This year, the Jersey Expert Fund regime marks 20 years since its inception. Here, members of the Jersey Funds Association give their thoughts on how the regime has galvanised Jersey’s proposition in the alternative investment space, and why the structure remains such a popular solution amongst fund managers today …

Q: The Jersey Expert Fund Regime came into being in 2004 - what was the thinking back then in introducing such a product?

Joel Hernandez, Vice-Chairman of the Jersey Funds Association and Chair of the JFA Legal & Technical Sub-Committee (JH): The Jersey Expert Fund regime can best be described as an innovative leap forward for the Island’s funds industry back in 2004. It was introduced to allow more flexibility for fund and asset managers as well as to provide a genuine speed-to-market advantage.

It did this by relaxing a number of policies and rules on the structure and operation of the fund with the aim of creating an attractive and popular route for abroad range of asset classes, including private equity, property and hedge funds as well as other funds investing in alternative asset classes.

Q: What did the Expert Fund Regime add to Jersey’s funds landscape, and what impact did it have on managers and investors?

Daniel Birtwistle, Managing Partner - Jersey, Mourant (DB): Having acted on the very first Jersey Expert Fund back in 2004, it was clear that a key element of the new regime was its ability to authorise a regulated investment fund within 72 hours.

Michael Johnson, Chair of the Jersey Funds Association (MJ): Previously, that authorisation process might have taken weeks. It was a fundamental change and truly a game changer for Jersey. As a testament to the regime, hundreds of Jersey Expert Funds have been launched over the past 20 years, and this includes some of the world's largest investment funds.

‍DB: It’s certainly the case that, twenty years later, there are still very few jurisdictions that can match the speed and flexibility of Jersey's Expert Fund regime.

Q: How significant was the introduction of such a regime for Jersey?

JH: It was an immediate success. A significant number of real estate funds we relaunched after its introduction and many of those funds continue to this day. More recently, Jersey Expert Funds have been used for sizeable private equity fund launches, with subscriptions reaching into the billions.

The regime helped solidify Jersey's reputation as a market-leading funds domicile, particularly in the alternatives space. When combined with the flexibility of fund vehicle choice – whether it be a Jersey unit trust, corporate entity or partnership - and experienced Jersey fund administrators, it’s a regime that continues to provide fund managers with all the key ingredients for the success of their investment fund. In a sense, it was a regime that was ahead of its time.

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Q: How has use of the regime evolved over the last two decades?

JH: The regime has withstood the test of time with very little change needed to refine it over the last 20 years and it continues to be a product-of-choice for some of the world's largest fund managers.

The regime did however need to evolve following the introduction of the Alternative Investment Fund Managers Directive (AIFMD). As another clever solution, Jersey's regulatory framework was adjusted to provide for an additional regulatory "overlay" to allow Jersey Expert Funds to be marketed to EEA investors under the various European national private placement regimes under AIFMD. These amendments ensured that Jersey continued to have a place with European investors who could still benefit from investing in Jersey Expert Funds.

Q: So how does the regime sit now within Jersey’s full armoury of fund regimes?

MJ: The Jersey Expert Fund regime continues to be one of the Island’s cornerstone products for fund and asset managers. It is an example of Jersey’s forward-thinking and innovative approach, and ability to being products to market to meet demand.

Overall, the regime tends to suit larger investment funds with 50 or more investors orthose fund managers looking for a fund product with non-intrusive fund regulation. It also perfectly complements Jersey's other success story, the Jersey Private Fund regime, which provides for 50 or fewer investors, with both products forming key elements of Jersey's compelling offering.

Although 20 years old this year, there’s plenty of life left in the regime yet.

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Attendees at this year’s Jersey Funds Association (JFA) Annual Dinner have helped raise a significant sum in aid of Kezia’s Fund as part of its ongoing commitment to support the local charity.

More than 400 people from across the industry attended this year’s Dinner, held at the Trinity Showground on 28^th June, between them helping to raise £14,420 towards Kezia’s Fund, thanks to a raffle held during the evening.

The fundraiser forms part of a three-year commitment on behalf of the JFA to support Kezia’s Fund, which is managed by the Jersey Community Foundation. The latest effort means that the JFA has helped raise almost £27,000 for the charity over the past two years, whilst it will also be helping at the Run for Kezia event in September this year and encouraging its members to participate.

Kezia’s Fund aims to support mental health among children and young people aged 5 to 25 and their families in Jersey; and provides grants and support to organisations that work to improve children and young people’s mental wellbeing. 

Michael Johnson, JFA Chair, said:

“I’m really pleased that the generosity of those who attended our Dinner this year have helped once again to raise such a good sum to support the work undertaken through Kezia’s Fund. These efforts form part of our wider commitment on behalf of the JFA to support the charity and the vital, amazing work it undertakes.”

Anna Terry, CEO of Jersey Community Foundation, added:

“The JFA has made a very welcome commitment to help continue the legacy of Kezia's Fund, including through this latest fundraising effort, and we are extremely grateful to all those who helped raise such a fantastic total once again this year. These substantial funds will go towards helping to address the critically important and prevalent issue of children and young people’s mental health in Jersey.”

Donations to Kezia’s Fund can be made at: www.kezias-fund.raisely.com.

Professionals from across Jersey’s growing funds industry came together last month to explore the key trends shaping the cross-border funds landscape and celebrate Jersey’s achievements over the past year.

More than 400 people from across the industry, including lawyers, fund administrators, fund managers, compliance experts and accountants as well as politicians and regulatory representatives, attended this year’s Jersey Funds Association (JFA) Annual Dinner, held at the Trinity Showground on 28^th June.

Speaking at the event, Michael Johnson, JFA Chair, told the audience that, in a challenging year globally for the sector, Jersey had held its position well. In particular, he pointed to the ongoing success of the Jersey Private Fund (JPF) regime, with the total number of JPFs now standing at just over 700 – an increase of 100 since last year – whilst the total assets under administration in Jersey now sits at £520bn.

Nevertheless, he pointed to the need to maintain momentum if Jersey was to retain its leading position as a European funds domicile with global ambitions. He said:

“After five continuous years of growth, the performance over the past year was largely flat, which is a first for Jersey, but not unexpected given the incredibly difficult fundraising environment we have seen over the past year at a global level. The outlook remains calm but not stable, and we need to be alive to the macro conditions shaping our industry.”

In particular, Michael highlighted that alternatives – including private equity, real estate and venture capital - continue to represent 90% of Jersey’s total funds business, a model that has created a stable platform of long-term capital. However, there was now a risk of that model being buffeted by global trade-winds, with Michael urging caution in the face of increased competition as market conditions improve:

“There are brighter times on the horizon but we cannot be complacent. Investors are continuing to apply pressure and are focusing new commitments on a narrow swathe of funds. Equally the activity related to the mountain of dry powder available remains stunted by historical standards. It’s vital that Jersey recognises that these macro-economic and political circumstances are out of our control and finds ways to ensure it can keep its wheels turning.

“It’s critical that we focus acutely as a jurisdiction on what managers really care about when it comes to choosing a fund domicile and assert our core strengths – our speed and our high-quality service levels in particular. By embracing innovation and being agile, we can also enhance our product and service range, including exploring the introduction of a Jersey ELTIF solution and clarifying our virtual assets proposition, for instance.”

Vice Chair of the JFA Joel Hernandez pointed further to the need for targeted innovation, and the significant volume of technical issues the JFA had addressed over the past year. In particular, he highlighted updated guidance to the JPF and progress being made in the virtual assets space:

“The recently published updated JPF Guide will help evolve and modernise that product further. This includes widening the categories for eligible investors, mutual recognition for carry schemes that have an element of team co-investment and widening the categories for family and employment connections. A similar approach is also being taken to update the JFSC's guidance to industry on virtual assets, specifically the tokenisation of real-world assets. This is a clear trend and it’s vital that Jersey maintains its reputation for good practical guidance to secure its future in this space.”

Gold sponsor for the evening was Mourant and silver sponsors were IQEQ, PwC, Ogier and BNP Paribas whilst the champagne reception was sponsored by Carey Olsen and the NextGen table was hosted by Gen II and KPMG.

The Jersey Financial Services Commission (the JFSC) has announced a number of updates to its Jersey Private Fund Guide (the JPF Guide).

A copy of the updated JPF Guide together with a consolidated redline is available on the JFSC website: https://www.jerseyfsc.org/jersey-private-fund-guide/.

The updates are the product of significant collaboration between the JFSC and the Jersey Funds Association (JFA), the Jersey Association of Trust Companies, Government and Jersey Finance Limited. The JFA was represented by Joel Hernandez, Vice Chair and Chair of the JFA's Legal & Technical Sub-Committee and Jon Stevens, Chair of the JFA's Regulatory & Compliance Sub-Committee.

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Updates to the Jersey Private Fund Guide

The Jersey Private Fund regime provides fund promoters with a cost effective, fast-track (48 hour) regulatory approval process for their Jersey private fund (a JPF) which can be offered to up to 50 investors that meet certain eligibility requirements.

