Funds in Gibraltar

December 16, 2024
In Blog Gibraltar

Why Gibraltar is the smart choice for your fund

Known for its robust financial regulation, attractive tax regime and flexible fund structures, this small but mighty British Overseas Territory is turning heads in the investment world. Here’s why Gibraltar might just be the golden ticket for your fund.

Built for innovation and success

Gibraltar is no stranger to innovation. With its stable political framework, commitment to high regulatory standards and pioneering legislation, it offers a secure yet forward-thinking environment in which to grow your fund.

It is also a highly tax-efficient platform for funds. There is no capital gains tax, inheritance tax, value added tax or wealth tax in Gibraltar. There is also no withholding tax on dividends from a Gibraltar fund to its non- Gibraltar-based investors.

Following Brexit, the provisions of the EU Alternative Investment Fund Managers Directive (AIFMD) remain in place, but funds and managers can elect to ‘opt out’ of these requirements, which means reduced regulation and cost.

Gibraltar is the only jurisdiction in Europe that permits the launch of experienced investor funds of all sizes without having to wait for regulatory approval, and Gibraltar is the only jurisdiction that enjoys ‘reciprocal access’ to the UK. This means that Gibraltar fund managers can market to and serve clients within the UK on the basis of their Gibraltar licence.

Flexible fund options for every need

Gibraltar offers two primary types of funds, each tailored to different investor profiles:

Private Funds – Keep it small, keep it smart

Private funds are perfect for family offices or close-knit investment groups. With a cap of 50 investors, these funds prioritise privacy and flexibility. Private funds are not regulated by the Gibraltar Financial Services Commission (GFSC), which allows them to operate with fewer constraints, focusing on bespoke investment strategies like real estate, venture capital or private equity. Private Funds cannot be listed on a stock exchange and must remain as private funds for one year, after which they may elect to become EIFs to allow them to accept external investors.

Experienced Investor Funds (EIFs) – Built for the big leagues

EIFs are Gibraltar’s flagship fund structure. Tailored for professional or high-net-worth investors and institutional investors, EIFs are regulated by the GFSC, ensuring strong investor protection while maintaining operational flexibility.

EIFs can be established quickly, either via a notification or prior approval procedure. Under the notification procedure, no regulatory pre-approval is necessary for launch. An EIF can be established in Gibraltar as a limited company, a limited partnership, a unit trust or as a protected cell company (PCC).

‘Experienced Investors’ are defined as investors who have a net worth of €1 million aside from their residential property, investment professionals or investors who invest a minimum of €100,000 in the fund.

There are no restrictions on borrowing or owning investments. Because the fund is targeted to experienced investors, an EIF can invest in any class of investment and at any percentage. Whatever your niche – hedge funds, real estate or crypto—Gibraltar EIFs have the flexibility and regulatory support to make it happen, and quickly.

EIFs are typically marketed in jurisdictions on a private basis under national private placement regimes. EIFs have no minimum or maximum requirements governing the invested capital. Generally, EIFs have no legislative restrictions on accepting US investors, provided that the fund and its manager adhere to the relevant US securities laws.

Digital Assets

Hedge funds are investing more in digital assets, due in part to increased regulatory clarity, new investment options – particularly exchange-traded funds (ETFs) – increased investor interest, and the rise of mainstream institutions entering the market.

Here’s where it gets exciting: Gibraltar is leading the charge in crypto fund regulation. With its balanced and forward-thinking approach, EIFs are increasingly becoming the go-to for digital asset funds. According to the PwC Crypto Hedge Fund Report 2024, Gibraltar is now the second most popular jurisdiction worldwide for digital asset hedge funds to domicile their funds, behind only the Cayman Islands and above the US. This highlights the territory’s growing appeal to fund managers who value a balanced approach to compliance and innovation.

Professional but practical governance

While Gibraltar ensures compliance through its high standards, it doesn’t bog you down with unnecessary bureaucracy.

Under the notification procedure, the EIF must notify the GFSC within 10 days of launch and provide it with a copy of the offering document, the constitution documents, a legal opinion from Gibraltar counsel stating that the fund was established in compliance with the EIF Regulations, a form signed by the administrator and the registration fee.

The EIF Regulations require a fund board to include two GFSC-approved directors, at least one of which must be resident in Gibraltar. The fund can be managed by a manager in any jurisdiction provided that the manager is entitled in that jurisdiction to manage funds.

EIFs must appoint a fund administrator that is licensed in Gibraltar or is licensed abroad but Gibraltar-approved to administer EIFs. A Gibraltar auditor must be appointed and annual audited financial statements as well as a regulatory return must be submitted annually to the GFSC.

This ensures your fund is in good hands, while you focus on investing and growing your fund.

Why work with Sovereign?

Sovereign specialises in making your fund set-up seamless. Established in 1987, with over 37 years of experience and a global network spanning 20+ jurisdictions, we have earned a reputation as trusted advisors to clients around the world. Our deep knowledge in fund structures, coupled with strong local connections in Gibraltar, will ensure that your fund is not only set up efficiently but continues to operate smoothly.

We understand that setting up a fund can seem daunting and complex, but Sovereign simplifies the process. From your initial consultation to achieving full operational readiness, we provide end-to-end support. Gibraltar’s requirements for two locally based directors and professional service providers can be easily met through our network of top-tier partners, ensuring your fund remains compliant, efficient, and ready for success.

Ready to take the leap?

Gibraltar isn’t just a place to set up a fund—it’s a place that sets your fund apart. With its innovative regulations, beneficial tax regime and investor-friendly environment, there’s no better time to make your move.

Let us help you turn your vision into reality. Contact us today to get started.

Contact Karl Cervan

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