Beyond Private Equity - Consult GC Guernsey

01 Sep Beyond Private Equity

Posted at 10:47h in News & Insights by Charisma Lyall

Why Guernsey is Well Placed for Funds Investing in Emerging and Unconventional Asset Classes

Space is no longer solely the domain of governments and national space agencies. Satellite communications, earth observation, launch services and space-enabled data have developed into commercial markets capable of attracting institutional and private capital. The UK space industry alone generated income of £18.9 billion in 2021-22 and supported more than 52,000 jobs.

That transition is now visible in the products reaching public markets. Seraphim Space is launching an exchange-traded fund focused exclusively on the “new space economy”, with an initial portfolio of around 23 companies (The Times, 31 August 2026). This is another indication that a strategy long associated with specialist venture and private capital is becoming accessible to a broader investor base.

Space may be an eye-catching example, but it is not an isolated one. Investment strategies increasingly extend to natural capital, carbon and biodiversity projects, digital infrastructure, intellectual property, specialist credit, litigation finance, life sciences and tokenised assets. Some represent genuinely new markets. Others involve established assets being financed, packaged or traded in new ways.

The description “unconventional asset class” is convenient, but it can also obscure more than it explains. These assets do not form a coherent risk category. A satellite business, a portfolio of music royalties and a forestry project have little in common simply because none is traditional private equity or commercial property.

What they do share is that the assumptions on which investment decisions depend may be less familiar, less observable or more dependent upon specialist knowledge. That changes the governance challenge.

It also changes the basis on which a fund domicile should be selected.

The relevant question is no longer simply whether a jurisdiction offers an appropriate legal structure, a competitive timetable and experienced administrators. Those remain important issues. The better question is whether the jurisdiction can support the process by which an unfamiliar investment proposition is translated into a governance framework that directors, managers, service providers, investors and regulators can understand and test.

That is where Guernsey has a credible and increasingly important advantage.

The asset is only part of the risk

An unconventional asset is not necessarily a high-risk asset. Equally, a familiar asset is not necessarily a low-risk one.

The significance of novelty is that it may reduce the value of established assumptions. Market prices may be unavailable. Cash flows may depend upon licences, technical performance, intellectual property rights or future policy decisions. Ownership may be represented through contractual rights rather than possession of a conventional asset. The investment may require a longer development period, have limited secondary liquidity or depend upon a small number of highly specialised counterparties.

Those features do not make the investment unsuitable, but they require the risks to be understood with greater precision.

It is useful to distinguish between three separate questions.

The first concerns the asset itself. What creates value, what could impair it and what evidence supports the investment case?

The second concerns the legal and financial structure through which exposure is obtained. Does the fund own the asset directly? Does it hold debt, equity, contractual revenue rights or an interest through one or more special purpose vehicles? Are those rights enforceable, transferable and capable of being realised?

The third concerns governance. Who possesses the relevant knowledge? Who makes each decision? What information reaches the governing body? Who verifies the assumptions made by the investment manager? How are conflicts, valuation, concentration, liquidity and operational dependencies monitored?

The first two categories frequently receive considerable attention during the investment process. The third may be expressed in familiar language – board oversight, delegated authority, administrator reporting and annual audit – without sufficient consideration of whether those arrangements remain effective for the particular strategy.

The central regulatory issue is therefore not novelty in itself. It is whether the fund’s governance arrangements have been adapted to the risks that novelty introduces.

Innovation does not change accountability. It changes the knowledge required to discharge that accountability.

Why the fund domicile matters more, not less

Fund domiciles have traditionally competed on legal flexibility, tax neutrality, market access, cost and speed to market. Those considerations remain relevant, but emerging asset classes make the surrounding institutional environment more significant.

A technically flexible vehicle is of limited value if the jurisdiction does not have administrators capable of accounting for the assets, directors able to challenge the investment proposition, lawyers who understand the relevant rights and regulatory perimeter, or advisers who can anticipate the issues likely to concern investors and regulators.

Guernsey starts from a substantial and mature funds base. At 31 March 2026, Guernsey funds had aggregate net assets of £272.6 billion across 885 authorised and registered schemes. Nearly £229 billion of that value was held in 758 closed-ended funds.

The predominance of closed-ended structures matters. Many emerging investments involve long holding periods, irregular cash flows, construction or development risk, and assets for which ready realisation cannot be assumed. A closed-ended structure does not remove those risks, but it can align the fund’s redemption terms with the time genuinely needed for the investment to mature, giving the asset room to perform rather than creating an artificial promise of liquidity that it cannot support.

