Advantages and Drawbacks of Four Main Fund Structures for Offshore Launches in the BVI

The British Virgin Islands (BVI) have become an increasingly attractive and competitive jurisdiction for launching, registering and operating investment funds over the last several decades. The BVI’s regulatory framework promotes flexibility, ease and speed of registration, along with offering various types of funds that managers can launch. Today, the BVI ranks as a leading offshore funds jurisdiction – second only to the Cayman Islands in popularity – in part due to the long-term benefits of the Mutual Funds Act of 1996, which helped pave the way for three general classes of BVI funds: private, professional and public. A fourth category of available BVI funds, known as “incubator” funds, is particularly attractive to emerging managers seeking to quickly launch a vehicle to begin establishing a track record. Fund managers contemplating the use of BVI vehicles must have a highly nuanced grasp of each structure's advantages and limitations. All these themes came across in a recent Hedge Fund Association (HFA) briefing featuring Alicia Green, marketing manager of BVI Finance, and Martin Litwak, founder of Litwak and Partners. This article summarizes the key takeaways from their discussion. For additional insight on how BVI law applies to private funds, see “What Does the Introduction of a Lighter Touch Fund Manager Regulatory Option in the British Virgin Islands Mean for Hedge Fund Managers?” (Feb. 14, 2013); and “Use by Private Fund Managers of the British Virgin Islands for Private Equity Fund Formation and Private Equity Investments” (Nov. 29, 2012). For coverage of another recent HFA event, see “Post-Brexit Environment Requires Fund Managers to Combine Granular Knowledge of Europe’s Varied Funds Markets With Appropriately Targeted Marketing Campaigns” (Mar. 2, 2017).

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