Members of the Jersey Funds Association reflect on the changing US regulatory landscape for private funds, what it means for fund managers, and how the changes are providing an opportunity for managers to re-think their structuring solutions to suit investor demands…

Regulatory shifts in the US private funds market have certainly created a huge amount of discussion in recent months, with managers continuing to get to grips with what the changes mean.

The US Securities and Exchange Commission (SEC) announced last year a set of amendments to the 1940 Investment Advisers Act – a lengthy set of proposals relevant to private fund advisors, the implications of which have taken sometime to filter through to the US manager community.

Aimed at creating a fairer environment with improved fee transparency, the rules – which follow those already in place for hedge funds - introduce enhanced regulation for private fund advisors and added rules around portfolio transparency and ‘democratising’ fee structures, representing a significant shift in private market industry practice.

Amongst the various provisions in those amendments, for example, is a requirement for quarterly reporting, something that may not be as straightforward as some managers had initially thought.

The changes have heralded calls from managers for further guidance on issues where further clarification is needed, and where some of the rules have the potential to create additional complexity for private fund advisors and added compliance costs. From an investor perspective, there is also the potential for preferential rates being offered to their peers, presenting further associated issues.

The result is a divided US private fund landscape, with as many groups, trade bodies and associations supporting the new rules as there are opposed to them – and there is a chance that the changes might be the end of it, if calls to reconsider are met with open ears.

Domiciles in Focus

In the wake of the rule changes, US managers have undoubtedly increased their enquiries relating to their domicile choices, taking the view that they can mitigate their administrative burden by revisiting their administration, structuring and governance frameworks.

“This is a period of concern for US managers and domiciles have come into focus as part of manager considerations,” says JFA committee member and Mourant Partner Alistair Horn.

“When it comes to transparency requirements, particularly around fees, they want certainty, security and guarantees from their domiciles that their structures can stand up to international regulatory scrutiny – and in some cases, stress tests with the more traditional existing jurisdictional partners in the Caribbean have not filled them with confidence.”

Jersey’s Solution

From Jersey’s point of view, this has provided an opportunity to remind US managers that it can provide advantages over other jurisdictions for private fund structures, including those in the Caribbean, in particular when it comes to high standards of governance and an ability to demonstrate genuine substance.

Key advantages include:

·        Lower cost of formation and maintenance, with no requirement for a Jersey Private Fund (JPF) to appoint an auditor. This makes the JPF regime cost-effective and quick to set up compared to Private Fund regimes in other jurisdictions.

·        Tax neutrality and great credentials on compliance with international standards

·        An internationally respected regulatory environment for funds, with robust and clear requirements around appointing directors and service providers

·        Investor familiarity, especially when marketing into the EU

Further detail around the Jersey Private Fund regime compared to other domiciles can be found here.

To bring this further to life, in 2023, the net asset value of regulated funds under administration in Jersey grew to almost US$600bn, while the Jersey Private Fund continued cemented its position as  a go-to vehicle for professional investors, with 645 registered in total.

The jurisdiction also continued to see an ever-increasing community of managers fully resident in the island across private equity, hedge fund, venture capital, debt and real estate with these managers bringing a real depth and diversity to the industry at a time when substance remains high on the agenda.

Jersey’s platform as a gateway to EU investor capital through private placement has also remained strong. Today more than 200 non-EU managers –including those in the US and UK - are using the private placement route through Jersey to access Europe. It’s a figure that has grown by around 60% in five years, without the hassle and expense of full onshore AIFMD compliance.

“The SEC rule changes have acted as a prompt for US managers to take stock, re-evaluate and look elsewhere for opportunities, and, as all the indicators, data and figures reflect, Jersey is absolutely able to meet that call. In fact, it is already doing so,” explains Michael Johnson, JFA Chair and Group Head of Institutional Services at Crestbridge.