Guernsey also offers materially different regulatory routes. These include fully authorised schemes, qualifying investor funds, registered funds and private investment funds, together with specific designations for Guernsey Green Funds and Natural Capital Funds. A complete Private Investment Fund application may be registered within one business day, while qualifying investor and registered fund applications may proceed through three-business-day fast-track processes.

Those timeframes are commercially valuable, but they should not be misunderstood. A fast-track process is not an absence of regulation and should not be presented as one. It places greater reliance upon regulated Guernsey service providers and the certifications, declarations and due diligence underpinning the application.

The attraction is therefore not speed at the expense of scrutiny. It is the ability to apply scrutiny through a proportionate allocation of responsibility.

That distinction is particularly important for emerging managers and unconventional assets. A jurisdiction that is merely permissive may facilitate establishment but provide little long-term protection when assumptions are challenged. A jurisdiction that is inflexible may attempt to fit each new strategy into rules designed for a different product.

The stronger model is one in which the regulatory route reflects the investor base and nature of the offering, while the substance of the governance framework reflects the actual risks of the investment.

For a manager raising a first fund around a new asset class, this has a direct commercial consequence. Institutional investors increasingly diligence governance capability before committing capital, not after it. A jurisdiction that can authorise the vehicle quickly but cannot demonstrate that the surrounding infrastructure — competent directors, an administrator who understands the asset, advisers who have seen the issues before — is itself investable has not shortened the fundraising process. It has only moved the friction from the regulator to the investor’s own due diligence. Guernsey’s advantage is that the authorisation route and the professional infrastructure around it can move at the same pace.

Role-appropriate competence

Discussions about fund governance often refer simply to “the board”. That shorthand can be misleading.

Depending upon the legal structure, the relevant governing body may be the board of a corporate fund, the board of the general partner of a limited partnership, the board of a licensed manager or a combination of them. A separate investment manager, designated administrator, depositary or custodian may each perform material functions. The precise allocation of responsibilities depends upon the legal form, regulatory regime, constitutional documents and contractual arrangements.

It is therefore necessary to identify who is responsible for what before considering whether the governance framework is adequate.

The answer is not to require every participant to become an expert in every aspect of the underlying asset. That would be unrealistic and would blur, rather than strengthen, accountability.

The objective should be role-appropriate competence.

The investment manager

The investment manager should ordinarily possess the deepest understanding of the investment strategy. It should be capable of explaining how value will be created, the material downside risks, the basis of valuation, the expected holding period, key operational dependencies and the circumstances in which the original investment thesis would no longer hold.

Where technical specialists are used, the manager should understand the scope and limitations of their work. Obtaining an expert report does not remove the need to assess the assumptions on which it is based or determine whether the expert is addressing the right question.

For unconventional assets, the manager’s responsibilities may also extend beyond investment selection. It may need systems capable of monitoring technical milestones, contractual performance, regulatory permissions, insured events, intellectual property rights or environmental outcomes. Conventional financial reporting may not provide the information required.

The governing body

The governing body does not need to duplicate the investment manager’s expertise. It must, however, understand the strategy sufficiently to exercise judgement over it.

That requires more than receiving a presentation explaining why the opportunity is attractive. The governing body should be capable of identifying the assumptions on which the investment case depends, understanding the principal risks and determining whether the information it receives is sufficient to decide whether the investment case is appropriate and to undertake ongoing monitoring of the assets.

A director need not be an aerospace engineer before serving on the board of a fund investing in satellite infrastructure. The director should nevertheless understand whether the investment depends upon successful launch, continuing access to spectrum, a small number of government contracts, technical performance or insurance recovery. More importantly, the director should know which matters require specialist advice and whether the advice obtained answers the governance question before the board.

This is not a hypothetical. In July 2026, Guernsey welcomed its first regulated defence and dual-use technology fund, the $300 million Resilience I Fund, investing across autonomous systems, AI-driven defence software, drone manufacturing, missile technology, space technologies and maritime platforms for European and NATO-allied markets, advised by Lakestar with Ferbrache & Farrell as Guernsey legal counsel and Aztec Group as administrator. Regulatory approval followed what the deal team described as extensive engagement with the Commission — the translation process this article describes, worked through on a genuinely novel investment thesis rather than assumed away. A director joining that board does not need to assess missile technology. They do need to know whose sign-off confirms the fund’s compliance with United Nations, NATO, United States, European Union and Guernsey requirements simultaneously, and what happens if any one of those frameworks shifts.

