Twenty-Five Years of Protected Cell Companies – Fund Management/ REITs

Written by Joe Truelove, Non-Executive Director

Originally designed for use in the captive insurance industry, the protected cell company has established itself as a go-to solution for a myriad of different uses in the 25 years since its inception. Here, Guernsey non-executive director Joe Truelove explores some of those uses.

2022 is the 25th anniversary of the introduction of Protected Cell Companies (PCCs) in Guernsey. In 1997, it was a truly innovative legal concept that has been copied by many jurisdictions ever since, often adopting the name segregated holding company.

The concept behind the structure is that the PCC is a legal entity within which there are a series of separate pools of assets and liabilities. In addition to the cells, there is also a core which is responsible for managing the structure and to which the entity’s board of directors is attached. Each of the cells, as well as the nucleus and their liabilities, are separated from each other.

Private Wealth Management Open-Ended Asset Allocation Funds

From the captive insurance industry, it was obvious to start using PCC as the legal structure of choice for umbrella funds. These evolving structures still exist and are often managed in Guernsey.

Structures like this are typically marketed to sophisticated investors and private clients of the private banks that promote them. The cell structure gives the manager the ability to effectively operate an asset allocation model so that investors can have all of their assets in one or two cells instead of managing multiple small portfolios. The classic model would be to have an income cell, a growth cell, and a balanced cell. The operating costs of many small portfolios are reduced for the client and for the manager. There is also a cost saving when it comes to maintaining the structure – there will only be one audit firm required, one board, one administrator and one corporate secretary.

Multi-manager structures

A number of providers have formed PCCs or Incorporated Cell Companies (ICCs) as “platforms” or “incubators” which they can then use to oversee a number of segregated funds, where the management or advice is delegated to a range of investment advisers.

There are a number of these structures in Guernsey. This approach helps new investment advisers establish a track record of performance in an established investment vehicle with an investment manager monitoring their performance, as well as the establishment of regulated service providers and corporate governance principles. .

Adding a new cell is a simple and cost effective process. Investment advisors can launch one or more cells if they have multiple strategies. Evaluation frequency and stock exchange listing may vary for each cell.

PCCs listed

The London Stock Exchange (LSE) is home to many closed-end investment companies and Guernsey is the most popular jurisdiction for LSE-listed companies after the UK with over 100 companies incorporated in Guernsey, including several listed companies. protected cells set up in Guernsey. in the old days.

The International Stock Exchange (TISE) is also very familiar with CCPs and shares of both open and closed-end funds can be listed on TISE. In fact, I chair the board of directors of World Shariah Funds PCC Limited, an open-ended authorized collective investment scheme with three classes of shares listed on TISE.

The advantages of using a PCC for a listed fund are the speed and cost effectiveness with which a second cell can be added to a PCC compared to launching a new legal entity.

Private equity and real estate ‘deal-by-deal’ structures PCC

In the aftermath of the credit crunch, even established fund managers struggled to raise funds for traditional “blind pool” investment funds. As a result, some managers have responded by launching co-investment vehicles, separate managed accounts or club deals. In many cases, they have retained the structure of a limited partnership as a co-investment vehicle with a general partner as manager.

Increasingly, however, clients are using a PCC for these non-fund structures, particularly for a “trade-to-trade” structure; a series of transactions where potential target investors have complete choice whether or not to invest in a given opportunity. The memorandum and terms of the basic private placement remain constant and the variability is linked to each investment, which is indicated in a cellular appendix.

I have served on the boards of several such PCCs, each with multiple cells, which are used by clients as vehicles to structure a series of separate private equity or real estate transactions. There has certainly been a marked increase in the popularity of PCCs used in these circumstances.

This way, investors can perform their own due diligence on each transaction rather than relying entirely on a fund manager. Alternatively, investors may wish to exit sectors, geographies or deal sizes or vary their potential commitment per deal depending on their risk appetite at that time or simply free cash flow.

CCP costs

Regarding a cost/benefit analysis of whether forming a PCC is more or less cost effective than forming a stand-alone fund. My experience is that if a potential client intends to make more than two separate investments or sub-funds, a PCC will be more profitable than launching three separate co-investment vehicles or stand-alone fund structures.


PCCs are clearly a very useful legal form for the investment management industry, whether for open-end or closed-end investment funds, whether the cells or core are listed or unlisted, and for a corporate structure profitable holding where a series of investments is intended. PCCs also work well for managed accounts (one cell per investor) and family offices (one cell per holding company to segregate potential liabilities arising from a series of businesses).

ICCs have not been considered in this article – and although their uses are very similar to PCCs, they require an article on their own!

Joe has been a director of eight PCCs incorporated in Guernsey over the past 10 years, including both regulated and non-regulated structures.

This article was first published on Joe’s LinkedIn page.

For more information on Guernsey’s financial sector, please visit

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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