Gibraltar Funds

The Private Fund vehicle is very useful for small fund start-ups, especially those that are cost sensitive, since there are few requirements.

• Regulation: It is an unregulated vehicle and is not subject to any licensing requirements.
• Registration: It must still be registered with the Gibraltar regulator, the GFSC.
• Investors: There are no restrictions on the type of investors, but the vehicle can only be marketed to a pre-defined network of investors (fewer than fifty).

Note: Despite the lack of requirements, it is recommended that Private Funds produce a Prospectus and appoint either a fund administrator, or an auditor, to establish an element of third-party oversight.

EIFs, as the name suggests, are exclusively targeted at experienced and high net-worth investors.

• Authorisation: These funds are authorised by the GFSC, but can be approved up to ten business days after launch, greatly reducing their speed to market.
• Regulation: EIFs are subject to 'light-touch' regulation and are tax neutral.
• Compliance: The onus for compliance and governance is placed on the board of directors (two of whom have to be pre-approved by the regulator as ‘EIF Directors’).
• Flexibility: There are no restrictions on eligible asset classes, diversification, borrowing, or the number of investors.

Due to their flexibility, EIFs are ideal for alternative strategies, as well as for the more traditional assets. VFS has set-up many different types of EIFs in the past, from traditional vanilla funds, to hedge funds, crypto, private equity, real estate and art funds.

There are a number of legal structures that can be used to set-up Private Funds and EIFs. Apart from the more common Private Limited Company structure, they can also be set-up as Unit Trusts and:

Limited Partnerships (LPs)

• Ideal for: Private equity and close-ended funds.
• Advantages: They are commercially flexible and tax transparent.
• Structure: LPs in Gibraltar have a separate legal personality and perpetual succession and they can have an unlimited number of partners.



Protected Cell Companies (PCCs)

• Availability: EIFs can be set-up as a PCC; Private Funds cannot.
• Structure: A PCC is a limited liability company established with different cells whose assets and liabilities are legally separate from one another.
• Benefit: This means the assets of each cell are ‘ring-fenced’ against any liabilities from another cell, making it useful for managers wishing to employ different investment strategies or target different investors without any risk of contagion.

Gibraltar funds wishing to market to the UK must appoint an Alternative Investment Fund Manager (AIFM). The AIFM directive also typically requires any fund with exposure over EUR 100 million to opt in.

Since it is no longer part of the EU, Gibraltar has been able to create a unique exemption:

• EIFs with exposures above EUR 100 million, who do not need to market into the UK, can request to be exempted from the AIFM directive.
• These funds only need to register with the regulator as a ‘Small AIFM’.
• This is particularly attractive for hedge funds, which reach the EUR 100 million threshold easily due to leverage strategies. The exemption saves these smaller hedge funds from the typically onerous and costly AIFM requirements.

For more information on Gibraltar funds, please go to the Gibraltar Funds and Investment Association (GFIA) website; https://www.gfia.gi/funds-hub