SCG Business Services & Fund Management in The Bahamas
Douglas G. Fathers is the Founder and Managing Director of SCG Fund Services (an Equityhub Group company) and is responsible for the overall day-to-day operations and management of the business. As an accomplished entrepreneur and business leader with a diverse background with over 32 years managing global companies in various industries, his unique perspective […]
Douglas G. Fathers is the Founder and Managing Director of SCG Fund Services (an Equityhub Group company) and is responsible for the overall day-to-day operations and management of the business. As an accomplished entrepreneur and business leader with a diverse background with over 32 years managing global companies in various industries, his unique perspective has been the stimulus towards his current success. SCG Fund Services launched in 2005 and for past 13 years have specialised in offshore fund formation. Today, SCG is considered one of the foremost consulting firms in the offshore fund industry with a presence in The Bahamas, BVI, and the Cayman Islands. As part of this month’s Professional Excellence feature, we spoke to Douglas about fund management in The Bahamas.
What type of funds does SCG Fund Services assist with? Are there fund structures unique to The Bahamas?
SCG Fund Services specialise in providing global clients with professional guidance through all aspects of launching and operating a fund. Our services extend to all stages of the fund formation process — from entity formation and the preparation of full-colour offering documents to advising clients on the selection of service providers to marketing the fund.
SCG maintains a personalized approach to guiding and educating new and emerging fund mangers in structuring both domestic and offshore funds. Our consultants and attorneys have significant fund experience in both the US and offshore.
In today’s challenging environment, The Bahamas offers several attractive structures used by professional managers, family offices, and project finance professionals. Within The Bahamas modern-day Investment Fund Act, there are four classes of funds including the Standard fund, Professional fund (open-end & closed-end), SMART fund, Recognised Foreign Fund. The SMART fund is unique to The Bahamas and provides managers several options to fit their needs.
Are certain funds more applicable to particular individuals and their circumstances?
Yes, certain fund structures are more applicable to the needs and circumstances of individual or group establishing the fund. For instance, an investment manager launching a fund with a specific strategy is likely to use a professional fund; whereas a private investment group or family office may prefer a Bahamas SMART fund. Strategies with illiquid investments, such as private equity or real estate investment, would favour a closed-end fund structure.
How important is the support function following a licensing?
Most jurisdictions, including The Bahamas, require licensed funds to engage an auditor and an independent fund administrator. These service providers provide investors with transparency and general oversight of the funds management and activities. The fund administrator provides most of the back-office tasks for the manager giving him/her more time to focus on the investments of the fund.
What factors would determine which jurisdiction to setup and license the fund?
There are several factors to consider including the reputation of the jurisdiction itself & its securities commission, the investors perception, foreign government’s perception, cost of setup, on-going fees, ease of setting up a bank account, licensing requirements, and regulatory requirements after licencing to name a few.
What structure should a manager use when setting up an offshore fund?
There are a number of structures to consider and in most cases, it would be determined depending on the location of the manager, location of the investors, and the type of investments the fund will make. Typically, you have four structures that include the Standalone, Master-Feeder, Side-by-Side, and Segregated Portfolio Company.
Standalone structure is one where only one fund vehicle (entity) is used. A Master-Feeder structure is typically used when there is a US presence and where a single manager is seeking investment from both US and non-US or tax-exempt US investors. The structure will comprise a master fund (an offshore vehicle), which conducts the trading, and at least two feeder funds that invest all of their assets into the master fund. A Side-by-Side, similar to a master-feeder structure, is used where a single manager is seeking investment from both US investors and non-US or US tax exempt investors. There will be two funds, an offshore and domestic US fund, both identically managed. Lastly the Segregated Portfolio Company or “SPC”, also referred to as an Umbrella fund, is a company where separate portfolios have statutory segregation of assets and liabilities. These are popular for operating various classes or portfolios with separate strategies.
Ste 205A-Saffrey Square
Bank Lane & Bay Street
P.O. Box N-9934
Nassau, NP Bahamas
Phone: +1 212 920 6690