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.

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Earlier this month, Jersey Finance contributed to a white paper by IFI Global looking at domiciliation trends in a fast moving world.

According to the report, BEPS may well be the most important development for structuring in the alternative fund industry in a generation, with many fund managers considering their domiciliation options more closely now, in part because of the growing costs and regulatory requirements of being in certain Caribbean jurisdictions.

The full white paper can be found here.

In the 12th edition of Jersey - First for Finance, JFA chair Tim Morgan explores how Jersey's funds industry is focused on honing its vision to provide the perfect ecosystem for cross-border alternative funds.

The full article and publication can be found here.

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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.

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As previously advised, in light of continuing COVID-19 related restrictions for holding large-scale events, the JFA committee has, with regret, resolved that it will no longer be possible to proceed with the 2020 dinner, scheduled for 15 October.

We have, therefore, decided to concentrate our efforts on arranging the 2021 Dinner and have secured the  Royal Jersey Showground for Friday 7 May when hopefully restrictions will have been lifted and we can hold an event on the same lines as previously.  We are delighted to confirm that Tom Allen, TV comedian and presenter (pictured below) is, as previously planned, lined up as our Guest speaker for the evening.

Bookings already made will be rolled forward to the revised date in 2021.  However, if you have any queries, or if you would like to make a booking please contact me at enquiries@jerseyfunds.org.

We will continue to monitor the situation but we hope to see you for a celebration on 7 May.

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

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

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

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

The Jersey Funds Association (JFA) has elected its new committee for the coming year as it looks to maintain momentum and continue to champion Jersey as the perfect ecosystem for alternative funds.

Elected at the JFA’s recent Annual General Meeting (17 July), the committee retains some continuity whilst also introducing a number of new faces. Tim Morgan remains Chairman and Michael Johnson Vice Chairman, whilst the remainder of the committee now also includes Richard Anthony, Mike Byrne, Steve Cartwright, Ben Dixon, Mark Grenyer, Ben Honeywood, Niamh Lalor, Dilmun Leach, Chris Marshall, Robert Milner, Simon Page, Martin Paul, Tom Powell, Peter Rioda, Ben Robins, Martin Rowley and Sarah Sandiford.

At the AGM, Chairman Tim Morgan also delivered an annual report identifying the key challenges and opportunities for the industry:

 “Jersey's funds industry operates in a fast evolving environment, with the ongoing economic and social implications of the coronavirus pandemic needing to being absorbed by a market that was already seeking to plan for and adjust to the political uncertainties relating to the UK's ongoing Brexit process.

“The pandemic is already proving to affect asset classes and sectors in very different ways, but for Jersey the essential positive message remains that we offer a platform of stability in a rapidly changing market which is borne out through very high levels of activity through the recent period covering the pandemic. This is a message that the new-look JFA committee will continue to champion over the coming year.”

Meanwhile, pointing to specific areas where the JFA had identified opportunities for Jersey, Tim commented:

“A trend away from widely-held blind pool structures and towards more narrowly-held joint venture and co-investment vehicles appears to be continuing, particularly in the private equity, real estate and adjacent sectors. The Jersey Private Fund regime continues to provide a popular, cost-effective and strong solution in this space.

“In addition, the trend of inward migration by substance managers, particularly in the hedge fund but also more recently in the private equity and venture capital space, continues and Jersey is an increasingly important hub for managers with a substantive local presence.

“Meanwhile, as the market develops further through the process of Brexit and as EU regulation continues to build, we anticipate increasing opportunities in Jersey for a wide variety of asset classes, transaction structures and investor bases.”

Acknowledging the work and achievements of outgoing committee members, Tim concluded by thanking all those supporting the work of the JFA:

“I’m really grateful for the efforts of the committee over the past twelve months. We have achieved a lot. I’m also pleased to welcome some new faces to help drive forward our plans for the coming year across our legal and technical, education and training and communications remit. In particular, I’m delighted that Tom Powell will be leading a new group for us to coordinate a strategy around ESG, an area that is now a fundamental part of our overall proposition as a jurisdiction.”

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The JFA will be responding to this consultation and we would welcome any comments from the membership.

The consultation closes on 4 September and any member who would like their comments considered in this response is asked to forward these to Peter Rioda at peter@rioda.me as soon as possible and no later than 31 August.

Consultation Paper on secondary legislation under the Financial Services (Disclosure and Provision of Information) (Jersey) Law 202-

DRAFT FINANCIAL SERVICES (DISCLOSURE AND PROVISION OF INFORMATION) (JERSEY) ORDER 202

DRAFT FINANCIAL SERVICES (DISCLOSURE AND PROVISION OF INFORMATION) (JERSEY) ORDER 202-

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

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

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

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

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

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

Tim Morgan, Chair of the Jersey Funds Association added:

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

A FAQ about the amendments can be found here.

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

‍By JFA member firm Langham Hall

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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.