In particular the issue of governance remains pivotal, says Dilmun Leach, JFA Committee member and Partner at Walkers:

“At the heart of all this is depth of expertise, substance and governance, and this is where Jersey really excels. Ultimately what managers want is peace of mind, and Jersey delivers on that. The JPF is incredibly quick and cost-effective to set up, the regulatory environment is clear and unambiguous, and the expertise available, including a number of one-stop shops who can hand-hold managers through the process, is truly market leading. For many US managers, it’s proving a breath of fresh air.”

What Next

The US regulatory landscape will no doubt continue to evolve this year –but regardless of whether these latest SEC rule changes are maintained in full, in portion or not at all, the change has already prompted managers to revisit their structures, question the status quo and begin to ask questions as to whether their existing positions are the best possible solutions for investors.

Given its well-established governance and substance credentials, its global distribution capabilities and its finely honed regulatory ecosystem, Jersey is well placed to support those US managers looking for an alternative and viable solution that can support them with both their global compliance obligations and their investor aims in the long run.

Figures recently published by Monterey Insight show that the value of Assets Under Administration (AUA) in Jersey’s funds industry grew by 1.4% year-on-year to stand at US$593.5bn as at June 2023, highlighting the appeal of Jersey’s stable platform for alternatives against a backdrop of challenging market conditions.

Published recently (29 January) in the 29th Monterey Jersey Fund Report, the figures paint a picture of sustained growth not only in AUA but also in terms of fund vehicles, with the number of serviced schemes increasing by 16% year-on-year to 1,883 and the total number of sub-funds recorded also up to 2,390, representing a 12% increase.

Significantly during the period, over 210 newly launched and newly serviced sub-funds were accounted for, reaching US$39.4bn for new products of domiciled and non-domiciled funds. 

In its analysis of asset classes, the report confirmed that growth continued to be driven by private equity and venture capital fund activity, accounting for a total ofUS$424bn of assets, followed by real estate funds with US$68bn. Private debt funds saw the highest growth in net assets, with a 21% increase compared to 2022.

The figures also reflect the increasingly diverse nature of Jersey as a global funds hub, with the industry supporting fund assets originating from not only the UK ($117.5bn) but also Luxembourg ($76.1bn), Japan ($60.3bn), the US ($52bn) and Sweden ($32.5bn).

Commenting on the report’s findings, Jersey Finance’s Head of Funds Elliot Refson said:

“The Monterey report provides a useful insight into the performance and make-up of Jersey’s funds sector. The key takeaway this year is that, against an inflationary and high interest rate environment that has significantly hampered global fundraising and deal flow, Jersey has nevertheless continued to remain attractive.

“We’ve seen growth in the value of assets serviced by firms here, but significantly we’ve also seen the industry help bring new funds to market at a healthy rate, in difficult conditions. That’s a strong reflection of the stable and certain platform Jersey provides for private equity, venture capital, real assets and other alternative funds. These figures should send out a clear message of confidence as the alternatives sector looks to ramp up activity in 2024.”

A new white paper published by IFI Global and supported by Jersey Finance has highlighted how the rapid growth of asset tokenisation is set to transform the cross-border funds industry over the coming years.

The paper, ‘The Tokenisation of Real Assets', highlights that forecasts for the growth of asset tokenisation are universally bullish, with one report predicting that asset tokenisation will grow into a US$16.1 trillion business by 2030 (BCG and ADDX).

It goes on to explore why asset tokenisation is on the cusp of widespread global adoption and how real assets, including private equity and real estate, are likely to be substantially impacted by tokenisation in the coming years.

In particular, the paper points to some of the major benefits of tokenisation for managers of real assets, but also highlights that there are a number of challenges the industry will need to overcome before it can realise its full potential.

You can read the full white paper here.

The total net asset value of regulated funds administered in Jersey rose by almost a fifth over the course of 2021 to reach a new record level whilst corporate activity and bank deposits also showed year-on-year growth, according to the latest industry statistics.

According to the most recent quarterly figures to be collated by the Jersey Financial Services Commission (JFSC) for the period ending 31 December 2021, the value of regulated funds under administration increased by £72.1bn year-on-year (19%) to stand at £450.2bn.