The updates are designed to further improve the JPF Guide and the JPF regime. They include:

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1. Carry and/or co-investment vehicles

A recognition that co-investment can, in some cases, form part of a fund's carry/incentive arrangement. Previously, carried interest vehicles were not counted as an investor, however the amendments extend this principle to co-investment arrangements that meet the requirements in the JPF Guide.
 

2. Investor eligibility

General: clarification that investor eligibility is satisfied upon admission. That eligibility can continue to be relied upon despite a status change, for example a departing 'employee, director, partner or expert consultant’.

Transfers (for example death or bankruptcy):for any involuntary transfer, such as on death or bankruptcy, there is no requirement for the transferee to qualify through the same criteria as the transferor, but the transferee will (itself) need to meet the investor eligibility requirements as defined in the JPF Guide.

Service providers: an expansion of the categories of ‘professional investor’ for the benefit of the JPF's service providers, by:

1. replacing 'senior employee' with 'financially sophisticated employee' to take a more inclusive approach to the changing demographics within JPF fund management and/or advisory teams,
 
2. including a reference to     'expert consultant' for added flexibility.

3. Governing Body

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The JFSC has clarified its expectation that there should be at least one or more Jersey resident directors appointed to a JPF board or to its governing body. The JPF annual compliance return will request additional data by asking how many Jersey resident or non-Jersey resident directors are on the board of the JPF or its governing body and how many of those directors are employees of the Jersey based designated service provider (DSP) or a group entity of the DSP.

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4. Arrangements that fall outside of JPF

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Changes have been made to the section that deals with arrangements that are not to be treated as JPFs. These include certain family (including family office) arrangements as well as some incentive arrangements (for example carry and/or co-investment vehicles).

The definitions of employees and family connections (including the term 'relative') have been widened and now include trusts established for a person satisfying the wider definition of 'family connection' (not just for a specific person or their dependents).

The JFSC has also clarified its expectation that JPFs should be:

1. established in Jersey and/or,
 
2. to have its governing body and management and control in Jersey.

Where a JPF is established in a country or territory outside of Jersey, having its governing body and management and control outside of Jersey, post authorisation the JFSC will request additional data on the JPF from the DSP, to establish the JPF’s indirect but relevant nexus to Jersey.

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5. Additional key changes

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Certain consequential changes/references to the Money Laundering (Jersey) Order2008 and the JFSC's Outsourcing Policy have been added to the JPF Guide.

Vice-Chair of the JFA, and Chair of the JFA's Legal & Technical Sub-Committee, Joel Hernandez, said:

'We're pleased to see the JFSC's commitment to work with the funds industry to refine the JPF regime. The JPF regime continues to provide an excellent solution for the global market through its effective, streamlined and proportionate regulation for a private investment fund. The speed and ease with which a JPF can be launched underlines the effectiveness of the regime.'

Chair of the JFA, Michael Johnson, added:

'The Jersey Private Funds regime has been an enormous success for our funds industry. Since its introduction in 2017, over 700 private funds have been launched, further reinforcing Jersey's reputation as a funds domicile. The latest updates mark another positive step forward for our industry.'

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Emerging trends in the digitalisation of fund operations and the opportunities presented by a burgeoning tokenisation and virtual assets industry were amongst the issues explored at a recent event hosted by the Jersey Funds Association.

The event, held last month in Jersey, brought together a number of industry leaders and discussed the challenges facing organisations set against a backdrop of continued economic and political upheaval before considering the opportunity presented by digital assets and blockchain, the potential of AI to be transformative, and the pace of change in digital innovation.

Experts in their field also provided updates to more than 100 delegates on specific developments relevant to the funds sector, highlighting in particular the emerging use cases for AI within a cross-border funds context, such as digital ID and asset diversification, before questions were opened up to the audience.

Following an introduction from BDO Director Manik Memon, E&Y Partner Leo Boessenkool discussed the emerging trends in funds digital operations, underlining the role of AI in undertaking manual tasks within the sector to boost productivity, while Walkers Senior Counsel, Sarah Townsend, took a deep dive into Jersey’s position regarding fund tokenisation, pointing to the launch of Jersey’s first tokenisation platform earlier this year and imminent updates to Jersey’s ICO guidance notes .

Following were C5 Alliance Director John Gamble, who explored how to practically approach AI, highlighting in particular the importance of focusing on training AI on good quality data and addressing fairness and bias in integrating AI, whilst PwC Director David O’Brien talked the audience through operations powered by generative AI across private markets functions, including the application of Gen AI in preparing DDQs, portfolio reporting and legal document drafting.

Commenting, JFA Chairman Michael Johnson, said: “Market conditions over the past 12 months, combined with added pressures such as the retention of talent and increased regulatory and compliance demands, have created a complex picture within which the cross-border funds sector operates. There’s no doubt that the integration of digital solutions forms a key part in addressing some of those major challenges, from enhancing productivity and improving client experience to opening up new and diverse opportunities to grow our proposition.

“Jersey has a great track record in embracing digital solutions, but it’s clear that the pace of change is relentless and we need to continue to move faster and faster if we are to remain competitive and at the forefront of the global alternative funds space. With that in mind, I was really pleased to see such interest at out latest JFA seminar in how Jersey is applying digital solutions to bolster its funds capabilities and support investors and managers with their increasingly digital ambitions.”

Funds Europe recently held a roundtable looking at Jersey's growing expertise and experience in tokenisation and digital assets.

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Specialists from across Jersey's funds sector explored the shift towards a rising importance of digitalisation within the private markets, and how Jersey is innovating to meet that demand

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Read the full roundtable here.

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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.”

Jersey’s funds industry has continued to perform well against a challenging macro environment but needs to remain agile and place a genuine emphasis on innovation in key areas to meet the competitiveness of an evolving industry, according to speakers at a recent Jersey Funds Association (JFA) Chairman’s Update event.

Held at the Pomme d’Or earlier last month (16 January), the event saw Chairman Michael Johnson discuss the current landscape and set out the organisation’s priorities for 2024, while Vice Chairman Joel Hernandez provided a legal and technical update.

Highlighting the robustness of the Island’s funds sector, Michael pointed to the £525bn net asset value of the sector and the continued success of the Jersey Private Fund (JPF), with 664 JPFs formed since the product was launched, making it the go-to product for sophisticated investors.

He also highlighted that the alternative asset classes now make up 81% of Jersey’s total funds business with private equity and venture capital accounting for the lion’s share.

Meanwhile, private placement continued to prove a popular access route to EU capital through Jersey, with 391 funds now being marketed by 213 fund managers, while the industry is also supporting an increasingly broad geography of managers, from Asia and Africa to the US, highlighting the jurisdiction’s global capabilities.

Commenting, Michael said: “The continued strength of our funds sector is testament to our offering, particularly our stable and no-change proposition when positioned against the wider backdrop of global market uncertainty. 2023 was a difficult year for both managers and investors, but despite that prevailing complex geopolitical and economic picture, Jersey saw a number of significant fund launches and we have a robust pipeline of new funds and managers.

“It remains vital, however, that we stay cognisant of what is an evolving environment whether that be from a regulatory, ESG, technological or geopolitical perspective in order to maintain our attractive ecosystem for alternative funds.”

That message was reinforced by Joel, who highlighted product innovation, including around the tokenisation of assets, as a key focus for the next 12 months. In particular, Joel, who is also head of the legal and technical sub-committee, pointed to the work the JFA was currently doing with the Jersey Financial Services Commission (JFSC) to modernise guidance for funds and special purpose vehicles with exposure to virtual assets.

He added:

“It has been another busy year for the legal and technical committee with sizeable collective efforts being undertaken regarding our AML/CFT framework, guidance around virtual assets, a response to what has been coined the ‘retailisation’ of alternatives, and improvements to our successful JPF regime. The coming months are set to be no quieter, but we are fortunate to have a collegiate approach that will ensure Jersey remains competitive based on what it has become known for - cost, speed to market and quality - all underpinned by an innovative mindset.”

 At the event, the JFA’s annual dinner was also confirmed to take place on 28 June this year. Further information can be found via the JFA website.

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By Michael Johnson, Chair, Jersey Funds Association

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As the global disruption of a pandemic continues to fade in the rear view mirror, new challenges – and opportunities - have come to the fore for Jersey’s funds industry.

Regulatory, economic and geopolitical change are now staples of the environment we operate in, but the good news is that Jersey's funds industry has been able to adapt to such a fast-evolving environment.

Jersey's forward-looking approach, commitment to first class service and focus on creating an ideal ecosystem for alternative investments have enabled its funds sector to thrive over recent years – but increasingly it is the jurisdiction’s ability to be agile and innovate in the face of change that is shaping our future course.

Buoyant

The past year has been another successful and buoyant one for our funds industry.

Figures in early 2023 indicate that the total net asset value of funds under administration in Jersey stood at a record high of more than half a trillion pounds (£523bn), with Jersey private funds continuing to increase year-on-year.

In addition, we are seeing an ever-increasing community of managers fully resident in the island across private equity, hedge fund, venture capital, debt and real estate. These managers provide depth and diversity to Jersey's industry, at a time when substance remains high on the agenda.

Jersey’s expanding and enhanced product range is being warmly received by global managers and investors too.