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2020 Annual General Meeting

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

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

2020 AGM Letter to Members

2020 AGM Notice & Agenda

2020 Nomination Form

2019 AGM Minutes

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Apex Group Ltd. (“Apex”), a global financial services provider, today announced the expansion of subsidiary brand, Throgmorton, into Jersey to deliver business services, including accounting, company secretarial and payroll services to businesses operating locally in Jersey.

This development follows the Group’s previous Throgmorton expansion announcement, last month, through the unveiling of a newly established Throgmorton US office. Now it is focusing on building out its well-established Corporate Solutions offering in Jersey.

Having acquired UK based Throgmorton in June 2019 as part of a larger deal, which also saw the purchase of the Corporate Services and Private Client business from Link Asset Services, Apex is now building on Throgmorton’s existing UK reputation and capabilities through geographic expansion. The Throgmorton brand has been well-respected in the UK market for over 20 years and has enhanced the Group’s corporate solutions expertise with the addition of over 150+ experienced business services professionals.

With over 40 offices worldwide, the Group is leveraging its existing global footprint to support expansion plans and systematically add new Throgmorton businesses to its offices in key locations worldwide. The strategy is in line with the Group’s long standing philosophy of delivering local service to clients on a global scale and reinforces its unique single-source solution capabilities.

Matt Claxton, Global Head of Corporate Solutions, comments:

“This is another important moment for our corporate solutions capabilities. Jersey is a highly respected business jurisdiction and it therefore makes a lot of sense for us to ensure we have a suite of services available for businesses locally. We have ambitious expansion plans for the corporate solutions arm of the Apex Group and Throgmorton’s services are a core element of this service line. Being able to deliver business services to the local market sets us apart through an extensive range of solutions available for clients under one roof.”

Adam Hewitson, Head of Throgmorton, comments:

“It was only last month that we unveiled the first of a number of geographic expansions for the Throgmorton business including the US. Our parent company, Apex Group, has enabled us to increase our geographic footprint through the complementary service we can offer clients as part of the combined Group’s single-source solution. Jersey is an important market for us and our depth of experience supporting UK businesses over the last 20 years means this is natural progression and an immediate value-add for businesses on the Island.”

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The JFA is planning to issue regular updates to members over the coming weeks, to ensure as much information as possible from the regulator and government relating to the Covid-19 pandemic is issued to the membership during this challenging time.

Please find below some links to recent updates provided by JFSC that should provide you with details on issues that may affect your business:

https://www.jerseyfsc.org/news-and-events/more-information-for-businesses-in-response-to-covid-19/

https://www.jerseyfsc.org/news-and-events/jfsc-allows-more-time-for-meeting-deadlines-in-response-to-covid-19/

In light of the current challenges and environment, the JFSC have decided to extend the closing date for the Investment Business Regime consultation to the 1st May. Please find the official Industry Update here.

The matters included in the consultation are important and warrant a full response from industry.

Click here to read the attached media release which is now also on the gov.je website under the Coronavirus business info section https://www.gov.je/Health/Coronavirus/Pages/CoronavirusBusinessAdvice.aspx

Revenue Jersey has issued guidance with regards to the implications of Coronavirus for Economic Substance determinations and the impacts on tax residence of companies.  Click here to view release.

Commenting on the guidance, Tim Morgan, Chair of the JFA, said:

"The publication of this guidance is a welcome move and a proportionate response from Revenue Jersey that should provide fund managers with some reassurance and help ensure that they can continue to fulfil their substance obligations.'

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Recent figures illustrating growth in Jersey’s funds industry are reflective of manager and investor confidence in Jersey and provide evidence that Jersey is right at the cutting edge in creating an ideal ecosystem for alternatives, according to the Chair of the Jersey Funds Association.

The latest figures for Jersey’s finance industry for the period ending 31 December 2019, collated by the Jersey Financial Services Commission (JFSC) and published in February, found that the net asset value of regulated funds under administration in Jersey grew by £25.8bn annually to stand at £345.7bn.  This growth was fueled by the alternatives sector, which rose by 6% over the year.In particular, private equity and venture capital increased by 19% in 2019 to stand at £136bn.

A deeper dive into those figures shows that, over the past five years, overall funds business in Jersey has grown by 51%, with private equity growing by more than 200%, and the value of real estate business growing by some 31%.

Those figures came shortly after the publication of the latest Monterey Jersey Fund Report, also published last month, which found that (as at June 2019) Jersey’s funds sector had achieved sustained annual growth over each of the past three years of 17%, again driven predominantly by private equity, venture capital, real estate and infrastructure funds.

That report also pointed to the growing global appeal of Jersey’s funds environment, with the value of Jersey-domiciled funds with US promoters rising by 20% year on year and funds with Japanese promoters doubling.

Tim Morgan,Chair, Jersey Funds Association, said: “From a funds industry perspective, this is all clear evidence that the focus we have placed on creating a perfect ecosystem for alternatives is hitting home amongst an increasingly diverse manager and investor base. The growth we are experiencing in private equity is impressive, but we’re seeing a strong performance in real estate, hedge and infrastructure too, and with good reason.

