BVI Investment Funds

BVI Hedge Funds
Types of funds in BVI

BVI Hedge Funds

Types of funds in BVI

There are a number of BVI fund products suited to everyone from the startup manager setting up an incubator fund to established institutional fund managers with billions under management.

Incubator Fund

An incubator fund allows emerging managers to engage in a two-year “validity” period to establish a track record and to test its viability. During that period, the fund can operate with light regulation, no mandatory service providers and without conducting an audit. Another benefit of establishing such a fund in the BVI is the fast track approval process, which enables an incubator fund to commence business just two business days after submitting a complete application.

The maximum number of investors during this time is 20 and each one must invest at least US$20,000. The incubator fund’s net assets may not exceed US$20 million at any time. At the end of the validity period, the fund must convert to a private, professional or approved fund. Alternatively, if the fund is not deemed viable it must wind down its operations.

Approved Fund

The BVI offers the approved fund for managers who want to establish a private offering to a small group of investors on a longer-term basis. The number of investors is capped at 20 and net assets may not exceed US$100 million. However, there is no minimum initial investment required and the fund is not required to appoint an auditor, a manager or a custodian. It is required to appoint an administrator to ensure there is some suitable oversight of its operations. This type of fund also benefits from the BVI’s fast track approval process and may receive approval to commence business within two days of submitting an application to the FSC.

Private Fund

Private funds do not have a minimum initial investment amount for each investor or any “professional” or “sophistication” test for investors. This makes them popular with start-up managers, allowing a friends and family offering.

To qualify as a private fund, the fund must either have no more than 50 investors or only make a private invitation to subscribe for or purchase fund interests.

Private funds must be recognised by the FSC before they carry on business. A fund will be regarded as having commenced its business when it publishes a prospectus or other document inviting to purchase or subscribe for shares of the fund.

Professional Fund

The most popular category, professional funds make up approximately 70 per cent of all regulated funds in the BVI. The interests may be made to either professional investors or exempt investors.

A professional investor is a person:

  • whose ordinary business involves the acquisition or disposal of property of the same kind as the property of the fund; or
  • who, whether individually or jointly with a spouse, has a net worth in excess of US$1,000,000.

The minimum initial investment for a professional investor must be at least US$100,000. Exempted investors, on the other hand, do not have a required minimum initial investment.

An exempted investor includes:

  • the manager, administrator, promoter or underwriter of the fund; or
  • any employee of the manager of the fund.

A professional fund may carry on its business or manage or administer its affairs for a period of up to 21 days without being recognised under SIBA.

Public Fund

A public fund is generally viewed as a retail product, making the regulatory burden considerably higher than that of a private or professional fund. However, a public fund is not subject to any BVI restrictions on the categories or number of investors it may invite to invest in the fund.

BVI Incubator and Approved Fund

A few years ago, the Incubator Fund and the Approved Fund were introduced in the British Virgin Islands under the Securities and Investment Business (Incubator and Approved Funds) Regulations, 2015. As we thought at the time, these have quickly become popular vehicles in short order for startup and new managers, with more than 50 new funds being established in a short period. Approved Funds being marginally more popular than Incubator Funds. These funds have satisfied a recognised need in the market for a lightly regulated investment vehicle that can easily grow along with a first time or start up manager as their business and assets under management grow.

For many years, a type of closed end structure was used to fill this void, and while those structures may still have their place, the draw back was that they were closed – not in the sense of a limited offering of shares but rather an investor’s right to redeem was restricted. This restriction often caused a manager difficulty in fund raising as even friends and relatives would generally prefer a mechanism to enable them to withdraw their funds on demand if needed or to allow them to vote with their feet if investment strategy was not going to plan.

The Regulations enable Incubator and Approved Funds to be set up and launched on a fast track, cost effective basis with minimal regulatory oversight by the BVI Financial Services Commission. This has proved successful.

Our fund services

Our Business Development Managers will guide you through the whole process – from choosing which jurisdiction is best for you, to obtaining your fund license and day-to-day management.

Our services include:

  • Advice and assistance in setting up your offshore fund
  • Ongoing support, from day-to-day administration to assistance with corporate, legal and tax matters
  • Fund accounting and valuation
  • Risk management and compliance services
  • Domiciliation and office rental (if required)
  • Audit services
Contact us today for an initial complimentary consultation and find out how we can help you achieve your investment goals!

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