Abacus has the experience and expertise to create and manage bespoke trusts, companies and funds to help our clients achieve their ambitions.
The dedicated Abacus funds team provides examples of who might use an Isle of Man exempt fund structure and its advantages.
Entrepreneurs:
A fund allows an entrepreneur to access a pool of capital from multiple investors, which can provide the significant financial resources needed to scale a business.
By bringing together multiple investors, investment risk is pooled, which can be advantageous for an entrepreneur seeking to raise larger sums.
Entrepreneurs can focus upon specific types of investors, such as venture capitalists, private equity firms, institutional investors or high-net-worth individuals, depending on the objectives of the fund.
Funds can be structured to provide stage-specific financing, allowing the start-up to receive capital in phases as it meets certain milestones, particularly appropriate for new technologies, infrastructure, aviation, yachting and medical sectors.
By using underlying SPVs underneath the fund structure for different projects and opportunities each can be insulated from the failure of another.
Funds often bring together investors who offer more than just capital. Many fund investors are experienced professionals who can provide strategic advice, industry connections and operational support. For an entrepreneur, this access to a network of knowledgeable investors can be invaluable in accelerating growth and entering new markets.
Backing from a well-structured fund can enhance the start-up’s credibility in the eyes of customers, partners and future investors.
A family business:
Exempt funds can be used to unitise, manage and transfer ownership stakes in a family business to the next generation.
A fund can help in creating a fair distribution of assets among family members, particularly when not all members are involved in the business' operations.
The fund might also be used to invest profits and reserves in a diversified portfolio of assets outside the core family business, spreading risk and potentially increasing overall family wealth.
An Isle of Man exempt fund is regarded as a private arrangement, is not subject to separate regulation and can be established relatively quickly and economically by licensed administrators.
An Isle of Man exempt fund is often referred to as a “Friends & Family” vehicle and is a popular option provided there are no more than 49 investors at any time and interests in the fund is not offered to the public.
Administration by a regulated, independent fund administrator provides an additional layer of scrutiny and security.
Investment clubs:
Exempt schemes are typically subject to lighter regulatory requirements compared to fully regulated investment vehicles. It allows the club to focus more on investment strategies and less on administrative and legal requirements.
Exempt schemes offer more flexibility in terms of the types of investments that can be pursued, including more esoteric opportunities. The ability to tailor the investment strategy to the interests and expertise of the members is a significant advantage.
Setting up an exempt scheme usually involves lower costs than creating a fully regulated fund. For an investment club this allows more capital to be directed toward investments rather than administrative overheads.
An exempt scheme can be structured to meet the specific needs and preferences of the investment club members. This could include customised investment terms, profit-sharing arrangements, and withdrawal conditions that are more flexible than those available in regulated schemes.
Members of an investment club are often more sophisticated investors who are comfortable making decisions without extensive regulatory protections. The nature of an exempt scheme offers an environment where members can pool their collective expertise for shared goals.
Exempt schemes are private arrangements that offer appropriate privacy and confidentiality. For an investment club that values discretion this can be an attractive feature.
Exempt schemes can be set up more quickly than regulated funds, which is beneficial for an investment club looking to capitalise on timely investment opportunities.
* Abacus Financial Services Limited (AFSL) is the fund administration arm of Abacus, an independent provider of professional, fiduciary and management services.
Originally part of Coopers & Lybrand, which later became PricewaterhouseCoopers, Abacus has a 40-years history of providing technical expertise and outstanding customer service.
AFSL was formed to compliment the Abacus Trust Group’s trust and corporate service offering. It is licensed by the Isle of Man Financial Services Authority to manage and administer Isle of Man and overseas collective investment schemes.
No action should be taken on the basis of this note, nor should it be construed as amounting to tax, legal or VAT advice. Suitable, specific and professional advice should always be obtained in respect of any particular issue.