The Jersey Private Fund regime (JPF) continues to assert its appeal as a fast, cost effective fund vehicle which is ideally suited to a small number of sophisticated institutional investors. More than 600 JPFs have now been established in total – meaning that their number has now overtaken Collective Investment Funds (CIFs) in Jersey for the first time.

Amendments to Jersey’s Limited Partnership law and the long-awaited introduction of the Limited Liability Company (LLC) structure in early 2023 have also bolstered Jersey's options for overseas managers, particularly those in the US.

Jersey’s platform as a gateway to EU investor capital through private placement remains strong too.

With this year marking ten years since AIFMD was implemented across Europe, more than 400 funds and 200 non-EU managers are using the tried and tested National Private Placement Regime (NPPR) through Jersey to access Europe– a figure that has grown by around 60% in five years.

It’s clear that global managers continue to respond positively to Jersey’s private placement option, which holds particular appeal for those who do not require a full onshore EU presence – which is around 97% of managers, according to the EU’s own figures.

As investors continue to navigate a challenging landscape, Jersey’s funds sector is, overall, in a good place, with global trends supporting the future outlook of our industry as investors continue to focus on the opportunities presented through alternatives– private equity, venture capital and real assets - areas where Jersey has particular expertise and experience.

Challenge

It is, however, prudent that Jersey remains on the front foot, alert to changes in the landscape and ready to respond with agility to market shifts.

At a macro level, for instance, Jersey’s weighting towards alternatives could turn out to be our greatest challenge should the industry adopt a cautious outlook as we cross the rubicon to a higher interest rate environment.

In early 2023, for instance, two-year UK Gilts stood at 5.5% and are expected to surpass 6% in the next year. That’s the benchmark for the risk-free rate – the key hurdle for allocators when determining allocations to portfolios.

Not only that but allocators are also contending with the denominator effect, further impeding their sentiment and ability to continue to allocate so freely to closed-ended alternatives. We cannot ignore some significant sectors that are likely to be impacted – real estate, a key area for Jersey, being one.

In this new era, embracing innovation, being agile and looking at our product range to see how we can introduce a wider choice of products and services will be vital. It’s why this year the JFA has established an innovation sub-committee to look at a range of ideas – such as developing the foundations for holding assets using digital ledgers.

The tokenisation of real assets looks set to have a transformational impact on the cross-border funds industry in the coming years. We are already well engaged on that topic, but it is vital we maintain momentum in an area that is witnessing real acceleration.

We are also well positioned in the rapidly growing arena of ESG investing. Jersey has a clear sustainable finance vision and is making good headway in implementing on that strategy – but as international regulation evolves, it’s vital we keep up with the pace of change.

The MONEYVAL assessment in 2023, meanwhile, has also underlined the importance of asserting our industry’s strength in combatting financial crime and working collectively as an industry and with the government to ensure our national approach is fully aligned with our industry approach.

Jersey's reputational advantage has long been at the heart of our success and as an industry we continue to be alive to the importance of being able to demonstrate the highest standards of anti-money laundering, compliance and governance.

In addition, if we are to maintain our growth trajectory, we need to be able to draw on a sustainable workforce. Experience and expertise have long been Jersey’s hallmarks, and a commitment to sourcing the best talent to boost productivity – in tandem with digital adoption - will be critical in the years ahead.

With that in mind, the JFA remains proactive in attracting both young and diverse talent to the industry and enabling ‘career switchers’ an opportunity to enter the sector.

As we look forward, the ability of our industry to be agile and embrace innovation, balanced against a commitment to remaining a stable and certain domicile, will continue to be at the core of Jersey’s proposition. If we can achieve that balance, then our funds industry can approach the future with confidence.

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You can read the full Jersey: First for Finance publication as an e-reader here.

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New regulation, both domestic and international, is creating significant opportunities for Jersey’s funds sector – but at the same time is requiring industry participants to be more agile than ever before, according to speakers at a recently held Masterclass event organised by the Jersey Funds Association (JFA).

Expert speakers at the recent event, held in September at the Royal Yacht Hotel and attended by over 50 industry representatives from Jersey's funds sector as well as colleagues from the Government of Jersey and the Jersey Financial Services Commission (JFSC), provided valuable insights into the evolving regulatory environment and the impact on Jersey’s funds sector.

In particular, the event emphasised the significant ongoing regulatory changes in both the UK and EU, including the UK’s ongoing efforts to enhance its ecosystem for asset managers and the EU’s review of the AIFMD. Prem Mohan, Partner at Kirkland and Ellis, highlighted how evolutions to AIFMD II could bring greater compliance challenges, whilst also pointing to how National Private Placement (NPP) arrangements, such as those through Jersey, still provide a good route to EU capital for non-EU managers with the current expectation that the NPP regime will remain in place for the mid-term.

Helen De La Cour, Director of Financial Services for he Government of Jersey highlighted Jersey's focus on developing regulation to ensure inclusive and appropriate access to financial services while being committed to enabling the funds sector to continue to grow and innovate.

David Eacott, Executive Director of Supervision at the Jersey Financial Services Commission (JFSC) shared his observations on Jersey's funds sector from his first half-year in post leading the JFSC's supervisory activities. David pointed to tokenisation and digital assets being very much on the JFSC's agenda.

Closing the session, David Postlethwaite, Sustainability and ESG Lead at KPMG, explored how ESG regulation was being integrated across the funds sector and how managers were having to increasingly apply an ESG lens to their due diligence procedures – something that is driving greater data sophistication when it comes to reporting and disclosure.

Jon Stevens, Chair of the JFA’s Regulatory and Compliance Sub-Committee and Deputy Managing Director of Mourant Consulting, hosted the event. He commented:

"Our latest Masterclass offered our broad funds sector a valuable opportunity to delve into crucial areas of regulatory progress. It’s clear that regulation in multiple areas – from sustainable finance and digital assets to domestic compliance and shifting international standards– are all impacting our industry, and firms at all levels of the supply chain are having to be nimble in responding to those changes.

“At the same time, Jersey has an opportunity to playa role in the inter-operability of these regulatory changes – helping investors to navigate and make sense of what it all means, across borders. And that will be an invaluable role for Jersey's funds practitioners to play in the years to come. Against that backdrop, I’m really pleased that there was such strong interest in our latest Masterclass event.”

Further details about the JFA’s Masterclass series and other events can be found here.

By Richard Anthony, JFA Committee Member and Head of Aztec’s Jersey Real Assets Team

UK real estate has long been an attractive sector for global investors – but for various reasons, it is currently not without its challenges.

It is also a sector where Jersey firms have considerable experience, with members of the Jersey Funds Association being fortunate enough to work with some of the top real estate fund and asset managers globally and specifically in the UK.

This piece provides a snapshot of the key issues currently facing the real estate sector, through the lens of our clients and investors.  

The Rise of Inflation

UK inflation has continued to rise sharply in recent months, with 2022 seeing the highest rate reached in over 40 years. As central banks aim to control inflationary pressures, interest rates have also risen in dramatic fashion.

This has undoubtedly influenced investor sentiment towards UK investment, the ability to generate attractive returns on existing portfolios and to secure financing for new projects, not to mention the impact on valuations. Speaking of which…

Uncertainty Surrounding Valuations

Asset valuations in UK real estate have become increasingly uncertain and downward adjusted in various sub-sectors, particularly in the commercial real estate sector - with various factors contributing to this challenge.  

As a result, deal flow has been impacted, with potential sellers not wishing to sell and potential buyers considering whether we are really at the floor of the market, keeping their capital dry or attempting a cheeky chip on price while at the heart of a transaction.  

On the upside, various asset and fund managers are hopeful for a bounce in the final quarter of 2023 and moving into the start of 2024, with fingers crossed for the plateau and descent of interest rates, which will bolster market sentiment.

Ability to Raise and Retain Capital

Fund managers in the UK real estate sector face the ongoing challenge of raising capital for their funds.

With increasing competition and changing market dynamics, attracting investors and securing commitments can be a daunting task. Investors are becoming more discerning, seeking transparency, track records and granular level due diligence.

Additionally, many open or quasi open-ended funds are having to work hard to maintain liquidity, as certain investors look to re-allocate or withdraw capital from the sector.  

In the current environment, fund managers must demonstrate their ability to deliver attractive risk-adjusted returns and navigate market uncertainties to gain the confidence of potential investors.

ESG Impact

In recent years, there has been a growing emphasis on environmental sustainability and energy efficiency in the real estate industry.

Buyers and sellers are increasingly considering Energy Performance Certificates (EPC) and BREEAM ratings when evaluating commercial buildings. This "flight to quality" trend means that buildings with higher ratings are more likely to attract buyers and command higher prices.

On the flip side, other buildings with lesser ratings are becoming harder to sell, forcing the need to either make further capital investment, or exit at less attractive valuations.

Jersey’s Role

Whilst the above challenges are undoubtedly shaping the UK real estate industry at present, and may persist for some time, members of the JFA continue to actively facilitate high quality capital flows into the sector through Jersey domiciled structures.

Why? The Island has a vast pool of industry leading legal and professional firms with talented real estate professionals. The legislation, regulation and taxation applicable to investment structuring is finely tuned, incredibly robust and sufficiently flexible to meet the needs of most investors.  