The growth is driven by the alternative asset classes, including private equity, real estate, hedge, credit and infrastructure, which now represent 89% of total funds business, with private equity and venture capital in particular increasing by 27% over the year.

Meanwhile, the total value of deposits held in Jersey banking institutions increased marginally, by £1.9bn (1%) to £133.5bnover 2021, with 56% held in foreign currencies.

Corporate activity also remained strong over2021, with levels of company incorporations over the twelve months meaning the highest ever year-end number of live companies on the register was recorded this period (34,523).

Commenting on the figures, Jersey Finance CEO, Joe Moynihan, said:

“Overall, these are positive figures for our industry in what continues to be a challenging global environment for cross-border financial services. The message is clear – investors and institutions value the certainty, stability and expertise Jersey offers in an uncertain landscape.

“The funds industry in particular maintained its strong upward trajectory, with total fund assets in Jersey now topping £450bn. Meanwhile our banking sector has remained stable despite ongoing currency fluctuations, and our corporate sector has been particularly active, reflecting a buoyant picture across the industry. These figures should give us optimism for the year ahead as we continue to innovate and deliver high quality services to global investors.”

Tim Morgan, Chair, Jersey Funds Association, added:

“Our focus as a funds industry is on creating the very best ecosystem for investors and managers, to facilitate the global distribution of capital securely and efficiently. That these figures show a near 75% increase in funds business over the past five years is testament to the fact that investors right across the alternatives spectrum recognise Jersey as a top-tier jurisdiction, offering expertise, innovative structuring options and a no-nonsense regulatory environment that is entirely geared up to supporting their endeavours.”

‍

Sustained buoyant private equity activity continued to drive growth in Jersey’s investment funds sector as the total value of fund assets administered in the jurisdiction grew by £26.3bn to stand at a new record level of £436.3bn at the mid-year point, according to new industry data.

The latest quarterly figures for Jersey’s finance industry, collated by the Jersey Financial Services Commission (JFSC) and published by Jersey Finance for the period ending 30 June 2021, show that the value of total funds business booked in Jersey grew by 15% over the first half of 2021.

In particular, the figures show that funds sector performance has been driven by private equity, which has grown by 24% over the half year to stand at £203.6bn. Combined, the alternative asset classes, including private equity, venture capital, hedge, real estate, infrastructure and debt funds, now account for 89% of all funds business in Jersey.

In addition, the number of registered Jersey Private Funds (JPF), a structure designed for small groups of sophisticated and professional investors, grew by more than 50 over the six-month period to reach 456 (up 13%). JPFs hold total Assets Under Management of £78bn – these are not included in the headline quarterly data.

Commenting on the figures, Jersey Finance Deputy CEO, Amy Bryant, said:

“These latest quarterly figures reinforce some important points. First, the fact that corporate activity has remained strong and our banking sector has been resilient despite significant currency movements in an uncertain environment, underlines the robust nature of our industry.

“In addition, the fact that our investment funds sector has shown such impressive and sustained growth – in particular in the private equity and alternatives space – highlights our strengths as a centre focused on putting significant and high quality institutional and private capital to work around the world. Investors and managers clearly recognise Jersey as an IFC that offers specialist alternative fund expertise. That is important not just for Jersey but for global economies as we all look to rebuild in a sustainable way.”

Tim Morgan, Chair of the Jersey Funds Association, added

“These are once again really positive figures underlining Jersey’s reputation as a specialist funds centre. We work tirelessly to maintain the perfect ecosystem for alternative funds - an ecosystem that is straightforward, well-regulated, effective, flexible and driven by genuine expertise - and those efforts are reflected in the ongoing growth we are seeing in the alternative asset classes, particularly private equity. That the JPF continues to grow its appeal across the range of investors from institutional investors through to family offices is also very welcome and demonstrates our ability to innovate to meet the range of needs across the market.”

 The full set of quarterly statistics is available here.

‍

Over the past 40 years, the private markets (or alternatives) sector has grown to become a bedrock of high value employment and prosperity in Jersey – the sector now accounts for nearly 90% of funds under administration in the jurisdiction.

