BVI Incubator Funds: A Tailor-Made Solution For Start-Up Managers

The introduction of the new BVI incubator fund product in June of this year has caught the attention of start-up fund managers.

The incubator fund builds on the existing attractions of the BVI fund regulatory regime. As a jurisdiction BVI is already recognised for its competitive fund establishment and operating costs, speedy regulatory approval and a light-touch regulatory approach. However the incubator fund has been specifically developed with the needs of start-up managers in mind and, as managers are discovering, it has a number of key features which combine to make it more attractive than alternative fund start-up vehicles.

These key features include:

1. no requirement to issue an offering document or to appoint an administrator, custodian, manager or auditor, which considerably simplifies the fund establishment process and reduces ongoing running costs;
2. incubator funds also benefit from low regulatory costs – incorporation fees payable to the BVI registry and application fees payable to the Financial Services Commission ("FSC") start at $1,850, and annual registry and FSC fees start at $1,350;
3. incubator funds can be brought to market very quickly – they may commence business on the third business day after submitting a complete application to the FSC; and
4. incubator funds may be marketed to a broad range of investors with a relatively low minimum initial investment of just $20,000 per investor.

These features allow start-up managers a window of two years (with the possibility of a one year extension) to focus on establishing a track record and marketing their fund to investors, with a minimum of regulatory distraction and at a very competitive price point.

The incubator fund regime also facilitates the straightforward conversion of an incubator fund into a private, professional or approved fund at the end of its term. In the case of conversion into a private or professional fund (both of which require the appointment of a manager) the manager can also avail of the BVI approved manager regime which combines regulated status and light touch regulation with a fast approval process and cost effective establishment and operation.

Walkers has seen significant interest in the incubator fund regime from start-up managers and fund consultancies alike. The approved fund regime has certainly put BVI firmly on the radar for start-up managers.

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