If you are considering an investment in real estate through a fund or corporate structure, consider Jersey.

The Jersey Funds Association (JFA) was delighted to welcome so many people to a networking event last month, as part of its support of the LEAP Jersey programme this year.

The innovative leadership and entrepreneurship programme, organised through the Jersey College Foundation,  aims to foster female talent from across the globe by offering female students aged between 14 and 18 the opportunity to develop their business acumen before pitching for funding to finance a social enterprise project.

The event was held on 19 July at the Radisson Blu Waterfront hotel and involved more than 30 local companies as well as all the participants in this year's programme, who hailed from countries including Australia, China, Japan, Rwanda and the USA, as well as Jersey.

It formed part of the 10-day programme, during which participants received advice from a variety of mentors and experts before putting their ideas to a ‘Dragon’s Den’ style panel of judges.

It’s ten years this month since the Alternative Investment Fund Managers Directive (AIFMD)was implemented across the EU. But what has been the impact on the alternatives landscape from Jersey’s perspective of a regulatory framework that was borne out of the 2008 global financial crisis and has played a significant role in shaping today’s cross-border funds industry?

When the AIFMD was introduced across EU Member States in 2013, it formed part of a global trend amongst regulatory and political authorities to increase regulation with a view to shore up market stability and protect investors, against the backdrop of the global financial crisis.

In the years leading up to the introduction of the AIFMD, there was a huge amount of industry consultation and debate around what the regulation might mean for cross-border funds and non-EU jurisdictions – debate that to some degree continues today.

A decade ago, there were frequent discussions, for instance, around whether and how non-EU managers would be able to market to EU investors and what that might mean for structuring. For some years, there were whisperings of a ‘passport’ being extended to non-EU third countries based around criteria of equivalence – with Jersey, as a non-EU jurisdiction, being high on the list should that option ever become available.

Ten years on, that passport option has not materialised. What has materialised however, is a Jersey funds sector that is thriving and buoyant, not in spite of the AIFMD but in part because of it.

Flexibility

A large part of this success is due to just how well the National Private Placement Regime (NPPR) has worked in practice – a marketing mechanism whereby alternative funds can be marketed to EU investors based on specific agreements with individual EU Member State authorities.

While ‘onshore’ EU funds are subject to the full scope of the AIFMD, for example, Jersey funds are not. Having to subject a fund to the full scope of the AIFMD rules comes with significant cost, whereas flexibility and speed to market are all advantages enjoyed by utilising NPPRs.

“The private placement approach has been something of a lightning rod for the Jersey funds industry,” explains Michael Johnson, Chair of the JFA. “It’s proven to work extremely effectively, offering quick and easy access to EU capital without the regulatory burden of complying with the AIFMD in its entirety.”

In scenarios where managers are needing blanket access to EU Member States, private placement is not necessarily the right choice. But the fact is that this is rarely the case.

"The reality,” says Elliot Refson, Head of Funds, Jersey Finance, “is that 97% of managers market into only three Member States or less – that’s backed up by figures from the EU Commission. Where that’s the situation, opting to go onshore, therefore, merely adds to ongoing costs and increases the regulatory burden disproportionately.”

The private placement alternative through Jersey, in contrast, is far more flexible and cost effective. This is a message that has resonated well with managers not just with their eye on EU capital but also with a global outlook.

There are currently, for example, more than 200 non-EU managers marketing their funds into the EU through private placement via Jersey – a figure that has grown by around 60% in five years. Specifically, the number of US-originated fund structures serviced through Jersey has grown 61% while the value of fund assets under management has risen by 22%, according to Monterey. It’s an indication of the appeal of Jersey’s platform as a gateway to Europe.

Jersey has accelerated that growth not by sitting back but by introducing complementary structures; half a decade ago we introduced the Jersey Private Fund (JPF) which allows up to 50 investors to establish a fund in under 48hours. Working effectively under private placement rules, it has become a go-to structure so much so that there have been more than 635 formed.

More recently, the jurisdiction introduced its own Limited Liability Company (LLC) legislation modelled on regimes in Delaware and Cayman - which offers its own legal personality and the option of attaching body corporate status - providing familiarity and certainty for US and other global fund managers. Again, the LLC works well with private placement criteria for managers wanting to target EU capital.

“It is this willingness to innovate, to stare down challenges and grasp opportunities that has led to Jersey’s position today where we are seeing record inflows of assets under management, with a sizeable 142% increase in a decade,” adds Joel Hernandez, Deputy Chair of the JFA.

All this is good for the EU market too – it opens up multiple options for EU investors, enabling seamless and effective connectivity between the EU and global markets, keeping high quality EU and global capital moving, generating growth and opportunity.

Reflecting on the past ten years, it is perhaps the ‘high quality’ bit here that is most important. At the outset, AIFMD was intended to protect investors. Alongside the onshore EU fully AIFMD compliance option, which will be the solution for certain managers, Jersey’s private placement option has established itself over the past decade as a key part of the modern European alternative funds infrastructure, helping to achieve that aim of investor protection and market integrity while at the same time driving high quality capital to where it is needed most.

Attendees at this year’s Jersey Funds Association Annual Dinner have helped raise a bumper total to support Kezia’s Fund, a fund which is managed by the Jersey Community Foundation.

More than 400 people from across the industry attended this year’s Dinner, held at the Trinity Showground on 14^th July, who between them helped to raise £12,500 towards Kezia’s Fund, thanks to a raffle held during the evening.

Kezia’s Fund aims to support mental health among children and young people aged 5 to 25 and their families in Jersey; and provides grants and support to organisations that work to improve children and young people’s mental wellbeing. 

Anna Terry, CEO of the Jersey Community Foundation said:

“This funding will continue the legacy of Kezia's Fund, ensuring that the substantial funds raised are used to address the prevalent issue of child and young people’s mental health in Jersey. We are extremely grateful to the Jersey Funds Association for supporting Kezia’s Fund at their dinner this year and we would like to thank everyone who generously donated on the evening”.

Michael Johnson, JFA Chair, commented:

“This year’s dinner provided us with an opportunity to consider our role in the local community and with that in mind I’m really pleased that, thanks to the generosity of those who came along to our Dinner this year, we managed to raise such a good sum to support the work undertaken through Kezia’s Fund.”

Donations to Kezia’s Fund can be made here.

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Representatives from across Jersey’s funds industry came together this month to celebrate the ongoing growth of the sector and discuss key trends shaping the future alternative funds landscape.

More than 400 people from across the industry, including lawyers, service providers, managers and accountants as well as politicians and regulatory representatives, attended this year’s Jersey Funds Association (JFA) Annual Dinner, held at the Trinity Showground on 14^th July.

Held each year, the event brings together Jersey’s funds community and serves to highlight key developments and trends in the market and point to the work undertaken by the JFA.

Speaking at the event, Michael Johnson, JFA Chair, told the audience that it had been another successful year for the funds industry, with the growth in fund managers in the jurisdiction in particular proving to be a critical element of Jersey’s funds infrastructure, against a backdrop of increasing regulation and a growing emphasis on substance.

With figures in early 2023 indicating that the total net asset value of funds under administration in Jersey stood at a record high of more than half a trillion pounds (£523bn), Michael said:

“We have a buoyant and active community, both in the funds and the fund manager space. In fact, we see an ever-increasing community of managers fully resident in the island across private equity, hedge funds, venture capital, debt and real estate. These managers are bringing a real depth and diversity to our industry, at a time when substance continues to be high on the agenda.”

Michael pointed in particular to the ongoing success of the Jersey Private Fund structure (JPF), with more than 600 having now been established in total – meaning that the number of JPFs has now overtaken collective investment funds in Jersey for the first time. He added:

“In particular, alternative funds now represent 90% of our total funds business, with private equity and venture capital making up 44% of total funds business undertaken in Jersey. It has created a very stable platform of long-term capital, largely insulated from short term market sentiment.”

However, Michael also urged caution around the potential impact of the ongoing high inflation environment on Jersey’s funds sector, given its weighting towards alternatives, and the need for the industry to embrace innovation in an increasingly complex and uncertain environment:

“Recently two-year UK Gilts stood at 5.5% and are expected to surpass 6% in the next year. That’s the benchmark for the risk-free rate – the key hurdle for allocators when determining allocations to portfolios. Not only that but allocators are also contending with the denominator effect, further impeding their sentiment and ability to continue to allocate so freely to closed-ended alternatives. We cannot ignore some significant sectors are likely to be impacted – real estate, a key area of Jersey, being one.

“As we cross the rubicon to a higher interest rate environment, embracing innovation, being agile and looking at our product range to see how we can introduce a wider choice of products and services will be vital. It’s why this year the JFA has established an innovation sub-committee, as we look to gather critical momentum in affirming Jersey’s reputation as forward-thinking, truly innovative funds domicile.”

Gold sponsor for the evening was Mourant and silver sponsors were BNP Paribas, Hawksford, Ogier and PwC, whilst the champagne reception was sponsored by Carey Olsen and the NextGen table was hosted by KPMG. Entertainment at the event was provided by comedian and writer Simon Evans.

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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.