Guernsey’s Finance Sector Code of Corporate Governance reflects this distinction. It requires the board collectively to comprise an appropriate balance of skills, knowledge and competence, taking account of relevant experience. Directors must be conversant with applicable law and regulation to an appropriate level, receive information of sufficient quality, evaluate their performance and regularly update their skills and knowledge.

The practical requirement is a board that can recognise the limits of its knowledge without surrendering its judgement.

The Administrator

The administrator’s role is different again.

It is not ordinarily responsible for deciding whether the commercial investment thesis is sound. It may, however, be responsible for books and records, investor administration, financial reporting, calculation of net asset value, monitoring of cash movements and the operation of important controls.

The more unusual the asset, the less safe it is to assume that conventional administration procedures will automatically remain adequate. The administrator may need to understand bespoke valuation inputs, complex waterfalls, milestone payments, capitalised development costs or the conditions attached to revenue recognition or, for digital assets, the custody and private-key arrangements underpinning ownership and the reconciliation of on-chain holdings against the fund’s books. It should also know when an apparent administrative or accounting issue may indicate a wider governance or operational problem requiring escalation.

This does not make the administrator a substitute investment manager. It means that it must possess sufficient understanding to perform its own function properly.

Custodians

Custody is easy to treat as a back-office formality once a fund is established. For unconventional assets, it is closer to a governance question in its own right.

The custodian’s core duty is not simply to hold assets, but to verify that the fund actually owns them. Guernsey’s guidance on custody of indirectly held assets is explicit that this responsibility does not stop at the asset holding level: the custodian should look through to the ultimate asset and take reasonable steps to ascertain that the scheme owns or has title to it, no matter how held. The equivalent depositary standard applied to assets that cannot be physically held at all — real estate, contractual rights, and by extension most of the asset classes this article has discussed — shifts the duty from possession to verification: confirming ownership from documentary and, where available, external evidence, and maintaining a current record of what has been verified and how.

That distinction matters for emerging asset classes precisely because so few of them can be ‘held’ in any conventional sense. A satellite transponder lease, a portfolio of music royalties, a forestry concession or an interest in a digital asset each raises the same underlying question in a different form: who verifies that the fund’s rights are real, and on what evidence? The governing body should know not only who is acting as custodian, but what that custodian has actually verified — and, as with the auditors and valuers discussed below, where the limits of that verification lie. The administrator’s own understanding of custody arrangements, discussed above, is only as reliable as the custodian’s verification beneath it.

Legal advisers

The role of legal advisers extends beyond producing constitutional documents and investment agreements.

Unconventional assets frequently depend upon rights whose legal character is central to their value. Questions of title, enforceability, transferability, security, insolvency priority, regulatory permissions and governing law may be as important as the underlying commercial opportunity.

Legal advisers should also understand the regulatory significance of the proposed arrangements. A provision may be legally effective but create governance, disclosure or investor-protection concerns. The value of experienced legal advice lies partly in recognising not only whether a structure can be documented, but which features are likely to attract scrutiny and how they should be explained.

Regulatory advisers

Regulatory advice is related to, but distinct from, legal advice.

The role is not simply to identify the rule that applies. It is to consider how the proposed business model is likely to be understood by the regulator; whether responsibilities are clearly allocated; whether the evidence of competence is proportionate; and whether the fund’s disclosures, risk framework and monitoring arrangements address the substance of the risks.

This becomes particularly valuable where an established regulatory principle must be applied to a product or asset that was not contemplated when the principle was written.

Auditors, valuers and technical specialists

External specialists can provide assurance, technical expertise and independence. Their involvement is often essential, particularly where valuation depends upon non-observable inputs or technical performance.

However, specialist involvement must be properly scoped. A valuation opinion may address methodology without verifying ownership. A technical report may assess expected output without examining contractual revenue. An audit may test financial statements without validating the commercial assumptions underlying an investment.

The governing body should understand what each specialist has – and has not – been asked to do.

Delegation is not the transfer of accountability

A well-governed fund will delegate extensively. Delegation is necessary because no single governing body can administer the fund, manage each investment, provide custody, undertake every valuation and supply all required technical expertise.

The danger lies in treating the existence of a reputable delegate as the end of the governance analysis.

In practice, some of the harder governance failures occur where responsibilities overlap: several participants receive the same information, each assuming that another is testing the underlying proposition.

Guernsey’s Corporate Governance Code expressly recognises that delegation does not absolve the board from overall responsibility for sound governance and that responsibility and accountability for material outsourced functions remain with the board. Oversight, conflicts and valuation controls are similarly treated as components of the fund’s governance framework rather than isolated operational processes.

