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Another regulatory advantage opens for offshore trusts
Private equity is becoming more popular and families are increasingly allocating it to offshore trusts for regulatory reasons, according to Guy Paterson of Stanhope Capital.
Private equity is becoming more popular and families
are increasingly allocating it to offshore trusts for
regulatory reasons, according to Guy Paterson of Stanhope
Capital.
The investment guru recently told Compliance Matters
that a family office with an offshore trust has a great
regulatory advantage over an individual investor when it comes to
investing in private equity.
He said: "We buy private equity funds for clients. We arrange for
them to sign a commitment to those funds in the form of a
subscription agreement. This is of interest to the offshore world
because if sassy investors are increasingly investing in the
unquoted space, that is in specialist credit funds, then that’s
what trustees should be looking at.
"To complete the picture, there is a rather nice advantage for
offshore trustees over people in the UK, which is that in January
this year, British regulators brought in a whole new series of
restrictions against promoting unquoted investments to retail
investors. This, quite rightly, was designed to deal with the
independent financial advisor in the high street flogging some
strange investment to Mrs Snooks, but actually it also affects
firms like ours that look after wealthy families, because most
individuals in the UK have to be treated as retail investors,
however rich they are.
"It is very difficult for an individual of high net worth to be
classified as a professional investor. He has to have amazing
expertise to qualify. But if our client is a Channel Islands
trust company, or an Isle of Man trust company, it would be a
regulated entity and automatically treated as a professional
investor.
"Offshore trustees should be looking at private equity as an
asset class, partly because they have this strange advantage over
individuals. For a UK family it’s much easier to allocate the
private equity to the family’s offshore trustees."