New regulation and industry wide adoption of ESG and sustainability metrics have created significant opportunities for service providers, while data management now occupies a central role in achieving ESG compliance, both in the eyes of regulators and investors.

Expert speakers at a recent Masterclass event, organised by the Jersey Funds Association, provided valuable insights into these dynamic developments and their implications for the local industry.

The event, held on 6th June at the Royal Yacht Hotel, attracted over 40 industry participants from Jersey's funds sector. The guest speakers explored various key topics, including the rapidly evolving regulatory landscape, Jersey's potential to grow as a leading centre for ESG funds, the integration of ESG principles in private equity, and the growing importance of data management in the ESG sphere.

The event emphasised the intricate nature of global ESG and sustainable investment regulation, noting the considerable differences in disclosure frameworks between Europe, the US and Asia. The differences present clear opportunities for Jersey domiciled service providers, managers and funds, who may opt in or out of differing jurisdictional frameworks, while relying on the robustness of the JFSC as their home regulator.

As global standards continue to evolve, especially in relation to nature and climate disclosures, the significance of "financial grade" data management is poised to grow. This, according to visiting speaker Antonello Argenziano, creates potential avenues for fund administrators and managers aiming to drive progress and differentiate themselves.

The speakers highlighted Jersey’s strong position, underscoring the alignment of its flexible ESG disclosure framework with international standards and that Jersey implemented anti-greenwashing rules in 2021, with further enhancements in the pipeline.

Tom Powell, Chair of the JFA's ESG Sub-Committee and CEO of Amthe Capital, led the first session on regulation and disclosure. Powell remarked: "Our latest Masterclass offered industry participants a valuable opportunity to delve into crucial areas of regulatory progress in the ESG investment landscape. The rapidly evolving lexicon of acronyms can be overwhelming. There is a genuine sense that Jersey's expertise in administration, data management, risk, compliance, and governance is highly desirable as the industry continues its forward momentum."

He continued: “It’s really important that as a jurisdiction Jersey continues to tell its story in this area, because it has a fantastic story to tell.”

The JFA thanks all those who attended and facilitated the event. More about Jersey’s proposition in sustainable finance can be found here.

The speakers at the masterclass were: Tom Powell, CEO of Amthe Capital - Jersey; Alison Cambray, ESG, Sustainability & NetZero Director at PwC Channel Islands; David Postlethwaite, ESG Associate Director at KPMG in Jersey; Antonello Argenziano, Product Director at Intertrust Luxembourg; and Jane Burns, Sustainability and Climate Change Engagement Manager for the Government of Jersey.

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The Jersey Funds Association (JFA) is supporting an innovative leadership and entrepreneurship programme, organised through the Jersey College Foundation, that aims to foster female talent from across the globe.

As the Platinum sponsor of a networking event this summer, the JFA is supporting this year’s LEAP Jersey programme which offers female students aged between 14 and 18 the opportunity to develop their business acumen before pitching for funding to finance a social enterprise project.

The event forms part of a 10-day programme, during which participants will receive advice from a variety of mentors and experts ahead of putting their ideas to a ‘Dragon’s Den’ style panel of judges where the winning idea will be awarded £2,000.

Held on 19 July at the Radisson Blu Waterfront hotel, the networking event will involve more than 30 local companies and celebrate the participants, who hail from countries including Australia, China, Japan, Rwanda and the USA. It will also give all interested parties an opportunity to learn more about the programme, the participants’ various project ideas, network and drive the cause of increased female leadership and entrepreneurship.

Commenting, Michael Johnson, Chair of the JFA, said: “Championing young female entrepreneurs is vital for our industry, for Jersey and for business more widely, to ensure we a have diverse and expert talent pool in the future. It is an honour to be able to support a programme aimed at nurturing the skills needed to be a female leader of tomorrow.”

Chair of the JFA’s ESG sub-committee, Tom Powell, added: “This programme offers a fantastic opportunity to develop business, entrepreneurial and leadership skills as well as to experience a real-life business pitch scenario. We are delighted to be able to support so many budding business leaders from home and further afield to develop such skills.”

More information, including on how to register to take part, can be found here.

The value of regulated fund assets serviced in Jersey rose by close to £39bn over the course of 2022 while the corporate and banking sectors also posted positive figures, 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 2022, the value of regulated funds under administration increased by £38.6bn (8.6%) compared to 31 December 2021 to stand at a new record level of £488.8bn.

Across the core alternative asset classes – which now make up 78% of total funds business in Jersey - the hedge fund sector in particular contributed to growth, increasing by some 24% over the twelve months.

In addition, a total of 638 Jersey Private Funds (JPFs) have now been registered in Jersey since the structure was launched in 2017, according to the JFSC – an increase of 107 (20%) over the past twelve months. The value of assets held in JPFs is now £61.7bn and is in addition to the headline funds figure.

Meanwhile, the total value of deposits in Jersey banks increased by £14.8bn (11%) over 2022 to stand at £148.3bn – the highest level since 2013 - with 58% held in foreign currencies.

Corporate activity also remained positive with a total of 35,028 companies on the register at the end of the year, increasing marginally (1.5%) year-on-year to an all-time high.

In addition, 79 Jersey company vehicles are now listed on global exchanges around the world, including the London Stock, New York and Hong Kong Stock Exchanges, with a combined total market capitalisation of £167.4bn.

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

“These are strong year-end figures that paint a sustained positive picture of our finance sector, particularly against the backdrop of global economic flux. The consistent growth of our funds sector confirms the appeal of our offering, cementing our position as a leading alternative funds hub in Europe.

“Meanwhile, our banking sector remains resilient, providing sought-after stability in uncertain times, and our corporate sector continues to see steady growth, reflecting a healthy holistic platform supporting investors, families and businesses around the world. This equates to a strong message, and one that will be hugely positive as we maintain our expansion and growth in global markets, including the US and South-East Asia.”

Mike Johnson, Chair, Jersey Funds Association, added:

“Jersey’s funds sector is clearly continuing to appeal to both managers and investors, and that is thanks to the high standard of our offering, which combines a depth of expertise, flexibility, certainty and a stable outlook rarely found in other jurisdictions. Of particular note in these figures is the ongoing march of the JPF, with more than 100 established over the year. It has firmly established itself as a go-to vehicle for alternative fund structuring, adding considerably to our reputation as a premiere funds jurisdiction.”

Jersey’s funds industry is maintaining its upward trajectory – but evolution in the market, regulatory change and competition means that the Jersey Funds Association (JFA) is busier than ever, according to committee members speaking at the JFA’s recent Chairman’s Update event.

Held at the Pomme d’Or recently (1 March), the event saw Chairman Michael Johnson and Vice Chairman Joel Hernandez assess the current landscape and set out some of the priorities for the JFA over the coming year, whilst sub-committee heads also took part in a Q&A session highlighting some of the trends, challenges and opportunities on the horizon.

Pointing to the fact that the value of assets serviced in Jersey rose to new record levels of more than £0.5trn in 2022,Michael also emphasised how important it was to be alive to the potential for change in the wider landscape:

“Our figures continue to illustrate an upward trend, but it’s really important we stay ahead of the curve and anticipate regulatory change and shifts in investor behaviour to maintain our attractive ecosystem for alternative funds.

“Speed to market, cost-effectiveness and service quality are absolutely crucial in our segment of the alternatives market and we are fully focused not only on safeguarding our position but on enhancing our proposition in those areas. On the ESG front, for example, the key is to establish a robust framework but without creating hurdles, whilst on the innovation front we see opportunities to build up a track record in blockchain, tokenisation and digital assets.”

Joel added:

“From a legal and technical perspective, it has never been busier in terms of the need to respond to consultations and international and domestic regulatory change – such as looking at our AML/CFT frameworks, enhancing our range of fund structures and regimes, and ensuring we keep the cost of doing business with Jersey competitive.  We are fortunate in the JFA to have broad and diverse expertise through our membership to support our efforts in these areas.”

The JFA will be holding a series of further events for members over the coming months to explore key areas of note for the industry, including a Legal and Tax Masterclass (20 April) and two Town Hall events on ESG (15 May) and Digital (5 June). The JFA’s annual dinner has also been confirmed for 14 July. Further information can be found via the JFA website.

Towards the end of 2022, Jersey Finance embarked on its first US roadshow, hosting events in Miami, Chicago and San Francisco, as well as New York, where it has had an office for three years.

A number of industry professionals from Jersey Funds Association member firms were involved in the roadshow, including Ian Horswell, Global Head of Business Development for Funds at Suntera Global. Here, Ian reflects on the roadshow and how Jersey is evolving its proposition for US managers…

Q: What sort of business is currently being undertaken between Jersey and US?

Ian Horswell (IH): We continue to believe that Jersey is a fantastic jurisdiction for US managers looking to access European assets or working with European investors – it is well respected, well-regulated and has tax neutrality, all of which is appreciated increasingly by managers we speak to.

In May last year, for instance, we acquired US-based fund services provider Socium Fund Services and since then we have seen rising levels of new business flows between both jurisdictions.

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Q: Why is the US such an interesting market for Jersey?

IH: The US is the largest funds market in the world and we’ve seen some exciting growth in the US this year. It’s also a market that is experiencing a sharp movement towards the outsourced model – so it’s a space where Jersey can add real value.

