Where should your first fund live, and what should you buy once it does?

Two decisions sit at the front of every first fund, and they are usually made in the wrong order. Where the fund is domiciled gets decided early, often by whichever counsel is in the room. What infrastructure the fund actually runs on gets decided late, in pieces, under time pressure before a first close. The second decision costs more and is harder to reverse.

What the market chooses

The concentration is striking, and it shows up in the registries rather than in any survey. The Cayman Islands Monetary Authority, CIMA, is the jurisdiction’s financial services regulator and keeps the public register that every Cayman fund has to appear on. Its figures put 31,145 funds domiciled there at the end of the second quarter of 2026. Of those, 18,132 are private funds, the closed-ended register that private equity, venture and real estate vehicles sit on, against 13,013 mutual funds. Private fund registrations rose by 410 in the first six months of 2026 and are up 43% since the end of 2020.

Jersey is the smaller, more specialised comparison. The Jersey Financial Services Commission, the JFSC, is the island’s financial services regulator and publishes quarterly statistics on the funds registered there. Its latest put total fund net asset value at £465.9bn across 608 funds, with private equity and venture the largest single category at £219.7bn. Those figures are as at 30 June 2025, the most recent the JFSC has published, so treat them as direction rather than currency.

Guernsey is the closest thing to a clean read on what private capital actually chooses, because the figures are a census rather than a sample. Monterey Insight is an independent research firm whose annual reports count every fund serviced in a jurisdiction, rather than polling a sample of managers within it. Its Guernsey report, published in January and taken as at 30 June 2025, puts private equity and venture at US$455.5bn, around 77% of all serviced fund assets. More usefully for a first fund: 89% of the 159 new funds and sub-funds launched that year were private equity or venture. That is what got launched, not what managers said they would launch.

Four questions that settle domicile

Where are your LPs, what are they already comfortable signing and what are their tax priorities?
Domicile is a distribution decision . An allocator with an existing Cayman operations process will move faster on a Cayman vehicle than on a better-argued alternative.

Where do you intend to market, and under what regime?
Marketing into the UK or EU brings its own requirements regardless of where the fund sits. Even within the EU, each member state may have its own specific requirements. Answer this before you pick.

What does the running cost look like at your size, not at scale?
Audit, administration, depositary and legal fees are largely fixed, so they land hardest on the smallest fund. Price the annual running cost of each candidate domicile against the fund you are raising now, not the one you hope to raise at fund three. Fixed costs are the whole game at fund one.

What happens at fund two?
Changing domicile between funds is possible and expensive. Choose the one you can repeat.

The second decision, and the one that often gets rushed

Once domiciled, a fund needs a manager with the right permission, someone to hold the assets, someone to keep the record of who owns what, an administrator to run the books and something for LPs to log into. Most first funds buy those from five different providers: a law firm, a third-party AIFM, a custodian, a fund administrator and a portal. Five contracts, five renewal dates and, quietly, a reconciliation burden between them that nobody prices at the outset.

The regulatory context is changing here. FCA CP26/28, published in July 2026, proposes a small AIFM tier for firms whose aggregate AIF net asset value is £750m or less, with medium up to £5bn and large above it. It would abolish the small registered route, so managers who operate on a registration-only basis today would need authorisation. It is a consultation, closing 14 October 2026, with implementation currently envisaged for 2028.

Your records will be examined

In July the FCA also published findings after engaging with 242 asset management and alternatives firms on financial crime controls, and it singled out firms active in private markets as carrying materially higher inherent risk. Around 40% of firms outsource customer due diligence, but only 36% of those had full oversight of the third party doing it. Roughly a fifth had no complete business-wide risk assessment.

Read that as a buyer’s warning. Outsourcing the work does not outsource the accountability, and a stack assembled from five providers is a stack where nobody owns the answer when a regulator asks who verified what.

Sequence it: vehicles before a fund

The cheapest way through both decisions is not to make them at once. Run two to four deal vehicles first. You build the LP relationships, the KYC records and the deal history you will need anyway, and you learn what your operating model actually has to do before you commit to a structure that is expensive to unwind. It also lets you settle domicile once you know where your LPs are and what they are comfortable signing, rather than guessing at it before you have any.

What this means for how you buy

Domicile is a decision you make once and live with. Infrastructure is a decision you can stage. That is the logic behind the FlowwFunds tiers: start with fund and investor tooling, add regulated custody when the ownership record needs to be somewhere defensible, add the full transaction and payments layer when the fund is running capital calls and distributions at volume. Same platform throughout, so there is no switching and no re-onboarding as you move between them.

Decide domicile with your LPs and your marketing plan in front of you. Decide infrastructure by what you will need at fund two, then buy the tier you need now.

Floww Markets Limited is authorised and regulated by the Financial Conduct Authority (FRN 980098). This article is for information purposes only. It is not financial, investment, legal or regulatory advice and it does not constitute a financial promotion of any investment. Capital at risk when investing in private markets.