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JFA News
Thursday
11
December 2014

A Tried and Tested Model

This article was first published in Preqin's 'Private Equity Spotlight', December 2014.

With the transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, recent weeks have seen a marked rise in analysis, and some speculative comment, about how it is bedding down in different jurisdictions, how private equity managers are coping with the regulation most effectively and how private equity fund structuring is changing.

From a Jersey perspective, far from the AIFMD prompting a re-domiciliation towards onshore locations, which is a sentiment that has emanated from some corners of the European funds community, in the months since the AIFMD came into play, there has actually been an uptick in the value of private equity fund business being structured through the jurisdiction.

The latest figures, compiled by the Jersey Financial Services Commission (June 2014), show that the total value of funds being administered in Jersey has stayed consistently high in recent months, around the £200bn/$330bn mark, with private equity forming a substantial proportion of this. In fact, the specific value of private equity assets under administration in Jersey has risen steadily in recent times, almost doubling over the past five years.

Further reflecting the confidence there continues to be in Jersey as an alternative funds domicile, in the real estate funds sector, values under administration in Jersey have grown to their highest since pre-crisis levels.

Moreover, Europe's largest private equity fund raised in recent years enjoyed its final $10bn closing this year from a Jersey management platform, whilst the second largest real estate fund ever to be listed on the London Stock Exchange was structured through Jersey this year. These are just two of a number of recent high value Jersey alternative fund launches.

Far from European regulation, including AIFMD, causing a movement away from offshore centres, undoubtedly the trend evidenced across managers in Jersey is one of building significant future management substance. A number of major alternative fund houses have moved to or expanded their presence in Jersey recently.

Having opened an office in Jersey in June this year, for instance, Carne Group recently received authorisation for an independent AIFMD-compliant management company in Jersey, the first to be approved outside the European Union, allowing alternative fund managers including private equity managers, to comply with the AIFMD regime while maintaining a fund in an offshore, non-EU jurisdiction.

This isn’t a one-off, but reflects a general growth in interest from major alternative fund houses and managers in a Jersey structure of this nature, allowing them to access the European market and meet the requirements of the AIFMD but without the need for an EU domicile.

Thanks to its approach to regulation and specialist alternative fund expertise, Jersey is affirming its position as a leading domicile for European private equity business, including structuring and servicing, both in spite of and as a result of the AIFMD.

Flexibility

The initial response of managers to the AIFMD has been interesting, not least the idea that the much hallowed pan-European AIFMD ‘passport’ may not automatically be the most suitable choice. In contrast, the private placement option remains popular, providing managers and investors with real, practical benefits.

Increasingly, private equity managers are finding that the private placement option into Europe offered through Jersey can provide them with certainty of European market access, but with added flexibility and without the headache and costs of reporting under full AIFMD ‘passporting’ compliance.

Figures from the Jersey Financial Services Commission (JFSC), for example, indicate a strong take-up in Jersey's private placement route into Europe. Just months after AIFMD came into play and 176 Jersey funds and 49 Jersey fund managers are already actively marketing into the EU with JFSC authorisation under private placement regimes.

Additional data also shows that the UK remains a key market for Jersey managers and, in indicating which EEA Member States they intended to market into, most managers licensed to carry on fund services business in Jersey say they intend to market their funds into the UK. The fact that the UK remains such a key market is not surprising, given its strong links with Jersey. With the UK Treasury confirming its national private placement regime will be in place until 2018, Jersey will continue to benefit from certainty of access to the hugely important UK investor market.

Interestingly, though, the next most important intended markets for Jersey managers were Sweden, Belgium, the Netherlands, Ireland, Denmark, France, Germany and Luxembourg.

This considerable success reflects the broad appeal of Jersey within Europe. However this is perhaps not surprising given the mixed reception the passport has been given by managers.

In recent research by IFI Global (‘The Impact of AIFMD’, October 2014), for example, a significant number of managers said the AIFMD’s carrot, the passport, was of ‘little’ to ‘no interest’ to them.

