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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.
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.
Believe it or not, the Jersey Expert Fund regime is 20 years old this year! Here, JFA members reflect on the significance of the regime and how it has helped evolve Jersey's alternative funds proposition...
More than 400 professionals from across Jersey's funds industry attended this year’s JFA Annual Dinner, held at the Trinity Showground recently...
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 28th 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.