As assets under management (AuM) in the private markets sector continue their rapid expansion worldwide, they’re set to play a key role in driving recovery and creating more sustainable and socially inclusive economies both here and across the globe.

Mainstream

The private markets designation brings together private capital (private equity and credit) and real assets (infrastructure and real estate), and this has real relevance for Jersey which has a formidable reputation in private equity and real estate in particular.

As investors go in search of returns that other asset classes may struggle to deliver, private markets are one of the fastest growing areas of asset management globally. It’s a sector that is now by no means niche – it’s fast becoming mainstream.

Reflecting that, earlier this year, PwC published Prime time for private markets: The new value creation playbook, an in-depth exploration of how the sector is evolving and how to capitalise on the potential. According to that report, it is anticipated that private markets AuM will increase by $4.9 trillion to reach $14.4 trillion by 2025 - around 10% of overall AuM worldwide.

Further, in the JFA’s own survey of its members at the end of last year, respondents painted a clear picture of an industry that is looking to grow and diversify, driven by the private markets. In an industry with alternatives at its core, 69% of respondents said they were confident that their business would grow over the next five years, whilst both short and medium term strategic priorities for Jersey’s funds industry remained focused on private equity, real estate, venture capital and debt funds, according to respondents.

Increasingly challenging

As the PwC report highlights, however, this is an increasingly challenging market in which the prizes will be hard won.

·        In search of return: with entry multiples so high and economies still fragile, traditional value levers such as financial engineering and cost reduction may no longer be enough to deliver target returns. Forward-looking private markets managers are therefore broadening their value creation lens in areas ranging from strategic repositioning and top-line growth to longer hold and ‘permanent capital’ models.

·        Competing in a concentrated market: Institutional investors’ growing demand for multi-asset mandates is making it difficult for smaller, single-asset-focused managers to compete with big, diversified rivals. There’s still room for specialised players with the right capabilities. The firms that are most vulnerable are those that have neither scale nor specialisation. They risk being squeezed out of the picture.

·        Keeping pace with changing stakeholder expectations: the other, and in many ways most far-reaching, challenge is the shift in stakeholder attitudes. As environmental, social and governance(ESG) priorities in areas such as health, sustainability and social inclusion come to the fore, ESG performance has become as important as financial returns.

This isn’t just altruism. As pension and sovereign wealth funds’ private markets allocations increase, reflecting the ‘people’s priorities’ will be ever more important in securing large mandates and sustaining scale and growth. Embracing ESG would help private markets managers to reframe public perceptions, cultivate closer affinity with investors and generate new forms of value. Investment opportunities include helping portfolio companies to move towards net zero production. Private markets managers could also help to bridge the funding gap for small and innovative growth businesses and boost infrastructure investment in areas ranging from healthcare to digital communications.

With government coffers drained by the COVID-19 pandemic, the record levels of dry powder at private markets managers’ disposal could make them a vital contributor to recovery and regeneration – a Marshall Plan for the 21st Century. This would need to be weighed against the increased public scrutiny that would come from a more prominent role in socially-critical areas such as small business finance and infrastructure development.

Opportunity

Jersey’s specialist expertise, record of innovation and supportive regulatory environment puts it in a strong position to take advantage of private markets expansion. But just as the sector as a whole must adjust to a changing world, firms in Jersey are working hard on sustaining relevance and where they can take the lead:

·        Picking their spot: the most crucial decision is whether to be a scale or niche specialist player. Firms in Jersey are carefully considering what it is exactly that might make business want to come here, and how they can build on their standout capabilities.

·        Challenging assumptions: Further questions centre on how to address changing investor demands. The ever-increasing risk of being called out for ‘greenwashing’ is a clear case in point. As a result, governance – the G in ESG – is rightly at the centre of the agenda. Firms in Jersey are deeply aware of the principal areas needing to be addressed, including gauging what investors really want and how to stay ahead of the game – the goalposts are moving all the time.