Further, the cost of reporting and compliance under AIFMD through the passport, and the possibility of those costs eating into investor returns, remains a major concern. Research by BNY Mellon and FTI Consulting (July 2014) highlighted that managers expect regulatory, risk and compliance reporting to account for the majority of ongoing costs associated with AIFMD compliance, with the increased costs in some cases looking set to fall onto individual funds.

The actual value of the AIFMD is being questioned too. The BNY Mellon/FTI Consulting research also suggested that only 39% of managers believe that AIFMD will be either very beneficial or slightly beneficial to their organisation, and the same proportion of respondents believe end investors will benefit from AIFMD.

As far as the European fund structuring landscape is concerned, the IFI Global research also reveals that managers hold the general view that AIFMD will not require them to change the domiciliation of their funds. What the AIFMD will prompt, the research says, is for the European alternative fund industry to become even more institutionalised than it is today, with fewer independent alternative managers left in the EU with AUMs below $1 billion by 2020.

The indications are that boutique managers cannot see any real advantages to AIFMD, with a number of them indicating that they might move to centres outside Europe. In such circumstances, Jersey can offer a cost-effective base with European market access guarantees.

Overall, the value, benefits and ease of implementation of the AIFMD passport are far from clear, whilst the private placement option is proving an attractive, flexible and highly credible alternative.

The results of ESMA’s recent ‘Call to Evidence’ will certainly be an important next step in terms of AIFMD passporting being extended beyond EU AIFs managed by EU AIFMs. However, the work that has gone into future-proofing Jersey’s regime means that, if the untested AIFMD brand succeeds in the longer term, the availability of an AIFMD-compliant option in Jersey, when third country manager passporting commences in the EU, will only add to Jersey’s appeal across all manager and investor types, and locations.

Ring-Fenced

For over 25 years Jersey has provided an efficient and familiar, appropriately regulated and tax neutral operational model for the structuring of private equity funds, which has helped deliver safe and stable returns for the industry and its international investors through all economic cycles.

As we now look to the longer-term, beyond AIFMD and with further regulation on the horizon, there is a real need for private equity managers to consider longer-term market developments, and Jersey remains well placed; being a non-EU jurisdiction, for example, Jersey is ring-fenced from the business risks and distractions of unprecedented levels of EU regulatory creep.

From a private equity servicing point of view, meanwhile, there is expected to be significant opportunity for Jersey service providers to support their onshore counterparts as regulatory pressures, including AIFMD, ramp up the volume and complexity of reporting requirements. Onshore managers are already looking to outsource their administration and governance requirements to dedicated specialists, and Jersey, with its sophisticated network of highly experienced administrators, is ready to meet that demand.

What is equally encouraging from Jersey’s perspective is that, whilst there has been a noticeable rise in alternative funds being structured through Jersey targeting UK and continental European assets, this has been accompanied by a growing number of promoters making use of Jersey for funds targeting assets and investors in non-European growth markets around the world.

For this reason, Jersey’s ability to offer a regime that is fully outside the scope of the AIFMD has been crucial, positioning it strongly to cater for a rise in the number of funds targeting growth markets across Russia, Africa and Asia.

A report commissioned by Jersey Finance and published by Capital Economics last month, for instance, highlighted that Africa has the opportunity to quadruple living standards by 2040, but to do so it will need to find $11.4 trillion in extra investment. Whilst the report estimates that only around 48% of that can be plugged by a combination of aid, domestic profits and local governments, the remainder, $6.1 trillion, will have to come from foreign direct investment.

By providing protection for investors, expertise and experience, efficient cross-border investment pooling, efficient and robust regulation and tax neutrality, Jersey is well placed to make an important contribution to the economic growth Africa needs. There are clear opportunities for private equity structuring through Jersey against this backdrop.