In practice, effective delegation requires the governing body to understand:

the function delegated and the standard expected;
the competence, resources and independence of the delegate;
the information required to oversee performance;
the limits of the delegate’s mandate;
the circumstances requiring escalation; and
the action available if the delegate fails.

These are familiar principles. Emerging assets make their proper application more important because the governing body may be more dependent upon information generated by a small group of specialists.

The test is not whether the board can independently reproduce the delegate’s work. It is whether it can evaluate the process, identify inconsistencies, challenge material assumptions and reach an informed decision.

Demonstrating competence

Competence cannot be established by a general statement in a board paper that the directors and service providers are experienced.

It should be capable of being demonstrated.

Ask whether your own board could produce that evidence tomorrow, on request. If it could not, the competence you are relying on is not yet in place.

For a fund investing in an emerging or unconventional asset class, the evidence might include a governance map identifying the responsibilities of each principal party; a board skills assessment mapped to the investment strategy; targeted induction and continuing training; clearly scoped specialist reports; valuation policies addressing unavailable market prices and conflicts; and reporting designed around the risks that actually determine performance.

Board minutes also matter. They should record the substance of the challenge rather than merely confirming that a presentation was received and discussed. Where the governing body has relied upon expert advice, the record should show why the adviser was selected, the issue referred, the material conclusions and any limitations identified.

Having reviewed a great many board papers from the regulatory side, the tell is rarely a missing document. It is more often a pack that thoroughly answers every question that was asked, without ever surfacing the one that should have been.

The quality of information supplied to the governing body is equally important. Length is not a substitute for relevance. A board pack containing hundreds of pages of financial and operational data may still fail to identify that a material licence is due to expire, a technical milestone has been missed or a valuation depends upon an assumption that has materially changed.

Before your board pack next goes out, it is worth asking whether a new director, reading it cold, could identify the one assumption on which the entire investment case depends.

For emerging assets, reporting should begin with the question:

What would the governing body need to know to recognise that the risk profile or investment thesis has changed?

The answer should determine the information architecture, rather than simply adding the asset to an existing reporting template.

Valuation deserves particular attention. IOSCO’s updated 2026 recommendations emphasise fair and consistent valuation, governance, oversight and the management of conflicts across collective investment schemes. The difficulty with unconventional assets is rarely solved by selecting a formula. It requires clarity about who supplies the inputs, who evaluates them, how independence is maintained, what happens when reliable data is unavailable and how uncertainty is communicated to investors.

The same discipline should apply to liquidity, custody or title, concentration, related-party transactions and conflicts of interest. Not every risk will be material to every strategy. Those that are material should be expressly allocated, monitored and evidenced.

Why Guernsey is well placed

Guernsey’s opportunity does not arise because it has developed a separate fund regime for every possible asset class. That would be neither practical nor desirable.

Its strength lies in combining a flexible fund framework with a governance regime that is expressly proportionate to the nature, scale and complexity of the business.

The Guernsey Green Fund and Natural Capital Fund regimes illustrate how established fund structures can be supplemented by credible designations where the investment objective requires additional assurance. The Green Fund regime is intended to give investors access to green investments through a trusted and transparent product. The Natural Capital Fund designation extends that approach to investments making a positive contribution to, or materially reducing harm to, the natural world.

Funds can already invest in many green or natural assets without using either designation. The significance of these regimes lies in creating a recognisable framework through which the stated characteristics of the product can be tested and communicated.

The Commission has taken a similarly differentiated position on cryptocurrency funds. It has acknowledged that appropriately operated collective investment schemes may provide a means for suitable investors to obtain indirect exposure to cryptocurrencies, while remaining cautious about virtual asset service providers and retail-facing activity. That is neither a blanket endorsement nor a blanket prohibition. It distinguishes between the asset, the product, the investor base and the surrounding controls.

The Innovation Sandbox and Concierge service provides a further route for firms whose products or activities do not fit neatly within existing categories. The model is deliberately sequential. A firm engages the Commission informally, through a Concierge Connect Form, before making any formal application, and receives regulatory signposting on whether the Sandbox is the appropriate route at all. Where it is, the firm applies under existing law rather than a bespoke licence type, is assigned a dedicated contact within the Commission’s Authorisations and Innovation Division, and operates for a defined incubation period under licence conditions tailored to the novelty of the business — scope and volume limits, enhanced disclosure, consumer safeguards such as cooling-off periods.

