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4.1. Where do Private Equity Fund<br />
Managers Domicile Their Funds?<br />
A PE fund’s domicile—i.e., its legal home—<strong>of</strong>ten differs<br />
substantially from the location <strong>of</strong> its headquarters or other<br />
<strong>of</strong>fices. A July 2014 Preqin article explored the variety <strong>of</strong><br />
domiciles used by PE fund managers relative to their<br />
geographic base (see Exhibit 1). The authors used data<br />
from Preqin’s Funds in Market database and looked at<br />
the distribution <strong>of</strong> domiciles over the past 10 years among<br />
fund managers based in different geographies. For fund<br />
managers based in emerging markets such as China and<br />
India, at least a third <strong>of</strong> funds in the sample were domiciled<br />
<strong>of</strong>fshore (e.g., Cayman Islands, Mauritius).<br />
different countries appear to have different preferences for<br />
places <strong>of</strong> domicile? We explore these themes below.<br />
4.2. Drivers <strong>of</strong> Domicile Choices<br />
Given large discrepancies in the domicile choices for fund<br />
managers based in different countries, we next explore what<br />
factors PE firms consider when choosing where to domicile<br />
a fund. Some important questions we considered were<br />
how tax incentives play into decisions and what non-tax<br />
factors are most important. We then (in Section 5) explore<br />
these questions in finer detail with respect to Mauritius, a<br />
prominent domicile choice for Africa-focussed PE fund<br />
managers.<br />
This information raises the question <strong>of</strong> domicile choice—what<br />
qualities do Mauritius, the Channel Islands, Luxembourg or<br />
the Cayman Islands have that make them so attractive to<br />
PE fund managers? Moreover, why do fund managers in<br />
In mid-2012 IFI Global surveyed investors and managers<br />
<strong>of</strong> both PE and hedge funds, along with lawyers and<br />
consultants, on domiciliation practices in the alternative<br />
fund industry. The study found that fund investors preferred<br />
Exhibit 1:<br />
Private equity domiciles for funds raised in the past 10 years (as <strong>of</strong> July 2014),<br />
by base <strong>of</strong> fund manager 30<br />
BASE OF FUND MANAGER<br />
PERCENT OF FUNDS BY DOMICILE<br />
United States<br />
87% in United States<br />
(<strong>of</strong> which 73% in Delaware)<br />
≈ 7% in Cayman Islands<br />
United Kingdom<br />
34% in United Kingdom<br />
30% in Channel Islands<br />
13% in Luxembourg<br />
France<br />
35% in Luxembourg<br />
Germany<br />
≈ 50% in Germany<br />
32% in Luxembourg<br />
China<br />
63% in China<br />
34% in Cayman Islands<br />
Hong Kong<br />
78% in Cayman Islands<br />
12% in China<br />
India<br />
≈ 50% in India<br />
38% in Mauritius<br />
<strong>Conduits</strong> <strong>of</strong> <strong>Capital</strong> – Onshore Financial Centres and Their Relevance to African Private Equity<br />
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