·        Nurturing talent: Firms are committed to addressing the need to deepen skills and talent, including creating more diverse boards and stepping up the recruitment and upskilling of women.

The evolution and expansion of private markets offer the win-win of high value economic growth locally, and an opportunity to help address pressing social and environmental priorities globally.

With so much at stake, Jersey’s funds sector is focused on tracking how investor demands are changing, ensuring it can keep pace, and articulating what it can offer that other financial centres can’t.

‍

The upward trajectory of Jersey’s funds industry continued in 2020 with the value of regulated funds business serviced in the jurisdiction growing by 9% over the year to reach a new record level, according to the latest quarterly statistics.

Figures for the fourth quarter of 2020 (ending 31 December 2020), collated by the Jersey Financial Services Commission (JFSC), show that the net asset value of regulated funds under administration in Jersey grew by £32.4bn annually to stand at £378.1bn. The increase reflects a period of sustained growth for Jersey’s funds industry, with the figure at the end of 2020 rising by more than two thirds (67%) over the last five years.

In particular, the alternative asset classes, which now represent 89% of total funds business in Jersey, continued to prove the engine room of growth, with private equity and venture capital up by 21% year-on-year to £164.6bn. In addition, the number of registered Jersey Private Funds, which are not included in the headline figures, grew by almost 100 over the year to reach a total of 403.

Meanwhile, the figures also show that deposits held in Jersey banking institutions at the end of 2020 stood at £131.7 billion, down 8% year-on-year, a reduction that was heavily influenced by currency movements and global market volatility, with 56% of deposits in Jersey held in foreign currencies.

Corporate activity, meanwhile, was also very strong in 2020, with a record level of company incorporations in the fourth quarter of 2020 and the total number of live companies on the register standing at the second highest level in ten years at the end of the year (33,626).

Commenting on the figures, Jersey Finance CEO, Joe Moynihan, said:

“Against the backdrop of a really challenging year for global markets, this is a positive picture for our industry, and for our funds sector in particular which has again achieved stellar growth to reach new record levels. The resilience and stability Jersey has shown has clearly resonated amongst investors and managers, as they have continued to put their faith in Jersey as a specialist high quality centre for alternative funds. Despite currency movements impacting overall bank deposits, material deposit levels have stayed largely stable and consistent over recent years, while the positive corporate activity we saw in 2020 is a reflection of the health of the industry and our role in supporting cross-border activity.

“Overall, thanks to the collaborative efforts of Jersey’s industry, government and regulator, we are in a strong place at the start of 2021 and stand ready to deliver on our duty as a responsible IFC and support global economic recovery in the months ahead.”

Tim Morgan, Chair of the Jersey Funds Association, added:

“Jersey continues to work tirelessly to create the ideal ecosystem for alternative funds, and these latest figures provide welcome evidence of the appeal Jersey continues to have, in particular in the private equity, venture capital and alternative space, with a number of big-ticket funds coming to market through Jersey over the past twelve months. The fact that almost 100 new Jersey Private Funds have been registered over the year is also hugely positive, underlining both the appeal of the JPF as the go-to vehicle for professional investors but also Jersey’s ability more widely to innovate in the right areas.”

Oakbridge FundServices (Jersey) Limited (“Oakbridge Funds”), a specialist independent fund administrator based in Jersey has launched to service the alternative funds sector.

Expert in the main alternative asset classes with a focus on Private Equity and Venture Capital, Oakbridge Funds will provide administration services to offshore closed and open-ended funds and corporate structures.

The Oakbridge team previously worked together at a pan European multi-jurisdictional fund administration business and have more than 40 years’ experience of working in the fund services sector.

Experienced private equity professionals Robin de Gruchy-Wilson, Alex Smyth and Jonathan Crawford will lead Oakbridge Funds’ operations and service led approach.  Jamie Crawford joins the Oakbridge Funds Board as a Director.  Jamie brings a wealth of financial services and investment knowledge and is a Director of ED Group.  

