First published in the Financial Times.
Guernsey has long been recognised as an attractive international funds jurisdiction, known for its expertise, stability and innovative regulatory environment.
As fundraising conditions remain challenging, there has been a growing interest in bespoke strategies – particularly single-asset ("deal-by-deal") arrangements and co-investments. Offering strategic flexibility, speed-to-market and cost efficiencies, these structures have become increasingly common across both private equity and venture capital markets – especially for new/emerging managers. We expect this trend to continue as a return to "peak fundraising" might still be a couple of years away1.
Deal-by-deals
Deal-by-deal arrangements allow investors to commit capital to individual transactions rather than a traditional blind pool fund. Each deal is assessed and approved separately, giving investors greater control over their exposure.
As the leading legal adviser to Guernsey’s investment industry2, we see deal-by-deal structures being utilised in a number of ways:
- continuation vehicles: extending the holding period for assets once a flagship fund enters its termination period, thereby providing liquidity for exiting investors and a longer runway for value creation for continuing investors;
- warehousing: where an immediately available asset is acquired ahead of the launch of a flagship fund (usually when the launch of the fund is delayed) and the asset is subsequently transferred to the flagship fund;
- first timers: persistent illiquidity has meant some investors have become more selective about the managers they invest in (limiting their appetite for new managers); so, given their smaller tickets, deal-by-deals present a good opportunity for new managers to create relationships with new investors;
- assets that cannot be accommodated within a main fund, whether due to capacity constraints, investment restrictions or otherwise;
- syndication of a desirable asset amongst a smaller group of investors; and
- key investors requesting bespoke arrangements through which they can invest, outside of the fund structure.
Co-investments
Co-investments can be structured via single-asset syndications, aligning closely with the deal-by-deal model. The key distinction is that co-investments enable investors to participate alongside a lead sponsor - such as a flagship fund - in a specific deal or series of deals. This approach provides co-investors with direct exposure to select opportunities, typically without incurring the full fee burden associated with traditional fund structures, whilst ensuring that deal execution remains efficient.
Over the past decade, co-investors have participated in 30% of all global private equity deals according to PitchBook data3. This trend has accelerated as sponsors seek fresh capital sources.
Benefits
The key advantages of these alternative structures can be summarised as follows:
- Alignment. Deal-by-deal strategies require sponsors to raise capital for each transaction, ensuring a focus on high-quality assets. Co-investments allow investors to participate on the same terms as the sponsor, fostering shared interests and a deeper, strategic relationship between investors and managers. Indeed, more and more LPs consider co-investment rights as an essential factor in selecting managers.
- Tailored risk management and diversification. By leveraging both models, investors can diversify across different sectors, geographies and strategies on selective basis. This enables them to complement their existing fund commitments without the constraints of a lock-in period and, where relevant, gain exposure to larger transactions.
- Flexibility. Investors have the freedom to choose which deals to participate in, avoiding unwanted exposure to underperforming assets or those misaligned with their investment strategy.
- Cost efficiency. Given the increased scrutiny on fund expenses and fees, deal-by-deal arrangements and co-investments are often structured without or with reduced or bespoke management fees, enhancing net returns.
- Fund restrictions. For sponsors, co-investing provides an opportunity to deploy capital into attractive assets that may otherwise be subject to investment restrictions due to concentration limits.
Regulation
Single-asset vehicles are not regulated as collective investment schemes in Guernsey, making them well-suited to most deal-by-deal and co-investment structures. As a result, neither the vehicle itself nor the entities managing those vehicles will need to obtain any licenses or approvals in Guernsey.
Where a vehicle has multiple investors and multiple assets - such as broader co-investment structures - Guernsey offers a flexible regulatory framework.
The private investment fund ("PIF") regime provides a simple, fast-track route to market. The PIF is a cost-effective and efficient fund structure widely used by asset managers and family offices with an investor base of up to 50 investors (subject to exceptions). Regulatory approval can be obtained in one business day, with no minimum subscription amount. If the number of investors exceeds 50 after launch, the fund's regulatory status can be adjusted to allow broader participation. Additionally, PIF managers are not subject to capital adequacy or audit requirements, further enhancing the regime's appeal.
Flexibility in structuring
Guernsey vehicles, including companies and limited partnerships, can be established on a same-day basis – sometimes in as little as 15 minutes – making them ideal for time-sensitive transactions. Protected cell companies can establish a new cell (to raise funds and hold investments on a segregated basis) by a simple board resolution.
Unlike some jurisdictions, Guernsey does not require notaries, apostilles or special stamps for corporate actions. This enables efficient decision-making and execution, ensuring a smooth and cost-effective process.
Conclusion
Alternative investment strategies offer a tailored approach, allowing investors to engage selectively while benefiting from Guernsey's well-established financial ecosystem.