None of this lowers the regulatory bar; it changes when and how compliance is evidenced. Around three months before the scheduled end date, the Commission assesses whether the firm graduates to unrestricted operation, continues on modified conditions, or exits in an orderly manner — a decision forced on a schedule, not left open-ended. Guernsey Finance’s Concierge service runs alongside this, connecting applicants with the local professional community that has not yet worked with the asset class in question. The Commission describes the Sandbox as a launchpad, not an indefinite arrangement, and that discipline is itself a governance safeguard: it stops provisional treatment quietly becoming permanent.

There is also a practical advantage in the concentration of expertise within the jurisdiction. Guernsey’s professional community includes fund administrators, investment managers, directors, lawyers, accountants, auditors and regulatory specialists accustomed to working with closed-ended and private-market structures.

A small jurisdiction does not automatically produce better coordination. It can, however, shorten the distance between the promoter, governing body, service providers and regulator. Where an investment proposition is novel, the ability to identify and resolve issues through direct engagement can be commercially significant.

The inference is not that every unconventional fund should be domiciled in Guernsey. Jurisdictional selection must take account of the investors, manager, assets, distribution strategy, tax position and wider operating model.

The better conclusion is narrower, but stronger: Guernsey has many of the characteristics required to support emerging asset classes well. It has structural flexibility, substantial closed-ended fund experience, differentiated regulatory routes and a governance framework that places responsibility upon the relevant parties without requiring every risk to be addressed through prescriptive product rules.

Regulatory Perspective

From a regulatory perspective, the most important questions are unlikely to begin with whether the asset is unusual.

They are more likely to be:

Who understands the asset and the structure through which it is held?
Who is responsible for each material decision?
What independent challenge exists?
How are valuation, conflicts, ownership or custody, liquidity and operational dependencies addressed?
What information reaches the governing body?
What happens when assumptions change?
What evidence demonstrates that these matters have been considered in practice?

A regulator will not expect every director or administrator to possess the same specialist knowledge as the investment manager. It is reasonable, however, to expect each participant to understand its own responsibilities, the limits of its competence and the circumstances in which additional expertise is required.

Nor should the appointment of an expert be treated as a complete answer. Expertise informs judgement; it does not replace responsibility.

The regulatory challenge is therefore one of translation. The fund must translate specialist commercial and technical risks into governance questions capable of being understood, allocated, monitored and evidenced.

A jurisdiction able to support that process offers something more valuable than speed or flexibility alone. It offers a framework within which innovation can become investable without becoming unaccountable.

Conclusion

The expansion of private capital into emerging and unconventional asset classes is unlikely to be temporary. Investors will continue to seek returns from new technologies, environmental markets, specialist infrastructure, contractual rights and assets that do not fit comfortably within traditional classifications.

The jurisdictions best placed to support that development will not be those that treat novelty as an exception to established standards. Nor will they be those that respond to every new asset with a new layer of prescriptive regulation.

They will be the jurisdictions capable of applying durable principles to unfamiliar facts.

Guernsey has a credible claim to be among them.

Guernsey’s more significant advantage lies in the combination of regulatory proportionality, closed-ended fund expertise and a professional community capable of converting specialist investment risks into workable governance arrangements. Speed and flexible legal structures matter, but they are most valuable when supported by that broader infrastructure.

The question is not whether everyone involved understands every aspect of the asset.

It is whether the right people understand the right matters, whether responsibilities are clearly allocated and whether those responsible for governance possess enough knowledge to ask the questions that should be asked.

Innovation changes those questions.

It does not change the responsibility to answer them well.

About the author

Charisma Lyall is a director of ConsultGC, a Guernsey-based regulatory advisory practice for boards, directors and money laundering reporting officers. She was previously General Counsel of the Guernsey Financial Services Commission (2020–2023), Deputy General Counsel (2016–2020) and Legal Counsel (2011–2016), and Director of Regulatory Consulting at Grant Thornton Channel Islands (2023–2025). She chairs the Guernsey Investment & Funds Association’s Administrator and Compliance Sub-Committee and sits on the States of Guernsey’s Scrutiny Management Committee. She is an Advocate of the Royal Court of Guernsey and a Solicitor of the Senior Courts of England and Wales.

ConsultGC advises boards, managers and administrators on governance frameworks for funds investing in emerging and unconventional asset classes. Enquiries: consultgc.gg.

This article is the first in a series in which ConsultGC examines the governance and regulatory implications of innovation in Guernsey’s fund sector.