Against that backdrop we hired a dedicated senior Business Development lead in the US to help tell our and Jersey’s story. The feedback is that US managers are increasingly used to the IFC model and see Jersey as an interesting gateway to Europe.

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Q: How is Jersey’s reputation evolving in the US?

IH: I think Jersey’s reputation is growing all the time. Jersey Finance and JFA member firms are more and more active in the US, which is giving Jersey greater visibility, while a number of US law firms have a large presence in London, which means that Jersey is already familiar to them. US managers and lawyers are using Jersey and having a good experience in doing so – that quality of service is a really strong play in the US market.

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Q: How useful was the Jersey Finance US Roadshow in getting Jersey’s message across?

IH: The roadshow was really useful, both from a jurisdictional and an industry perspective. Jersey Finance and Suntera are already well known in New York and its surrounding areas, and this series of roadshow events brought our story to a much wider audience and new groups of stakeholders.

Chicago, for example, was a new city for both Jersey Finance and Suntera, but actually Chicago has several managers who use Jersey and we had lots of legal contacts in the area too. The roadshow gave us an opportunity to reinforce our message face to face with a new audience, which was vital, and gave managers a chance to ask questions.

It also gave us an opportunity to really focus and ensure our clarity of message – that Jersey is well positioned to support the US market, with excellent experience in all major asset classes. One important point which we highlighted a lot during the week was our political stability, whilst we also pointed consistently to how, as a small jurisdiction, Jersey punches well above its weight with over 14,000 financial services employees.

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Q: How well is Jersey perceived in the US market?

IH: Overall, the Roadshow has really helped move the dial in terms of Jersey’s proposition for the US. What was clear was that those managers and lawyers that use Jersey already are big fans.

However, we also need to continue to focus on other groups, those that are less familiar with what we do, and do some educational work to explain our USP over other IFCs – in particular in relation to our responsiveness, pragmatic regulator, and the impressive flexibility and experience we offer. That will be our focus for the US in 2023.

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Find out more about Jersey's US proposition for US managers here and about Jersey Finance's US roadshow here.

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Professionals from across Jersey’s funds sector including lawyers, administrators, NEDs and compliance specialists, heard from the JFA’s Legal and Technical Sub-Committee this week, at a briefing outlining some of the measures the industry is taking to maintain Jersey’s leading position as a centre for alternative funds.

A number of speakers from the sub-committee, including Chris Patton, Head of Private Equity, Intertrust Group, Simon Burgess, Fund Advisor and Non-Executive Director, and Matt McManus, Managing Associate, Ogier, discussed a range of areas of regulatory and legislative focus for the JFA, including the recent JFSC AML Exemptions Consultation Paper, a JFSC Outsourcing Paper and JFSC Consultation on Senior Management.

The session was hosted by Joel Hernandez, Head of Funds, Mourant, Vice Chair of JFA, and Chair of the JFA Legal and Technical Sub-Committee, who said:

“Our role as a sub-committee is to look at ways to defend and develop our industry from a legal and technical perspective, working with other stakeholders and organisations, to enhance Jersey’s proposition and add value to the funds sector. The fact that so many people joined us for this session reflects the appetite to support the evolution of Jersey’s funds industry, which is fantastic to see.

“The most recent figures for our funds industry were extremely positive, with AUM and AUA reaching record levels yet again. It’s clear though, that there is a huge amount of work being undertaken by the JFA to maintain our position and appeal in a landscape that is extremely competitive and increasingly influenced by international regulatory and compliance pressures – and this is what the session really focused on.

“From looking at our AML/CFT frameworks and how we can keep the cost of doing business with Jersey competitive, to enhancing our Jersey Private Fund regime, as well as honing our ecosystem for virtual assets – there is a lot that the Committee has been working on. On balance, we feel that Jersey remains in a strong position, given the support of the JFA's members and its other partners.”

The total net asset value of regulated funds administered in Jersey rose by almost £8bn over the first half of 2022 whilst the corporate and banking sectors also posted record mid-year figures, 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 30 June 2022, the value of regulated funds under administration increased by £7.7bn (1.7%) compared to 31 December 2021 to stand at £458bn.

The alternative asset classes, including private equity, real estate and hedge, continued to drive growth to now represent 89.5% of total funds business, with private equity and venture capital making up 44% of total funds business undertaken in Jersey. The value of hedge fund business booked in Jersey in particular grew over the past six months, increasing by 14%.

In addition, a total of 556 Jersey Private Funds (JPFs) have now been registered in Jersey since the structure was launched in 2017, according to the JFSC- an increase of 100 (22%) over the past twelve months. Total Assets Under Management (AUM) held in JPFs, which is reported separately to the quarterly figures for regulated funds, now stands at£61.7bn, spanning private equity, venture capital, real assets and other global equities.

Meanwhile, the total value of deposits held in Jersey banks increased by £10.8bn (8%) over the first six months of the year to stand at £144.4bn – the biggest half year increase since 2019. 57% of deposits in Jersey banks were held in foreign currencies.

Corporate activity also remained strong over the first half of the year. There were 35,447 registered companies on the register as at 30 June 2022 – the highest number in the past decade – whilst in the second quarter alone there were 974 corporate registrations, the highest quarterly figure on record.

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

“In a persistently challenging environment, these are really robust figures for our industry. We have seen consistently positive figures and a growth trajectory for our funds industry for some time now, and the past six months have consolidated our position as a leading specialist funds hub in Europe.

“Meanwhile, it’s pleasing to see the appeal of our IFC reflected in impressive figures for our banking and corporate sectors too. Record levels of company incorporations over the past six months and a resilient banking sector underline Jersey’s appeal as a stable, reliable centre, supporting international business and growth as the world looks to rebuild after a period of uncertainty.”

“Particularly as we look to build out our service lines and take our messaging to new markets in 2023, in particular across Asia and the US, these positive figures paint a very positive picture of the role Jersey is playing in supporting high quality cross-border capital flows.”

Mike Johnson, Chair, Jersey Funds Association, added:

“The fact that Jersey has maintained its upward trajectory in 2022 against a backdrop of instability in Europe and a complex post-pandemic fundraising landscape, is a reflection of the high regard in which Jersey is held by managers. The growth of the JPF, five years since it was introduced, is particularly noteworthy. Its success means that today, across its suite of fund regimes, Jersey is administering high quality global fund assets well in excess of £0.5trn, and that figure continues to grow.”

Following its recent Annual General Meeting (8 July), the Jersey Funds Association (JFA) has elected a new-look committee as it continues to champion Jersey's ecosystem for alternative funds.

With outgoing Chairman Tim Morgan completing his three-year tenure, Michael Johnson takes over the role, with Joel Hernandez taking on the position of Vice Chairman. Michael is Group Head of Institutional Services at Crestbridge, whilst Joel is a Partner at law firm Mourant.

The new committee features some continuity whilst also introducing a number of new faces, with Robin Wilson, Sophie Reguengo, Stephanie Hopkins, Clive Spears and John Riva all joining. Remaining on the committee this year are Richard Anthony, Mike Byrne, Steve Cartwright, Ben Dixon, Ben Honeywood, Dilmun Leach, Robert Milner, Tim Morgan, Simon Page, Martin Paul, Tom Powell, Peter Rioda, Ben Robins, Martin Rowley, Sarah Sandiford and Elliot Refson.

At the AGM, outgoing JFA Chair Tim Morgan, who is a Partner at law firm Maples, provided an assessment of achievements and highlights from the past year:

“Jersey's funds industry continues to operate in a fast-evolving market, with regulatory, economic and geopolitical uncertainty continuing to pose challenges – but the fact that Jersey’s funds industry succeeded in reaching new record highs of assets under administration in 2022 and in each of the past three years speaks volumes about the appeal of Jersey’s platform of stability. As ever we need to continue to work hard to underpin this.

“Reflecting on the past three years, there’s no doubt it has been a busy but exciting time to lead the JFA, through a complex period encompassing the implications for Jersey of the effects of Brexit, to the challenges of the global pandemic, to on going enhancements to Jersey’s international standing for tax and regulation. It is a credit to the committee and to the wider industry that Jersey’s funds offering has gone from strength to strength throughout this period. I’m really grateful for the efforts of all those who have given their time to the committee, including Caroline Harrington, who is retiring from her role as secretary of the JFA after many years. We have achieved a lot – from navigating tax and regulatory changes, to integrating ESG into our thinking and supporting cutting-edge training for our members.”

Meanwhile, newly appointed JFA Chairman Michael Johnson added:

“There’s no doubt that the landscape continues to pose challenges. Geopolitical developments have significantly worsened since the increased hostilities in Ukraine, and from a macro-economic perspective, inflation rates, interest rate changes and other economic indicators are pointing to a significantly more challenging economic environment. Jurisdictionally, the competitive environment remains intense and evolving too.

“But there is plenty for Jersey to be positive about. We have a compelling proposition, an industry that is growing at an impressive rate, and more and more managers of substance looking at Jersey to support their cross-border needs. Private equity, venture capital and real assets are at the heart of global economic rebuilding efforts, and we have precisely the experience and platform here to support that and make a positive impact.”

