The British Virgin Islands is home to the second-largest amount of hedge funds in the world and it is widely regarded as a flourishing, prominent, and promising jurisdiction for the establishment of a variety of funds.
Its popularity is due to a number of different reasons- namely its flexibility in offering different regulatory regimes for small to medium-sized hedge funds. This means it is a very attractive option for investment managers and advisors in this category that are looking to set up a fund. But what are the benefits of BVI investment funds?
- The cost of setting up is low cost when compared to a number of other jurisdictions which is great for small to midsize funds.
- In terms of the regulatory regime, private equity and venture capital managers are subject to a somewhat “lighter” touch.
- The market is tailored for smaller fund managers with the Approved Fund and the Incubator Fund products.
- There is a good level of corporate governance and an accommodating corporate statute through the provisions of the BVI Business Companies Act 2004.
BVI Approved Funds and BVI Incubator Funds
A BVI Approved Fund is a hedge fund vehicle with a lower start-up cost than other kinds of funds. It provides a way for fund managers to bring together a smaller number of investors in a cost-effective way. It also enjoys a minimal regulatory burden.
It has a maximum number of investors capped at 20, no requirements for minimum investors and it is capped at $100 million in net assets. It also enjoys no term limit and can continue indefinitely.
A BVI Incubator Fund is classified as a start-up fund and is suited for managers that want to keep costs low until they are established and have more of a track record. Once this is achieved, they can attract more subscriptions that in turn, make the fund more viable in the long turn.
The maximum number of investors for an Incubator Fund is 20 and there is a minimum investment of $20,000. In terms of the maximum net assets, the limit is $20 million.
Benefits of this kind of fund include no licensed investment manager, custodian, administrator or auditor, instead investors must be given a written description of the investment strategy and any potential risks. This fund can only be approved for a maximum of two years, then it must be converted into another kind of BVI funds such as a Private Fund, a Professional Fund, or an Approved Fund.
Professional Funds and Private Funds
A Professional Fund is one that is only available to professional investors and each investor must invest a minimum of $100,000. A Private Fund is a mutual fund and must not have more than 50 investors and they may only be invited to partake on a private basis.
Fast Offshore can advise on fund formation and structuring in the BVI as well as drafting required documentation, incorporating a BVI company, providing a registered office, administration services, compliance, and managing ongoing maintenance. To benefit from over two decades of experience in the sector, contact us today.