It was recently announced that Nordic private equity firm Altor successfully completed fundraising on its fourth buyout fund, closing in a record time of less than three months. This $2bn fund was also notable for its choice of domicile, as the firm’s previous vehicles in the series were all domiciled in Jersey, but the latest Altor Fund IV is domiciled in Stockholm, Sweden. In this blog, we take a look at fund domiciles and investigate where have private equity fund managers been domiciling their funds over the past 10 years.
According to Preqin’s Funds in Market online service, 87% of funds raised over the last 10 years by US-based fund managers have been domiciled within the US. In fact, 73% of these US-domiciled funds have been domiciled in Delaware. With the US being the single largest player in the private equity space, it is no surprise that the state of Delaware alone accounts for 34% of global private equity domiciles. For the 13% of funds that are domiciled outside of the US, well over half (56%) of these are domiciled in the Cayman Islands, an offshore tax haven.
European-based fund managers, however, seem to prefer domiciling their funds elsewhere. For example, UK-based fund managers have domiciled only 34% of all funds raised in the last 10 years in the UK mainland. Jersey and Guernsey have been common destinations for domiciles, with the Channel Islands a domicile for 30% of all UK private equity funds raised. Another preferred destination has been Luxembourg, which accounts for 13% of UK-based fund domiciliation. France-based firms have been seen to domicile in Luxembourg too, with over a third (35%) of France-based private equity house funds domiciled here. Germany-based fund managers have also only domiciled half of their funds at home, with Luxembourg also accounting for a significant share of the domiciliation, standing at 32%.
Over the past decade, China-based fund managers have domiciled 63% of funds at home, but have evidently been open to using the Cayman Islands as well, with 34% of funds domiciled here. Specifically, Hong Kong-based GPs follow a more extreme preference trend, domiciling a vast majority (78%) of their funds offshore in the Cayman Islands, as opposed to only 12% in China. India-based fund managers only domicile half of their funds at home, with 38% of funds being domiciled in Mauritius.
Other than the US, it seems many fund managers have chosen to domicile their funds away from home, with offshore locations such as the Channel Islands and the Cayman Islands being common locations. However, these trends may change in upcoming years, with the introduction of regulations such as the AIFMD encouraging talk of re- and co-domiciliation.