“Our ability to enable managers to distribute funds easily and cost-effectively into the EU through private placement and to the rest of the world outside of the constraints of AIFMD is really finding favour with managers, whilst our commitment to nurturing a substance-driven environment and our emphasis on governance, quality service and specific expertise is increasingly attractive.

“It’s particularly pleasing to see our Jersey Private Fund (JPF) product, the AUM figures for which are not included in the JFSC’s overall reported total values, continue to grow in popularity too and surpass the 300 mark, cementing its position as the go-to vehicle for sophisticated investors.”

At the end of last year,the JFA presented the findings of its annual members survey, which found that 85% of members were confident or very confident on their growth outlook.

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At the end of last year, we presented the findings of our second annual JFA members survey – a project that will be instrumental in informing the organisation’s and our industry’s direction and strategy this year and beyond.

Exploring key opportunities and issues for Jersey’s funds industry, the findings painted a generally positive picture as far as the sentiment of practitioners is concerned, and their perceptions of Jersey as a specialist alternative funds jurisdiction.

Amongst its key findings, for example, were that the industry’s approach to the key macro issues were largely optimistic. On Brexit and new economic substance rules, attitudes were balanced but largely positive, with over 80% of respondents saying Brexit would be neutral or increase business and around three quarters saying the same about substance rules.

Members were also very positive in terms of their overall growth outlook for the year ahead, with 84% saying they were confident or very confident of growth over the coming five years, a significant increase from last year.

These responses tally with the performance we saw in our industry over 2019, with NAV figures reaching new record highs of £342bn and private equity in particular being the stand out performer.

We’ve also seen asset managers continuing to commit to relocating to and establishing a presence in Jersey, which is a huge positive in light of the economic substance rules introduced last year, whilst the number of managers making use of private placement through Jersey and into the EU reflects the high regard in which Jersey is held for straightforward, seamless market access.

We really shouldn’t underestimate just how positive the outcome of Jersey’s work around the key issues such as Brexit and substance have been, or just how significant the recognition Jersey received from the EU almost exactly a year ago was for our industry – it signposted that, without doubt, as a jurisdiction we are serious about cooperation and global standards, and that has translated into good business flows.

The fact that practitioners are confident that Jersey can maintain this growth trajectory against what continues to be a challenging global environment is hugely encouraging.

Future

But that’s only really half the story, because what really stands out from the survey findings is that, despite being so positive about the future, our industry is not complacent and is pragmatic and ready to find ways to continue to enhance our proposition and hone our vision to provide the perfect ecosystem for cross border alternative funds – conscious that competition is very real and that the environment around us continues to change.

As an industry, we are very clear that maintaining growth requires a commitment to innovation, continuing to source the best talent, engaging with stakeholders, and differentiating ourselves through service quality, ease of doing business and stability.

In respect of technology, for instance, the survey indicated a clear trend, with over 56% of respondents saying that they had employed automated technology over the past year. That sort of investment is impressive, and will be pivotal in meeting the needs of alternative managers in the coming years in areas like cyber security, reporting and data management – around 95% of respondents said they considered automation will have a moderate or significant impact on them over the coming five years.

Meanwhile, there’s a real appetite to back product development – around three quarters of member firms said they would be willing to contribute ring-fenced fees to the regulator in order to fund product development. Enhancing onboarding procedures for new clients came out particularly strongly in this respect, rather than bringing new products to market – through automation and online portals, and by looking again at significant simplification and clarification of Jersey’s AML regime.

There were also a number of calls amongst respondents to look at ways to further enhance Jersey’s private placement regime and revisit third country passporting, whilst respondents also pointed to the need to be more proactive in meeting the demands of and responding to the needs of an industry that is increasingly engaging on the green finance and ESG agenda.

Outsourcing is another potentially exciting opportunity – around 40% of respondents said they saw outsourcing increasing over the coming three years. But we need to find ways to change perceptions of what outsourcing is all about and how, through embracing technology and understanding risk, we can meet outsourcing demands.

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...members are unequivocal – it is simplicity, ease of doing business and clarity that will resonate with fund managers and investors...

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The overwhelming message, though, was that our absolute focus should be on providing clarity and simplicity in everything that we do. In a hugely complex environment, our members are unequivocal – it is simplicity, ease of doing business and clarity that will resonate with fund managers and investors, and we should not lose sight of that.

Jersey is not a volume player; we are all about service quality and standards and those, the survey suggests, will be our differentiators.

Over the coming months, we’ll be working hard to engage with industry and key stakeholders both on and off island to respond to the challenges this survey has set out, capitalise on our core identified strengths and look at ways to innovate in order to enhance our funds ecosystem.

With almost 90% of firms indicating that they considered promoters, investors and gatekeepers would give Jersey a four or five star rating, we have a good basis to start from, and with the backing of a clearly very ambitious and focused industry, we are on a good path to maintain and improve on the success we saw in 2019.

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