Argument for Luxembourg vs Guernsey (PCC)
1.) Guernsey, unlike Luxembourg, does not have a securitization law.
2.) The products are classified as Structured Products, whereas in Luxembourg they are categorized as Bond or Equity.
3.) Guernsey is an offshore jurisdiction, so investors may be subject to higher taxes on capital gains. For debt structures, there are almost no double taxation treaties in Guernsey to reclaim withholding tax. Luxembourg, on the other hand, is onshore and has double tax treaties with almost every country.
4.) 4) A secondary spread of 1% (+/- 50 bps of NAV) is applied to the GenTwo solution, while in Luxembourg there is only a handling fee of about 10 bps.
Does it make a difference for Swiss investors?
Not on capital gains, but on the coupons. Since the borrower cannot reclaim the withholding tax applied (ref. interest rate according to the loan agreement), this money is gone forever. Thus, this must be included in the calculation of the coupon (deduction or paid by the company - a fonds perdu).