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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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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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.

With the 100-day countdown to Brexit now firmly on, Jersey is finishing 2018 on a real high and there’s every reason to look to 2019 with confidence.
To finish the year with the most recent figures showing that our funds business is at an all-time high, breaking through the £300bn barrier in Q3, is a fantastic achievement. Just as impressive is the performance of the individual asset classes - private equity has grown by 41% year-on-year, hedge by 18%, real estate by 11%, and infrastructure/credit/debt funds by 26%.

In fact, in recent times, we’ve seen some of the largest funds ever raised in Jersey – Softbank’s Vision Fund, CVC Fund 7, and Nordic 9 to name just a few – whilst Man Group, the world’s largest listed asset management firm, opted to establish a presence here.

It’s a challenging environment but the clear evidence is that fund managers in the UK, Europe and markets further afield are putting their faith in Jersey. And they have every reason to do so - as I look back over the past twelve months, I think we can be proud of what we’ve achieved as an industry.

In particular, we’ve seen Jersey assert its position as a centre that can offer seamless market access – and that’s absolutely key in light of Brexit and global protectionist policies more widely. With the likelihood of the UK crashing out of the EU without a deal still hanging in the balance, managers are quite rightly looking to mitigate the impact on their fund structures. Jersey has proved to be a popular choice of jurisdiction for UK managers, offering cost-effectiveness and flexibility through private placement.

Mid-year figures showed that the number of Jersey managers marketing into the EU through private placement rose 23% year-on-year whilst the number of funds being marketed into the EU this way increased by 11% over the same time frame. The expectation is that these figures will continue to rise around Brexit as managers look for certainty and stability.

With that in mind, I was really pleased that the JFA was able to bring to life just how well private placement is working by collating a series of real life case studies this year - it’s proving to be a valuable piece of work.

We’ve also successfully managed to deliver innovations to the market – the Jersey Private Fund, only launched in 2017, has come to the fore as the go-to product for small groups of sophisticated investors. Speed to market has become crucial for managers and the JPF has been able to meet those demands, offering impressively fast regulatory approval - as at June this year, 130 JPFs had been established holding combined total assets under management of almost £20bn. The rate of establishment is so fast, the 200 mark should be passed fairly quickly in 2019.

Whilst the JPF has proven to be an attractive vehicle in itself in 2018, Jersey also made applications for the JPF online only this year, making the process even quicker. It really is revolutionary and a real statement of Jersey’s intent in the digital space as we look to ‘go paperless’ in the years ahead.

We’ve also worked hard this year to make Jersey’s commitment to high standards of governance and substance absolutely clear. In particular, we worked together with Jersey Finance to produce a factsheet outlining our position on the OECD’s BEPS project – the overriding message is that the action points outlined under BEPS have not altered Jersey’s position as a leading, forward-thinking centre for the domiciliation, management and servicing of funds.

It’s actually a year ago this month that Jersey became only the third jurisdiction in the world to ratify BEPS into domestic law, putting Jersey in a better place to respond to it than many other jurisdictions. And fittingly, this December Jersey approved economic substance legislation, further underlining our position as a responsible, high quality jurisdiction.

So what can we expect looking forward to the coming twelve months?

First of all, the high-level trends are right on Jersey’s sweet spot, with global allocation to alternatives continuing to increase. That’s good news right across the private equity, hedge, private debt, real estate and infrastructure asset classes, and there’s a real opportunity for Jersey to provide a home to a growing number of managers, as well as funds, as they look for a stable location to operate from. In 2018, Man Group chose

We’ll see greater global opportunity – UK managers will continue to be a core market for Jersey, but we also have a real opportunity to support managers elsewhere with fund distribution. The Monterey Insight Jersey Fund Report 2018 suggests an increasingly global picture for Jersey’s funds sector already, with the number of Jersey funds with US promoters growing 165% over the past five years. I expect this trend to continue into 2019.

Innovation will remain key – speed to market, flexibility and cost-efficiency will remain vital, and we are in a strong position to satisfy those needs through our ongoing work to deliver both the right products to the market and a digital infrastructure that appeals to managers and investors.

But just as there is opportunity, there is plenty of competition too. In 2019 more than ever, we need to continue to bring the Jersey proposition to life and develop clear and compelling messages.

I strongly believe we have the very best ecosystem for a funds industry – not only does that include having a first-class physical, digital, regulatory and legislative infrastructure in place, it also means having the best people too. Time and again, we hear that service quality is what matters when it comes to jurisdictional selection. Our people are at the very heart of delivering that and will be what continues to set us apart in the year ahead.

Enhancements made last month to the Jersey Private Funds (JPF) regime, making it possible to submit applications online, will significantly speed up the authorisation process and revolutionise Jersey’s funds sector, according to the head of the Jersey Funds Association.

Last month (2nd August 2018), the Jersey Financial Services Commission (JFSC) launched a dedicated online application tool for JPFs, Jersey’s fast-track fund product designed to cater for limited numbers of professional and institutional investors.

The new tool is autonomous, offering suitable applicants the potential for instant approval. Under JPF rules, applications will be made by Jersey-based authorised service providers, who will have an account to use the online tool.

The tool forms part of the JFSC’s e-enablement strategy, with the JFSC also announcing last month (14th August 2018) that all JPF applications made from 1st September onwards would need to be online and that submissions in paper format will no longer be accepted. A number of minor amendments to the JPF Guide were also announced last month to clarify this.

The JFSC is anticipating that all applications and notifications will be paper-free by early 2019.

Commenting on the developments, Mike Byrne commented:

“The JPF has already proven to be a hugely popular fund structure amongst professional and institutional investors, with around 130 having been established in just over a year since its launch, a number being used to target EU investors. The ability to make applications online will undoubtedly make it even more attractive for managers, speeding up authorisation turnaround times significantly and making the whole process more efficient.

“It really is revolutionary for Jersey’s funds industry, particularly in the current market where managers frequently need to bring their funds to market quickly and, ahead of Brexit, are looking for centres than can guarantee them rapid, efficient support. This tool also lays the foundation for future online capabilities right across the funds sector, emphasising Jersey’s focus on innovation and underlining its ambitions in the fintech space.”

As at 30 June 2018, the JFSC had granted authorisation to 128 JPFs, an increase of 190% since August 2017.