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With figures from the JFSC confirming that total regulated funds business grew by a fifth over 2021 and now stands at almost £460bn (March 2022) and with 200 managers and around 370 funds currently marketing into the EU through private placement in Jersey, the JFA has worked with industry to put together a new factsheet designed to illustrate why Jersey provides such as compelling proposition for alternative funds compared to other jurisdictions.

You can access that factsheet here.

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Towards the end of last year, Jersey Finance published a ground-breaking report that highlighted the value Jersey’s finance industry adds to global markets and the positive impact the work done in Jersey has around the world.

The ‘Jersey’s Contribution to Global Value Chains’ report explores the redistribution of the value of work done in Jersey – and it makes some significant findings. In particular, Jersey firms intermediate £1.4 trillion (€1.7 trillion) of global capital each year and support £170.3 billion of global economic output.

That activity in turn supports millions of jobs of ordinary people, and accounts for 0.27% of total global economic activity each year. It’s an impressive contribution globally for a small jurisdiction.

Read the full article here.

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Stability, expertise and flexibility have been highlighted as key components of the international fund domicile of the future in a new report published this month by IFI Global and supported by Jersey Finance.

‘The Evolution of the International Fund Jurisdictions’ report forms the latest in a series undertaken by IFI Global with Jersey Finance, with previous reports published over the past two years having focused on fund domiciliation, structuring, and fund governance.

This new report explores the origins of the fund domiciliation industry and how a number of locations around the world with no previous connection to funds, have ended up playing fundamental roles at the heart of the global funds landscape, servicing more than US$16 trillion of fund assets.

The report also explores how those centres, including Jersey, BVI, Bermuda, Cayman, Guernsey, Ireland and Luxembourg, have since evolved and what their past experiences tell us about their future direction. Among the report’s key areas of focus are:

·        Key dates, from the establishment of the first expatriate banking operation in Jersey in the 1960s to EU alternative fund regulation in 2018

·        The origins of the international funds industry in the 1980s, including the first investment funds offered to expats and the largely Anglo-Saxon asset management industry of the 1990s

·        The dawn of alternatives, including the introduction of regulatory measures, the shift towards institutional investors, the heightened focus on governance and substance in the wake of the global financial crisis, and the impact of Brexit

·        The future, including the growth of sustainable finance and crypto funds and the importance of first mover advantage when it comes to new investment categories

 Commenting on the findings, Elliot Refson, Head of Funds at Jersey Finance, said:

“Given the trends over the last decade or more highlighted in this paper, there’s no doubt that the fund jurisdictions that will be most successful in the future will be those that are stable with strong expertise and infrastructure, and robust but flexible regulatory frameworks. This has really been Jersey’s mantra for the past twenty years, and we’ve seen the fruits of that in the growth of Jersey in recent years as a trusted funds domicile.

“There will undoubtedly be more changes over the coming decades and our focus will remain on staying true to our values and on retaining our position as an integral part of the global fund landscape.”

 Simon Osborn, CEO of IFI Global and author of the report, added:

 “Fund domiciliation patterns have always been subject to change and there is no reason to believe this will not continue to be the case in future. To understand how the asset management business might develop in the future, it is a good idea to know something about how the international fund jurisdictions, on which this industry depends, are evolving.

 “This White Paper touches upon how a few unlikely locations, dotted around the world, got into this business, focuses on what is happening in international fund domiciliation today and explores what may well happen to international fund jurisdictions over the next few years.”

The new research can be viewed and downloaded 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.”

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By Alistair Horn, Mourant LP Partner and JFA committee member, John MacFeeters, Counsel and Rachel Fowler, Senior Associate at Mourant

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With reports suggesting that global investors have set aside up to £46bn to deploy in the London office market alone this year (the highest since 2012), it’s an opportune time to take a look at some of the trends we are seeing in Jersey for UK real estate investments.

For years, Jersey has been an attractive option for asset managers looking to establish real estate holding structures, and for investors wishing to invest in real estate assets and recently we have seen a noticeable increase in the use of Jersey REIT structures, whilst the traditional Jersey Property Unit Trust (JPUT) remains just as popular as ever.

In fact, there has been an uptick in establishing new JPUTs despite the continued impact of COVID-19.

We've seen a particular recent trend in the increased use of JPUTs to acquire healthcare and logistical assets, with the importance of the latter increasing due to the online activity of consumers during the past 12 months and beyond. Notably, many of the JPUT investors have come from South East Asia and North America, emphasising how far-reaching the JPUT has become.

Meanwhile, Jersey continues to grow its market share in private REITs and this trend is expected to continue. The UK REIT regime is already attractive to many sovereign wealth funds, pension funds, major global financial institutions and specialist property investors.

However, it is expected that this market will grow following the UK Budget 2021 announcement of the rise in the corporation tax rate from 19% to 25% starting in 2023. This change will make the REIT regime more attractive to a broader range of UK real estate investors.

In addition, we are seeing a trend that 'responsible' capital and sustainability are no longer 'fringe' concepts. They do (and will increasingly need to) underpin strategic decision-making and investment allocations by fund managers in the coming decades, as the global economy grapples with the impact of climate change, other potential environmental damage, rising inequality and political and economic crises.

Funds focusing on social housing, urban regeneration, supported living as well as more bespoke projects such as water related regeneration are becoming more common.

With these trends in mind, it’s worth noting that there are a number of reasons underpinning Jersey's continuing appeal in this space that should give managers and investors confidence, including the following benefits.

‍Accessibility

As an independent jurisdiction conveniently located near the UK and mainland Europe, Jersey appeals to managers who want to access global investors whilst remaining outside the AIFMD environment.

Removing the additional costs associated with AIFMD compliance, whether that is achieved by marketing into the EEA via national private placement routes or by targeting the US and Asian markets, can result in lower running costs and higher investor returns.

Managers and investors alike are familiar and comfortable with Jersey as a jurisdiction, and this appeal is enhanced by Jersey's global reputation as a market leader in promoting anti-money laundering measures and combating financial crime.  

Speed to market and cost efficiencies

As detailed below, it is possible to establish and manage real estate holding structures efficiently and effectively due to the flexibility and expertise that the Jersey real estate services industry can provide.

Holding vehicles can be established on a same day basis, whilst a Jersey 'private fund' can be established and authorised in as little as 3 business days (with a slightly longer lead time where there is EEA/UK investor marketing).

The expertise available across legal, accounting and administrative functions can also lead to lower launch costs and on-going maintenance costs, which ensures that Jersey remains a cost-effective choice.

Legislative flexibility

Jersey's company, partnership and unit trust laws are broadly based on the UK equivalents and will therefore be familiar to lawyers and asset managers in the UK and other common law countries.

The Jersey legislation is, broadly speaking, more flexible and more permissive which means it can easily accommodate the commercial terms of a deal.

JPUTs, for instance, are popular for single investor/single asset structures, but they are equally suited for multi-asset joint ventures or as investment fund structures. JPUTs often hold UK real estate directly, however, a JPUT does not need to, nor is a JPUT required, to hold the UK real estate directly. In addition, we are also seeing a revival in the use of JPUTs as hybrid or evergreen investment fund structures.

Regulatory flexibility

Jersey's regulatory environment provides significant flexibility in choosing a regulatory regime for a real estate structure, its investors and asset managers. Whilst some small structures can benefit from special dispensations afforded to joint ventures, the 'private fund' regime in Jersey is a popular option where there are a small number of sophisticated institutional investors who would benefit from a light-touch and effective regulatory approach.

For those asset managers who are seeking to attract a larger number of investors, or less sophisticated investors, then there are several public fund regimes which offer increased investor protection.

Tax neutrality

Jersey's tax regime is designed to avoid double taxation on real estate holding structures, so that these remain tax neutral where appropriate for non-resident investors and asset managers who are dealing with foreign real estate assets.

Service providers

Jersey is well known for its real estate-based service provider expertise, with service providers able to confidently support managers and investors throughout the entire property life-cycle from acquisition to development, financing, leasing, planning work and joint ventures, and eventual disposal.

Against the backdrop of its longstanding appeal and given the current trends in the market, as a jurisdiction, Jersey has the right infrastructure and ecosystem to assist first time and established asset managers with setting up and administering real estate fund structures, whilst at the same time providing certainty of tax treatment - which is not necessarily fully mirrored in other jurisdictions.

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An ability to remain agile in a changing landscape, deliver innovative solutions and offer a platform of stability are key differentiators for Jersey’s funds industry that are resonating clearly with managers and investors, according to the chairman of the Jersey Funds Association (JFA).

JFA Chair Tim Morgan gave his update at the JFA Annual Dinner recently (23 September), attended by more than 350 funds and wider industry professionals, including an overview of the current funds landscape, the ongoing work of the JFA with its key stakeholders in Jersey, and future opportunities for Jersey’s funds sector. It was the first physical return to events for the JFA since 2019, since when all updates had been provided on a digital basis.