Oakbridge Funds benefits from the resources and experience of its majority owner, ED Group. ED Group is an investment business with activities in the UK, Europe, North America and theChannel Islands. In Jersey, ED Group also owns a regulated Investment Business, Oakbridge Limited, and a regulated Trust Company Business, ED Capital Limited.

Oakbridge Funds Managing Director, Robin de Gruchy-Wilson, said: ‘We have founded Oakbridge Funds with a clear vision.  We are a dynamic and ambitious team.  We have a clear strategy for growth and our independent ownership structure means we are navigators of our own journey.’

‘Oakbridge Funds’ launch comes at a time when there is demand in the market for a truly independent specialist provider.  We are based in Jersey with a focus on carrying out fund administration for multi-jurisdictional funds using industry leading technology and have no intention to outsource any of this work. We believe in excellence and attention to detail and our experienced Jersey based team is very well placed to achieve this.’

ED Group Director, Jamie Crawford, said: ‘Our venture with Oakbridge Funds echoes ED Group’s ethos of investing in and helping innovative companies grow. We already have substantial experience and resource in the local financial services sector between our existing trust company and investment businesses. We look forward to working with Robin, Alex and Jonathan to grow Oakbridge Funds into a leading specialist administrator in the funds sector. ED Group is delighted to provide a solid foundation for the launch and growth of Oakbridge Funds.’

Oakbridge Funds is regulated by the Jersey Financial Services Commission for the conduct of Fund Services Business and Trust Company Business.

‍

With the end of the transition phase looming, new figures continue to point towards Jersey playing an increasing role in enabling alternative fund managers to access EU investor capital post-Brexit.

According to recent data from the Jersey Financial Services Commission (JFSC), the number of managers choosing to market their funds into the EU through Jersey using national private placement regimes (NPPR) is continuing to rise.

As at 30 June 2020, there were 192 Jersey-registered alternative managers marketing their funds into the EU through private placement – a 5% rise on the figure from six months prior and 12% compared to June 2019.

In addition, the number of Jersey-registered funds marketing into the EU through NPPR also increased to stand at 333, representing a 4% rise since December 2019 and 7% annually.

Commenting on the figures, Joe Moynihan, CEO, Jersey Finance, said:

“With Brexit deal negotiations finely poised, the likelihood is that there will continue to be uncertainty for some time around the way non-EU funds, including UK funds, can be marketed to EU investors. The fact remains that private placement provides a tried-and-tested, flexible and cost-effective solution for third country private equity, infrastructure and other alternative managers to continue to target EU investors in light of Brexit.

“These figures are evidence of a sustained trend stretching back some years now of managers putting their faith in Jersey’s platform and in particular the private placement route to market, and we expect to see further growth in this area as managers implement post-Brexit strategies.”

Tim Morgan, Chair, Jersey Funds Association, added:

“This is a critical moment for managers as they explore models and structures that are future-proofed against the backdrop of Brexit, and the clear evidence is that private placement through Jersey, backed-up by the jurisdiction’s expertise, framework, and oversight, remains a vital and increasingly popular solution amongst alternative managers, that can guarantee ongoing seamless market access.”

According to the latest quarterly figures, Jersey currently administers £361bn of fund assets, as at June 2020.

‍

In light of continuing COVID-19 related restrictions for holding large-scale events, the JFA committee has, with regret, resolved that it will no longer be possible to proceed with the 2020 dinner, scheduled for 15 October. Therefore we will be postponing this event, with a view to reinstating the flagship event for Jersey's funds industry in Spring 2021.

We are disappointed to have had to make this decision, however we trust you'll understand our position and that supporting Jersey's Framework for managing COVID-19 and ensuring Members' health and wellbeing is our priority at this time.

The JFA is continuing to plan for the coming year, in anticipation that a return to more normality should hopefully be more realistic from Spring 2021.

In the meantime, we are continuing to proceed with other events on a virtual basis and we'd actively encourage you to participate in these if you can.

Jersey Finance has welcomed a new amendment to Jersey’s legislation that will make it significantly easier for managers to migrate limited partnership fund structures to the jurisdiction.

