Fund Finance: Bermuda Chapter
Article first published in Global Legal Insights in February 2017
Bermuda is a major centre in the international offshore investment fund industry with over USD166 billion of fund assets domiciled here. In addition to over 600 investment funds registered in and operating from Bermuda, there are also a signifi cant number of unregulated investment funds, being primarily closed-ended investment companies and limited partnerships that fall outside of the Investment Funds Act 2006. As closed-ended funds are not required to be registered with the Bermuda Monetary Authority (BMA), it is not possible to estimate with accuracy the number of such funds domiciled in Bermuda.
The Bermuda fund industry sees investment predominantly from North America and Europe and therefore trends in the Bermuda fund fi nance market track the major onshore markets. Although there is no overall data reporting service for the fund fi nance market, anecdotal reports from many of the major facility lenders as well as Appleby practitioners indicate that the market will continue to expand in 2016, as well as continue to diversify in terms of product offerings.
Bermuda as a jurisdiction is highly responsive to evolving market demands and over the past 18 months key stakeholders, including the government, the fi nancial services regulator (the BMA) and investment industry professionals have collaborated to make legislative changes that serve to cement Bermuda’s position as one of the premier offshore jurisdictions for private equity funds. A review of the most significant changes from a private equity fund perspective is set out in the ‘Key developments’ section below.
Fund formation and finance
The Investment Funds Act 2006, as amended (IFA) governs the exclusion, exemption and authorisation of investment funds and contains certain requirements for the formation of investment funds, their operation and the offering of shares or interests of investment funds. An ‘investment fund’ is broadly defined under the IFA and means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits and income.