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.

‍

By Michael Johnson, Chair, Jersey Funds Association

‍

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.

‍

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

‍

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.

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.

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.”

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.

‍

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.

‍

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.

‍

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.

‍

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.

‍

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

‍

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.

‍

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 number of registered Jersey Private Funds (JPFs) has surpassed the 500 mark, according to the latest figures, as the structure continues to assert its appeal for flexible alternative fund structuring.

According to the latest quarterly statistics collated by the Jersey Financial Services Commission and published by Jersey Finance, there were 502 JPFs at the end of September 2021, a number that has risen by 38% 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 authorisation and lighter touch ongoing regulatory requirements. Further, the nimble nature of the structure mean it chimes particularly well with the tried and tested private placement route for marketing funds into Europe as well as within the ESG space.

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

“These latest figures show the enduring strength of the JPF, particularly when it comes to private capital co-investment and cross-border institutional alternative fund structuring. By being cost-effective, flexible and swift to market, the structure has genuinely become a go-to vehicle that has, undoubtedly, played a part in the sizeable growth we’ve seen in our funds sector as a whole.”

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.

‍

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.

‍

Live streamed last week (4 February), the latest Jersey Finance Funds Masterclass, which featured a number of industry and Government of Jersey representatives, explored what lies ahead for the European alternative funds landscape in the wake of Brexit with the transition period having now come to an end. Amongst the themes explored by panellists were the change stemming from Brexit, the review of the AIFMD, the shifting global corporate tax environment and the stability Jersey offers the alternative funds community in light of this period of change.

Watch the Masterclass again here.

‍

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

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

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

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

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

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

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

Tim Morgan, Chair, Jersey Funds Association, added:

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

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

‍

‍By JFA member firm Langham Hall

‍

Over the past few months, we have seen the fundraising landscape turned on its head,with many LPs halting any new allocations and instead paying careful attention to their existing portfolios.

In late March we estimated that over half of global LPs had pressed pause on underwriting new private fund investments, either stopping their investment allocations entirely, or only proceeding with in-process investments.

As markets begin to open up again, we are seeing positive sentiment from LPs, who are now starting to look at resuming their investment programmes, albeit with perhaps a different risk appetite to that of 2019.

Looking to Europe in particular, we have seen a sustained increase in the number of non-EU sponsors looking to market to the bloc, where the aggregate AuM now exceeds €23 trillion.

For these sponsors, there are several routes to market, with no “one size fits all” approach. These include reverse solicitation, marketing under National Private Placement Regimes (“NPPR”), or the setup of a European parallel vehicle to access the marketing passport under the Alternative Investment Fund Managers Directive (“AIFMD”):

·        Reverse Solicitation: this refers to the acceptance of subscriptions from investors that actively solicited the manager without any active marketing taking place. Managers that receive genuine inbound enquiries may accept subscriptions via reverse solicitation, but it would be prudent to document that true reverse solicitation has taken place in case of litigation further down the line. Due to its passive nature, reverse solicitation cannot be considered a marketing strategy.

·        Private Placement: for managers using non-EU structures, e.g. Cayman, Delaware or Channel Islands, some countries still retain their National Private Placement Regimes. These can be tricky to navigate but for managers raising in just a handful of countries, this can be a cost-effective way of accessing Europe. For many countries, the manager will be required to complete and file Annex IV reports for each Alternative Investment Fund (“AIF”) being marketed. For countries such as Germany and Denmark, a depositary-lite is required to be appointed. It is important to note that NPPR is particularly difficult in much of southern Europe, including France, Italy and Spain.

·        European Parallel: Under AIFMD, funds which operate within this framework qualify for the European marketing passport, allowing these AIFs to be distributed in all 28 European member states. In this model, the fund will be required to appoint a regulated full scope Alternative Investment Fund Manager (“AIFM”), as well as a depositary. We often see these funds setup in Luxembourg, using a host-AIFM, to avoid the regulatory and substance burden of setting up a sponsor owned Luxembourg AIFM. By having an AIFMD compliant parallel fund, managers can accept capital opportunistically and at short notice. There are also no restrictions on where the fund can be marketed (although there are restrictions on the parties to whom it can be marketed).

Clearly there are pros and cons to each method, and managers will need to review which is the most suitable depending on their marketing strategy. However, with such a large pool of institutional capital in Europe, it is getting harder and harder to ignore the fundraising potential in the region.

‍