The changes to the Limited Partnership (Jersey) Law 1994, which were approved by Jersey’s government this week to come into force today (17 July), introduce a new statutory basis for limited partnerships, which are frequently used for alternative fund structuring, to be migrated from other jurisdictions, providing greater legal certainty for managers and investors.

Whilst migrating a limited partnership to Jersey has been technically possible in the past, the move brings Jersey in line with the laws of other jurisdictions, making it easier for lawyers to give a clean legal opinion as to the validity of the migration of a limited partnership into Jersey from elsewhere, as the same legal entity.

Commenting on the amendment, Joe Moynihan,CEO, Jersey Finance, said:

“In an increasingly complex global alternative funds environment, managers are increasingly looking at their fund structuring options and indeed, over recent months, our funds industry has reported a rise in interest in Jersey from private equity and other alternative managers wanting to restructure their funds. They are attracted by the sort of stability, expertise, and high-quality service levels Jersey offers, whilst its strong track record in corporate governance, its ability to offer certainty around substance and its ‘whitelisted’ status are all seen as real benefits too.

“This amendment makes it easier for managers to migrate their structures from elsewhere in a quick, cost-effective manner so that they can benefit from Jersey’s ideal alternatives ecosystem. We anticipate a strong uptick in fund relocations following this amendment.”

Tim Morgan, Chair of the Jersey Funds Association added:

“The industry, regulator and government in Jersey have all worked very efficiently together to bring this amendment to fruition impressively quickly. This is a really important development, introducing an express mechanism whereby limited partnerships can migrate to Jersey quickly and seamlessly, and it will undoubtedly prove an attractive proposition for managers who are exploring how they can better navigate the complex environment they operate in. We have already seen a number of enquiries for migrations into Jersey in recent weeks.”

A FAQ about the amendments can be found here.

A factsheet about the migration of foreign limited partnerships to Jersey can be found here.

2020 Annual General Meeting

Please be advised the 2020 Jersey Funds Association Annual General Meeting will take place on Friday 17 July commencing at 1.00pm via video call.  Any member who would like to attend the AGM is asked to contact Caroline Harrington at enquiries@jerseyfunds.org to obtain the dial-in details.

Below are links to the associated documents relating to the Annual General Meeting.  Any member interested in joining the Committee is asked to complete and return the nomination form to Caroline Harrington by close of business on Friday 10 July.

2020 AGM Letter to Members

2020 AGM Notice & Agenda

2020 Nomination Form

2019 AGM Minutes

‍

With much uncertainty persisting around the UK’s departure from the EU, Dilmun Leach, partner at JFA member firm Collas Crill, takes a look at why Jersey’s ability to offer continuity and certainty should be music to the ears of non-EU fund managers…

Q: Jersey is outside of the EU – so how is it affected by Brexit?
DL: Jersey is not a member state (or associate member) of the EU and not part of the UK. Jersey has its own government which is elected locally, makes its own laws (including in respect of taxation) and has its own court system.

As far as its relationship with the EU is concerned, Jersey is currently part of the EU Customs Union by virtue of ‘Protocol 3’. When the UK joined the EU (the European Economic Community as it was then) in 1973, it was agreed that Jersey would benefit from the UK's membership of the EU by bringing it, along with the other Crown Dependencies, within the EU Customs Union for the purposes of trade in certain goods (but not services), whilst preserving its autonomy.  This agreement was set out in Protocol 3.  

The Protocol 3 relationship is dependent on the UK remaining a member of the EU and will cease to exist, simultaneously with all other treaty arrangements between the UK and the EU, once the UK's membership of the EU ceases.

Q: Without Protocol 3, how will Jersey trade with the EU?
‍DL: Jersey is able to market financial services to the EU because those services currently meet the requirements imposed by the EU – that will not change because of Brexit.  Services have always been outside the scope of Protocol 3.

