Fund Finance - the offshore perspective
26 June 2017
The private equity funds market, like many aspects of the financial services industry, has become increasingly globalised and complex over recent years. Whether it is General Partners (GPs) in China looking to raise capital from investors based in the United States, or Europe-based banks lending to Asia-based funds, this global trend looks set to continue as existing players search for new opportunities and new market entrants look to break into the industry.
One thing that is certain is that this growth in cross-border activity and complexity has coincided with an ever-increasing use of fund vehicles established in well-regulated and sophisticated “offshore” finance centres such as the Cayman Islands, Guernsey and Jersey. For example, based on statistics released from the Registrar of Exempted Limited Partnerships in the Cayman Islands, there were just under 18,000 exempted limited partnerships registered in the Cayman Islands at the end of 2015, almost double the number registered at the end of 2009.
This chapter (published by Global Legal Insights in 2017) explores the role of the leading offshore jurisdictions in the private equity funds market. As part of this, we will discuss the key reasons why offshore vehicles are popular from a sponsor, investor and lender perspective, and review findings from a research project commissioned in 2016 by Mourant Ozannes (in which market participants, including many of the leading global private equity sponsors, were interviewed by independent researchers). We will then examine the key offshore aspects of a typical subscription finance transaction, using a Cayman Islands structure as an example. Finally, we will look at some of the trends we have observed from an offshore perspective in each of the United States, Asia and Europe from our Cayman Islands, Hong Kong and London offices.