Pointing to the fact that Jersey’s funds industry recorded another new record high of fund assets being administered at the half-way point in 2021 (£436bn), with private equity and venture capital increasing by 21% year-on-year and the number of Jersey Private Funds (JPFs) rising to 456, Tim commented:

“The latest figures show that Jersey’s focus on alternative investment funds continues to provide a stable platform of long-term capital. From the start it was clear that the pandemic was affecting participants differently. Large, well-known sponsors with strong platforms continued to fundraise. Conditions were more challenging for new and smaller investment groups. However, many have in any case proceeded with the raising of successful, small, first funds and club deals, and that correlates with the continued growth in the number of JPFs we have seen. It’s a real endorsement of Jersey’s appeal and expertise.”

In addition, Tim, who is also a partner at the Jersey legal practice of the Maples Group, highlighted the importance of Jersey’s funds industry maintaining momentum in delivering innovative solutions to global investors:

“Jersey has continued to test innovations in digital assets, as well as increased amounts of structures aimed at sustainable technologies and related assets, which is very positive. In addition, significant changes have also occurred in the administration space – increasingly tech is a key component of how services are being provided, which is enhancing how governance, risk management and compliance are managed in practice. Jersey service providers have been impressive in adopting a digital first approach over the past year and this is undoubtedly a key part of our success.”

Meanwhile, Tim also highlighted that shifts in global geopolitics, regulation and competition were providing challenges, with Jersey’s focus on maintaining a perfect ecosystem for alternative funds putting it in a strong position:

“The political environment is volatile – the change in US administration; increased pressures from the EU and OECD in relation to tax; numerous policy initiatives from UK in the post Brexit and post pandemic environment; upcoming elections in Germany and France. All this means that there is a need for continual engagement in relation to Jersey’s position internationally. At the same time, jurisdictionally, the competitive environment is intense.

“However, Jersey’s ability to pivot in an agile manner, in particular between JPFs and more narrowly-held joint venture and co-investment vehicles, is valuable and provides popular, efficient solutions. At the same time, Jersey has an incredibly strong culture of partnerships with the JFSC, government, and other industry elements all working together on areas of opportunity or concern for our funds and wider finance industry. This is a real differentiator for us, as we continue to focus on our core message - that Jersey offers a unique ecosystem to provide a platform of stability in a rapidly changing market.”

Entertainment at the event, which was held at the Trinity Showground, was provided by comedian and writer Jo Caulfield and London-based singer-songwriter and former Jersey Young Musician of the Year Sam Walwyn.

The main sponsor of the dinner was Mourant, whilst silver sponsors were BNP Paribas Securities Services, IQ-EQ, Ogier and PwC, and the champagne sponsor was Carey Olsen.

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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.

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The 2021 JFA Dinner is to be held on Thursday 23 September at the Royal Jersey Showground.

Tables for either 10 or 12 people are available and tickets are £90 per person.

Bookings can be made by contacting Caroline Harrington at enquiries@jerseyfunds.org

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.

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The 2021 JFA Annual General Meeting will take place on Friday 9 July via Zoom. Any member who would like to join the meeting is asked to contact the Secretary at enquiries@jerseyfunds.org for the dial in details.

Any member who is interested in joining the Executive Committee is asked to complete an appropriate nomination form by close of business on Wednesday 7 July 2021. A Nomination Form can be obtained from the Secretary at enquiries@jerseyfunds.org

Accelerated digital adoption, upskilling and product innovation will be key themes for a “confident and ambitious” funds industry in Jersey over the coming years, according to the findings of the third annual survey of Jersey Funds Association (JFA) members.

Presented by JFA Chair and Maples Partner Tim Morgan at a recent virtual event, the findings of the survey, which explored key opportunities and issues for Jersey’s funds industry and the sentiment of practitioners, will be instrumental in informing the JFA’s strategy over the coming years.

Tim was joined at the event by a panel of experts including Mike Byrne, Partner at PwC, Amy Bryant, Deputy CEO at Jersey Finance, Martin Moloney, Director General at the Jersey Financial Services Commission, and Alex di Santo, Group Head of Private Equity at Crestbridge.

Amongst its key findings were that digital transformation will continue to be pivotal to the core operation of funds businesses in Jersey, shaping approaches to regulation, tax and governance over the coming years. Highlighting the impact of Covid-19in particular, 92% of respondents said that the pandemic had changed the way their business uses technology to some degree, with 63% saying it had significantly accelerated digital adoption within their business.

Further, while the vast majority (62%) considered that current skills training was sufficient, around 37% suggested that greater support was needed to support upskilling for a more digitised future.

Meanwhile, on the regulatory front, the survey indicated that Jersey’s response to economic substance rules had been broadly welcomed by the industry, with 42% of respondents claiming that substance rules had had a positive impact on Jersey’s competitiveness, while 70% suggested that Jersey is striking the right balance between ease of doing business and regulation.

It also highlighted that Brexit is still seen as, on balance, a neutral or positive factor for Jersey’s funds industry, with almost a third (31%) of respondents anticipating an increase in business as a result of Brexit.

The survey also painted a picture of an industry that is looking to grow and diversify, with 69% of respondents saying they were confident that their business would grow over the next five years, driven largely by organic growth (69%).

In terms of strategic priorities, both in the short and medium terms, the focus remains on private equity, real estate, venture capital and debt funds, whilst geographically, Jersey’s funds industry is increasingly global in nature, with the US West and East coasts and Middle East markets seen as increasingly important, complementing the existing strong focus on the UK.

Commenting on the findings, Tim said: “Despite the challenges of the last year, Jersey’s funds industry has continued to see hugely impressive growth, with the latest figures for funds business registered in Jersey rising to a new record level of some £378 billion in 2020. The ecosystem Jersey provides for alternatives – its stable platform, quality regulatory framework, expertise and service quality – is clearly resonating with investors, and the outlook for the coming years remains very positive.

“Nevertheless, what this survey shows is that Jersey’s funds industry is both confident and ambitious, and continues to look to push boundaries, innovate and improve. The focus on digital adoption and upskilling comes across clearly this year, with the industry keen to position itself as an authority in the alternatives space, while there are also real ambitions to diversify and grow, including in the ESG space.

“These findings will be vital in informing how we continue to enhance our funds ecosystem, and I’d like to thank our membership for their time and support in putting their views forward.”

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The rise of sustainable finance, the impact of Brexit, EU regulation and the fallout of the pandemic all have the potential to shape considerations around alternative fund domicile selection, according to new research published recently by IFI Global and supported by Jersey Finance.

Based on the views of alternative managers, law firms and advisors from across North America, Europe and Australasia, including some of the world’s largest investors in alternatives, the research for this new report – entitled ‘The Future of International Fund Domiciliation 2021’ – was carried out between October 2020 and February 2021.

More information and the full report can be found here.

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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.”

Following continued COVID-19 related restrictions for holding large-scale events, the JFA committee has, with regret, once again resolved that it is unlikely that we will be able to hold the 2020 dinner scheduled for 7 May.  

Although we are disappointed to have had to make this decision, 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.

We are looking at alternative dates for later in the Year and we will notify the membership once further information is available.

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.

Figures in the recently published, and 26th iteration of, the annual Monterey Jersey Fund Report paint a picture of a vibrant and growing funds sector in Jersey, driven in particular by private equity and venture capital.

The report finds that fund assets serviced in Jersey rose to US$493 billion in June 2020, up 2.5% from 2019, whilst the number of serviced schemes increased to 1,495, up 11.9%.

The private equity and venture capital asset classes accounted for US$325.9 billion of assets for domiciled and non-domiciled funds with just over 950 funds and sub-funds.

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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.

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The total number of registered Jersey Private Funds (JPFs) has grown by almost two-fifths year-on-year, according to the latest figures, as the structure continues to assert its appeal for cross-border alternative fund structuring.

According to the latest quarterly statistics collated by the Jersey Financial Services Commission and published by Jersey Finance, there were 365 JPFs at the end of September 2020, a number that has risen by 37% compared to the same time the previous year.

Launched in 2017, the JPF structure is tailored to the needs of small numbers of sophisticated investors and offers high levels of flexibility, fast-track authorization and lighter touch ongoing regulatory requirements.

Meanwhile, the latest quarterly figures also show that the total value of regulated fund assets serviced in Jersey grew to a new record level of £365.6bn in the third quarter of 2020, up 7% year on year. This was driven by growth in the alternative asset classes, including private equity, venture capital, infrastructure and real estate, which saw growth of 12% over the year.

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

“In the context of the challenging environment for fundraising in 2020, these latest statistics reinforce the appeal of Jersey as a safe location for institutional capital, as investors have sought resilient, stable, robust, transparent and straightforward fund structuring options to continue to generate returns.

“The Jersey Private Fund in particular has become areal success story and, thanks to its speed to market, flexibility and cost-effectiveness, is now perceived as the go-to vehicle for private capital co-investment and cross-border institutional alternative fund structuring.”

Tim Morgan, Chair, Jersey Funds Association, added:

“Whilst other centres have struggled to keep up to speed as the environment has changed so quickly over the past 12 months, the sophisticated eco-system Jersey provides has proven to be hugely attractive amongst investors. The JPF is a key element of that appeal, complementing Jersey’s pragmatic regulatory environment, access to expertise, and global distribution capabilities. These figures reflect the strong position Jersey is in as we move into 2021 and continue to help investors navigate a challenging landscape.”  

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