Jersey has also taken steps to ensure continued market access for Jersey investment funds into the UK post-Brexit. Jersey’s financial services regulator, the Jersey Financial Services Commission, has signed a Memorandum of Understanding (MoU) with the UK’s Financial Conduct Authority which ensures Jersey firms can continue to use the UK’s National Private Placement Regime (NPPR) after Brexit.

That MoU will come into effect if EU law no longer applies in the UK, either through a ‘no deal’ Brexit or at the end of any transitional arrangements (that are agreed as part of a negotiated deal) once the UK leaves the EU.

Q: Will anything change for fund managers with Jersey funds and investors in the EU/UK?
DL: In short, no. It is expected to be 'business as usual' for Jersey funds.

As far as the UK is concerned, the MoU signed with the FCA, outlined above, provides certainty that access by Jersey funds and managers to UK investors will continue uninterrupted and irrespective of any Brexit outcome.

In terms of the EU, Jersey is not and has never been part of the EU. Rather, as a third country, Jersey will maintain access to the EU funds markets as a result of agreements between the Jersey Financial Services Commission (JFSC) and financial regulators in 27 of the 31 EEA States.

Q: Will the ‘NPPR’ route to market continue to operate through Brexit?
DL: Jersey funds are currently eligible to be marketed into the EU and EEA in accordance with the provisions of the AIFMD through NPPR, and that will not change.

In fact, NPPR is set to continue to operate for the foreseeable future, with a report undertaken by KPMG for the EU Commission at the end of last year confirming that NPPR is of added value to the EU, works in the interest of investors, and should remain in place. Certainly it’s a route to market that is proven to work well through Jersey – currently, more than 170 managers are marketing in excess of 300 funds into the EU through Jersey in this way.

NPPR permits the marketing of non-EEA alternative investment funds in the EEA, subject to national law and regulation in force in the relevant country.  In addition, certain conditions set out in the AIFMD must be met.  Those conditions include the need for supervisory cooperation agreements to be entered into between the JFSC and regulators in the relevant EEA countries in which the marketing is to take place.  Jersey benefits from cooperation agreements with regulators in 27 out of the 31 EEA countries.

Q: What about passporting?
DL: AIFMD made provision for "third countries" to be granted the same passporting rights as EU member states, subject to certain conditions being met. ESMA published its assessment of potential "first wave" third countries and, along with Guernsey and Switzerland, found that were no significant obstacles to Jersey becoming a third country jurisdiction.

The EU Commission has not yet pressed ahead with the implementation of the third country passporting regime, but the indications are that if and when the regime is put in place Jersey will be amongst the first non-EU countries to be granted passporting rights.  Until then, and potentially beyond it too, NPPR through Jersey will remain a key route to the EU market for non-EU managers.

As far as the ‘rest of the world’ is concerned, AIFMD is not relevant to Jersey funds with a Jersey manager which markets outside the EU/EEA, and these will continue to be subject to the laws of the countries in which the fund is marketed.  

Q: So is Brexit a good thing for Jersey?
DL: It is generally thought that actually Brexit presents opportunities for Jersey in the funds space. Jersey's NPPR remains best in class for accessing EU investors and there may be additional opportunities for Jersey (rather than our EU competitors, such as Luxembourg) to provide structures via which UK investors can invest in UK assets.

In addition, managers in the UK, US and elsewhere may be able to launch funds in a shorter time-frame and with lighter ongoing regulatory requirements than in an EU member state such a Luxembourg.  

On 12 March 2019, the European Council of Finance Ministers confirmed Jersey's status as a transparent and cooperative jurisdiction, and that Jersey's legal substance requirements are considered compliant with EU requirements.  The effect of this is that the European Investment Fund (EIF), being a specialist provider of risk finance for small and medium-sized enterprises across Europe, backed by the European Investment Bank, EU, and a range of public and private banks and finance institutions, confirmed that there is no impediment to the EIF investing in Jersey private equity or venture capital funds, meaning that Jersey funds continue to be open to billions of Euros of potential investments.

Real-life case studies compiled by the JFA to illustrate how NPPR is proving effective in accessing EU investor capital can be found here.