BVI Funds

Funds are a structure used for collectively holding and managing the investments of several people, under the direction of a fund manager. The BVI is particularly well suited to this given its economic and political stability, tax neutrality and its respected legal system. The BVI offers a wide range of fund structures and is well served with professional services who can support the creation of such funds. BVI Limited Companies are commonly set up to support the formation of a fund

Funds are a more sophisticated structure which enable many people to invest together. The degree of regulation that they fall under depends upon what kind of investor will access the fund and how many investors are involved. The largest and most publicly-facing funds are highly regulated and overseen, however for early-stage setups there are light-touch alternatives available.

BVI Funds fall into several types including five collectively known as ‘open-ended’ and one which is ‘closed-ended’. The main difference between these categories is to do with the ability for investors to exit. Investors in an open-ended fund have a right to apply to recover their investments anytime beyond a minimum set time. In closed-ended funds there are more defined fixed terms. This difference reflects on the kinds of investments the funds make with open-ended funds normally focusing on more liquid assets and readily tradeable assets and closed-ended funds, making investments which require a longer time to realize the underlying value.

BVI open-ended funds fall into five types: Incubator funds, Approved funds, Professional funds, Private funds and Public funds.

How Otonomos assists you with the launch of your fund

Otonomos has streamlined the process of launching an investment fund by working together with BVI counsel. Our expertise will help you decide on many important factors when it comes to structuring your fund.

With this guidance we ensure that you will be fully up to speed with all there is to know before speaking to counsel. Having all terms fully defined before speaking with counsel will prevent

BVI Incubator Funds

The Incubator is the most light-touch of the funds and often used to hold down costs for small or new funds. It benefits from not requiring to have an Offering Memorandum, an administrator, an auditor, or a licensed investment manager.

However it is restricted in the following ways:

• Limit of 20 investors
• Maximum initial investment in the fund of $20M
• Maximum total assets of $20M
• 2-year duration only as Incubator status
  • Period can be extended by 1 more year
• The fund can be upgraded if required into an Approved, Professional or Private fund.

BVI Approved Funds

This fund is a step up with higher maximum assets and longer duration. It is still intended to be a relatively low-cost early-stage fund.

Its restrictions include:

• Limit of 20 investors
• Assets up to $100M
• No minimum investment
• No Term limit

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Unlike an Incubator, it does require an administrator, but not a professional manager.

BVI Professional Fund

This type accounts for most BVI funds and it operates at a much higher scale. It does require professional operation and the restriction on the number of investors is removed.

Certain restrictions apply:

• A Professional fund is only open to professional investors each investing a minimum of $100k. (Professional Investors are people who have the knowledge and experience to form their own investment decisions and work as an investor or have a net worth exceeding $1M)
• Requires a minimum of 2 directors, at least one of those must be a person
• Must have a manager, custodian and an administrator
• Must have a money laundering reporting officer
• Annual financial statements and audits are required
• Required to be registered on the BVI online financial reporting system
• Full record keeping of transactions, retained for five years

BVI Private Fund

A private fund is differentiated by its closed invitation basis. Investors must be invited to join a private fund. Its key restrictions are:

• Maximum of 50 investors
• Must be fully incorporated, formed and licensed prior to investment
• Invitations are private, but the invitees are not required to be professional investors
• Must be an authorised representative.
• Requires audit (local sign-off not needed, and exemptions can be made)
• Requires a formal valuation process
• Fund administrator is not mandated but frequently one is appointed

Public Fund

This type of fund has the most requirements placed on it and it is intended as a retail fund.
It is characterized by:

• No limit on number of investors
• The BVI does not restrict the assets under management, or the investment strategy.
• A Fund Prospectus document is required
• Audit is required
• A full set of service providers is required to support the fund, however they do not need to be BVI based.

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