Offshore fiduciary services: A compelling opportunity for private equity investors
This article explores the market dynamics and growth drivers within the offshore fiduciary services sector, and key considerations for private equity and trade investors looking to acquire within this space.
Offshore fiduciary services is an attractive sector for private equity and trade buyers. It sits at the intersection of rising global wealth, growing regulatory complexity, and increased demand for outsourced expertise. The sector serves three primary functions: providing trusts and family office services for private clients, setting up and managing corporate structures for businesses, and delivering fund administration services for investment managers.
Offshore fiduciary services firms are typically based in jurisdictions with well-established legal frameworks and reputations for fiduciary excellence, including the Channel Islands (Guernsey and Jersey), Luxembourg, Switzerland, and to a growing extent, the Isle of Man and the Cayman Islands. These centres offer the clear rules, strong legal protections, low-tax regimes, and trusted oversight that high net worth individuals (HNWI), corporates, and investment managers need to set up and run wealth and fund structures with confidence.
Current deal activity across both segments is focused on broadening jurisdictional reach and service capabilities, enhancing overall market position. Recent increased deal flow reflects heightened investor interest, driven by a fragmented market and attractive asset valuations that haven’t been overbid. This article explores the key drivers behind growth in private client, corporate services, and fund administration, along with considerations for investors evaluating opportunities in the space. It draws on Armstrong’s extensive experience advising investors and management teams in this space.
Private client & corporate services: Serving families, trusts and corporate structures
Offshore private client and corporate servicing cover the setup and administration of trusts, family offices, foundations, and corporate vehicles. They protect, preserve and transfer wealth efficiently across generations and borders.
Drivers:
- Global wealth expansion: Growth in the number of HNWIs and their wealth, especially from emerging markets and the Middle East, fuels demand for cross-border estate planning and asset protection.
- Regulatory sophistication: Clients require robust governance and compliance support, which reputable offshore services firms deliver. Geopolitical instability is further driving this need.
- Rising demand for corporate services: Globalisation and the need for efficient holding and trading structures are increasing demand for offshore corporate vehicles, particularly among multinational businesses and private investment offices.
- Succession planning: Many offshore trust companies are family-founded and now facing generational handovers, creating buy-and-build opportunities for PE.
- Cross-sell potential: Well-managed private client or corporate service firms can leverage relationships to expand into broader services, e.g. investment management and portfolio services, supported by M&A activity.
UK changes to non-domiciliation status and inheritance tax have raised concerns about wealth outflows, reflected in more Britons applying for overseas residence. However, the immediate impact on the Channel Islands or European trust hubs is likely limited. The Channel Islands are premier, self-governed trust jurisdictions, offering the stability that attracts global wealth, regardless of proximity. Crucially, they already draw significant inflows from the Middle East, a notable location where not only UHNW Britons re-locate, but also where weak local trust laws sustain demand for established Jersey and Guernsey structures. In addition, Switzerland remains Europe’s third-largest wealth centre, but private banks still rely heavily on outsourcing trust structures to the Channel Islands. It’s worth noting that Henley’s Private Wealth Report 1 projects only 0.6% of UK millionaires to exit (in volume terms). Investors should not disregard Channel Island or other European jurisdictions but consider the strategic importance of Middle Eastern ties and presence.
Investors should also watch high-growth wealth hubs in Asia and LATAM, which are boosting flows to other global jurisdictions (e.g. USA and Hong Kong). Service specialisation and pricing can also differ by jurisdiction, for example, Malta is strong in ecommerce and is typically more cost effective for private client services in comparison to Jersey, while the Netherlands is popular for corporate services, given its favourable tax environment.
Fund administration: Supporting funds’ middle and back-office activities
Unlike private client services, fund administrators serve institutional managers rather than HNWIs and their families. Fund administrators provide operational support to investment managers, covering elements such as NAV calculations, investor reporting, regulatory filings and compliance oversight, so that managers can focus on the ‘high value’ activities e.g. investor relations and fundraising.
Drivers:
- Rise in alternatives: Growth in private equity, private debt and real assets requires specialist administrators who tend to be concentrated in Luxembourg, Ireland and the Channel Islands.
- Outsourcing trend: Regulatory demands and investor pressure push managers to rely on third-party administrators for cost efficiency and expertise.
- Sticky revenues: Long-term fund lifecycles and complex structures mean recurring, high-retention revenues.
- Scale benefits: PE-backed platforms can acquire smaller players to gain critical mass and geographic reach, improving margins through standardised tech and processes.
Investors should be mindful of tech-enabled challengers focused on areas like regulatory reporting, as these disruptors are gaining traction amid rising regulatory scrutiny and margin pressure on firms without strong operational leverage.
Key diligence considerations for investors
When considering an offshore fiduciary services business, investors should assess the quality and mix of revenue (recurring vs. one-off), client concentration, and average relationship tenure. It’s important to understand the firm’s jurisdictional footprint, regulatory standing, and scalability of operations, including its tech stack and reliance on manual processes.
Key risks include limited operational leverage (impacting margins) for fund administration business and succession planning for private client and corporate services. Investors should also evaluate the strength of the referrer network, such as lawyers, investment managers, and tax advisers, as a critical source of new business, alongside the firm’s ability to cross-sell across services and jurisdictions.
In summary, offshore fiduciary services, including private client, corporate clients and fund administration, offers PE firms predictable cash flows, low churn, and clear opportunities to drive value through consolidation, technology upgrades and international expansion. As global wealth grows and regulation intensifies, this market’s fundamentals remain strong making it a sector to watch and act on now.
For those interested in exploring offshore fiduciary services opportunities and understanding our credentials in this space, please contact:
Anjali Obhrai
aobhrai@armstrong-ts.com
+44 7909 094 604
Solomon Ishack
sishack@armstrong-ts.com
+44 7943 036 633