Geoff Cook of Jersey Finance highlights the effects of the AIFMD on Jersey
Recent figures for Jersey’s funds sector show that business has reached its highest level in five years, with a strong upward trend in the alternative funds sector.
From a fund servicing point of view, as regulatory pressures ramp up the volume and complexity of reporting requirements, there is also expected to be a significant opportunity for Jersey’s specialist service providers to support lawyers and fund promoters onshore by meeting the demand for outsourced administration and governance requirements.
Jersey’s concentration of fund expertise, structuring capability and robust but flexible regulation is increasingly attracting managers interested in relocating all or part of their business, and the island has seen a significant increase in Jersey-based fund promoters over the past five years; as of June 2014 there were 123 Jersey-based managers, up from 70 five years ago.
To maintain Jersey’s prominent position as a funds jurisdiction, Jersey’s government, industry and regulator have consulted regularly to ensure that the appropriate regulatory environment and business conditions are available for fund managers and other international investors seeking to establish alternative investment vehicles.
Jersey’s broad range of fund regimes are kept under constant review and innovations are sought for structures whenever possible. A recent legislative change, introducing an exemption to Jersey’s Financial Services Law, has helped bolster Jersey’s standing as a centre for hedge fund business by enabling Jersey-regulated fund managers to serve qualifying segregated managed accounts without the need for separate regulation, but continuing to benefit from Jersey’s zero rate of corporate income tax. In particular, the exemption has boosted Jersey’s appeal as a centre for a variety of hedge fund businesses and will prove popular with Jersey managers who are seeing a rise in managed account business where there is potential to provide investment services to European clients without the need for full compliance with the EU’s Alternative Investment Fund Managers Directive (AIFMD).
As far as AIFMD is concerned, when the transitional phase for implementing the directive finally came to an end in July 2014, there was a marked rise in analysis and some speculative comment about how it is bedding down in different jurisdictions.
From a Jersey perspective, far from the AIFMD prompting a re-domiciliation towards onshore locations, which is a sentiment that has emanated from some corners of the European funds community, in the months since the AIFMD came into play, there has actually been an uptick in the value of private equity fund business being structured through the jurisdiction.
Recent statistics also indicate a strong take-up in Jersey’s private placement route into Europe since July 2014. There are 186 Jersey funds and 55 Jersey fund managers already actively marketing into the EU with authorisation from Jersey’s regulator under private placement regimes, and undoubtedly the trend evidenced across managers in Jersey this year has been one of building significant future management substance.
These facts and figures evidence the positive impact of the AIFMD in Jersey, where the operation of EU private placement, the jurisdiction’s readiness for third-country passporting equivalence and ability to operate outside the AIFMD environment where there is no EU marketing, points to something more significant than ‘business as usual’. The statistics demonstrate steady growth and suggest the successful, tried and tested Jersey model will continue to support discerning and successful managers and investors into the future.
While there have been acres of comment on the future of the European funds market, it is worth noting that there has been a noticeable increase in the volume of non-European fund activity being channelled through the island in recent months. Asian sovereign wealth funds for instance are increasingly looking at global property investment opportunities through Jersey, while the ‘Jersey’s Value to Africa’ report, published by Capital Economics last year, reaffirmed the view that Jersey funds can play a significant role in channelling much-needed foreign investment into infrastructure and private equity projects in Africa.
March Conference
These trends and others will be on the agenda when Jersey Finance holds its annual funds conference in London on Thursday 19 March. Staged at 8 Northumberland Avenue and with the added attraction of former BBC Newsnight anchorman Jeremy Paxman moderating two panel debates and providing the closing address, the conference will include a focus on the impact of new regulatory measures in the EU and how political issues are affecting private equity structuring. Entitled ‘Winning moves’, there will also be a wider discussion of the nature of the challenges facing alternative fund domiciles, including insights into how Jersey is working as a conduit for inward real estate and infrastructure investment from the US, Middle East and Asia.
With its emphasis on analysis and insights into the international funds industry, the Jersey Finance annual funds conference will appeal to lawyers, fund managers and other UK-based senior finance professionals. More details about how delegates can register are available at: www.jsy.fi/jflfunds2015