PwC, Crestbridge and Carey Olsen have combined to help you plan for the future and address the three most significant operational challenges of the next 5 years: BEPS, Brexit and Burdensome compliance.

1. © 2017 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires,
individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not
responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions
of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.
170303-164021-SD-OS
Alternative fund managers –
are you ready for the next
five years?
Three of the most significant
operational challenges you may
face over the next five years are
BEPS, Brexit and Burdensome
compliance. PwC, Carey Olsen
and Crestbridge as three leaders
in the fields of international fund
taxation, administration and
regulation provide an overview of
these challenges and present a
single solution.
BEPS and Transfer Pricing
The Challenge
The OECD’s Base Erosion and Profit
Shifting (‘BEPS’) project has led to
significant developments in the
international tax and transfer pricing
landscape. Recent guidance published
by the OECD (BEPS Actions 8-10)
emphasises the importance of the
actual conduct of parties to a transfer
pricing arrangement, meaning there is
now less automatic acceptance of mere
contractual / legal arrangements.
BEPS Actions 8-10 provides clarity on
the types of activities and
competencies required to evidence
control over economically significant
risks, as well as those activities that
are insufficient to demonstrate such
control. This guidance enables clearer
views to be formed about ‘substance’
and existing fund managers /
promoters will need to assess their
transfer pricing position in light of
these changes.
1 The term “ManCo” is used generically to refer to an AIFM under AIFMD, or other managers.
Sufficient substance is required in
order to support contractual / legal
arrangements, and evidence the arm’s
length nature of transfer pricing
arrangements. This will also be critical
from a VAT recovery perspective in
relation to any charges made to an
international entity.
Brexit
The Challenge
Just as managers had come to terms
with the impact of AIFMD, the UK’s
Brexit vote has re-opened the debate
on where to site your fund and
management entities so as to optimise
market access while minimising cost
and time to market. In particular,
there is uncertainty concerning the
position of funds and managers
located in the City of London and
Caribbean jurisdictions when seeking
to access EU / EEA capital.
However, one aspect of Brexit that is
seldom mentioned is the effect it could
have on EU / EEA funds and
managers seeking to access UK capital;
the risk that managers of AIFs and
UCITS in Luxembourg and Dublin
may be unable to continue to utilise
their passport to market funds into the
UK.
Burdensome compliance
The Challenge
For many start-up and boutique fund
managers, the sheer volume of
legislation requiring compliance can
prove daunting – AIFMD, MIFID,
EMIR, CRS and FATCA can all pose
challenges. Not only are new laws and
regulations being imposed every year
but changes in policy and updates can
continually affect the substance and
skillset of even the most
straightforward fund and manager.
Investors can theoretically benefit
from this compliance but are generally
unwilling to pay for it, leading to ever-
increasing cost and logistical issues for
managers, with attendant risks if any
failure to comply is identified.
The solution
In light of these three challenges, PwC,
Carey Olsen and Crestbridge have
developed a response, bringing
together tax, regulatory and
operational support. This solution,
which is based on in-sourcing
management company (‘ManCo’) 1
capabilities, seeks to provide increased
flexibility around commercial and
economic factors, whilst also meeting
regulatory requirements and ensuring
an approach that is compliant with the
latest OECD guidance on transfer
pricing.
Jersey has an almost unique
relationship with both the UK and the
EU. It has been treated by the EU as a
third country for financial services
purposes for many years and since the
introduction of AIFMD has proven a
popular location for managers and
funds wishing to access EU / EEA
markets using private placement
routes (there are currently 127
managers marketing over 254 funds
into the EU from Jersey). It has been
assessed by ESMA (the European
Securities and Market Authority) and
is likely to be in the first wave of third
Helping you plan for the future
Jersey Management Companies

2. © 2017 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires,
individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not
responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions
of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.
170303-164021-SD-OS
country locations to receive the
AIFMD passport.
Further, Jersey’s constitutional
position as a Crown Dependency is
expected to ensure that irrespective of
any change to the UK’s relationship
with the EU, Jersey managers and
funds will continue to enjoy market
access into the UK and that Jersey’s
historic role as a gateway for
international capital looking to invest
into the UK will be maintained.
Therefore, although no-one knows for
sure how Brexit negotiations will
develop, Jersey can provide fund
managers and promoters with a degree
of flexibility, both in relation to the EU
and the UK, regarding both market
access and the ability to deploy capital.
Historically, managers using Jersey
have either established their own
operations locally, or used an
outsourced Jersey-based ManCo
provider. Under the latter model the
outsourced ManCo provided support
through specialist compliance teams
and specially developed reporting
procedures. The cost of this service is a
third party cost to the fund manager,
and there is therefore no opportunity
for optimising the group’s transfer
pricing position.
The proposed solution to address the
future challenges involves the fund
manager establishing its own ManCo,
in-sourcing specific functions and
capabilities (sourced from a provider
such as Crestbridge, PwC or Carey
Olsen). Under this model, the ManCo
can develop the skills and substance
required in order to have control of the
economically significant risks of its
own business.
New and existing fund managers have
the opportunity to augment the in-
sourced Jersey activities with the
capabilities of their own employees /
partners (either through local hires or
relocating existing personnel),
increasing the skillset and
functionality of the ManCo in line with
the particular strategy and business
model of the individual fund manager.
In this model, the ManCo will be a
wholly owned part of the fund
manager’s business, allowing greater
flexibility to carry out additional
commercial activities, such as
marketing / development of IP. The
remuneration of the ManCo from a
transfer pricing perspective will reflect
the underlying economic activity
within its business. We can help fund
managers to establish a robust transfer
pricing policy that is ‘BEPS compliant’
and assist with identifying and
mitigating key risk areas within
existing structures.
The use of such an approach to
address any one of the above issues
can often be advantageous in relation
to one or more of the other two
challenges. PwC, Crestbridge and
Carey Olsen can work together to
provide bespoke analysis, structuring
and implementing in a seamless
manner. The contacts below would be
delighted to assist with any queries
you may have.
PwC overview:
PwC’s asset & wealth management
practice provides unique industry
insights to traditional asset managers,
hedge funds, real estate firms and
private equity houses. With around
18,200 asset & wealth management
professionals globally, we focus on the
future of the industry, working with
clients as they shape their business
and execute their strategy.
Crestbridge overview:
Crestbridge is a leading independent
fund administrator with offices in five
strategic locations: Bahrain, Jersey,
Luxembourg, London and Cayman.
We have 200 employees, 90 per cent
of whom are professionally qualified.
Overall we administer in excess of
$110 billion, spread over 1,500
structures, while our ManCos have an
AUM of over $7 billion across 26 funds
and 54 sub funds.
Carey Olsen overview:
Carey Olsen is a market leading
offshore law firm. We specialise in
advising institutional, boutique and
start-up fund managers on Jersey,
Guernsey, BVI and Cayman Islands
law, with additional offices in London,
Singapore, Hong Kong and Cape
Town. Since July 2014, Carey Olsen’s
funds team has advised on 43 per cent
of all new funds business in Jersey
(source: 2016 Monterey Insight Jersey
Funds Report) – Twice the number of
our nearest rival.
Rob Mellor
EMEA Alternative Asset
Management Leader
PwC, London
Elliot Refson
Director, Fund and Management
Company Services
Crestbridge, Jersey
Robert Milner
Partner
Carey Olsen, Jersey
+44 (0)20 7804 1385
robert.mellor@pwc.com
+44 (0)1534 835049
elliot.refson@crestbridge.com
+44 (0)1534 822336
robert.milner@careyolsen.com