fund is set up as public or as a private entity and if it is set up as a closed-ended or open-ended structure, and the approval will be provided by the Jersey Financial Services Commission. Foreign businessmen are invited to contact our team of affiliates in Jersey for in-depth information on the requirements available for the authorization of a hedge fund operating here.