Thanks to its approach to regulation and alternative fund expertise, Jersey is not only affirming its position as a leading domicile for European funds business, but is also strengthening its appeal as a European time-zone centre for global private equity fund structuring and servicing.

Where Europe is concerned, now reluctantly accepted as the unavoidable future regulatory model onshore, the AIFMD brand has provided commentators with an opportunity to second-guess the Channel Islands' dominance in the alternative funds business. Before jumping aboard the passporting juggernaut, private equity managers need to consider carefully all the options available to them. All the statistics suggest the tried and tested offshore model will continue to support discerning and successful managers and investors for many years to come.

Further, as cross border finance grows, so too will the demand for tax neutral capital raising and pooling centres. With its flexible regulatory regime, structuring expertise, respect for the rule of law, use of a common business language, time zone convenience and protection of property rights, Jersey is extremely well placed to meet this demand, both within and outside of Europe.

With the transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, recent weeks have seen a marked rise in analysis, and some speculative comment, about how it is bedding down in different jurisdictions.

Tuesday
9
December 2014

New legislation can bolster Jersey Hedge Fund appeal

A change to Jersey’s legislation will help bolster the jurisdiction’s standing as a centre for hedge fund business, according to Jersey Finance.

The introduction of a new exemption in Jersey’s Financial Services Law, designed to simplify and encourage the establishment of hedge fund management businesses in Jersey, was signed into law by Jersey’s Chief Minister in late November.

The change enables Jersey-registered hedge fund managers to be regulated solely under Jersey's 'funds' regulations and not also its ‘investment business’ regulations, provided the managed accounts meet certain criteria to be 'qualifying segregated managed accounts'.

In enabling hedge fund managers to offer managed account services to non-fund clients alongside fund clients without the need for further regulation, the change allows managers to benefit from Jersey's 0% corporate income tax rate without incurring the tax disadvantages of an 'investment business' registration.

In order to benefit from the exemption, a managed account must be able to meet a number of certain criteria, relating to the level of its initial subscription, the strategies it follows, how the assets are held in custody and the name the managed account is held in. The manager will also have to meet a number of reporting responsibilities.

Geoff Cook, CEO, Jersey Finance, said:

“Jersey has a healthy and growing hedge fund sector, and this change in legislation is expected to encourage further growth by simplifying the framework for managed accounts whilst retaining an appropriate level of regulation.

“In particular, it is anticipated that the exemption will boost Jersey’s appeal as a centre for facilitating the incubation and hosting of start-up and smaller hedge fund businesses. In addition, the change is expected to prove popular with those Jersey managers who are seeing a rise in managed account business where there is potential to provide investment services to European clients without the need for AIFMD compliance.”

The latest figures for Jersey’s finance industry, for the period ending September 2014, reflected a particularly strong performance for its funds sector, with the value of funds business in Jersey reaching the highest level in five years, and the net asset value of regulated funds increasing by around 5.5% year-on-year to reach just over £205 billion.

A change to Jersey’s legislation will help bolster the jurisdiction’s standing as a centre for hedge fund business, according to Jersey Finance.

JFA News
Friday
5
December 2014

Jersey funds figures reach five year high

The latest figures for Jersey’s finance industry reflect a particularly strong performance for the funds sector, with the value of funds business in Jersey reaching the highest level in five years.

The statistics highlight that the net asset value (NAV) of regulated funds increased by £5 billion in the third quarter of 2014, and by around 5.5% year-on-year, to reach just over £205 billion, the highest figure since March 2009. In addition, the total number of regulated funds rose by 21 during the quarter.

This was led by another strong performance in the alternative asset classes, with private equity and real estate funds both growing on the previous quarter by over 4%, and real estate increasing by an impressive 33% year-on-year.

The latest statistics, collated and prepared by the Jersey Financial Services Commission, are for the three month period ending 30th September 2014, with headline figures including:

  • The net asset value of regulated funds under administration increased by £5bn from £200.4bn to £205.4bn during Q3 2014.
  • The total number of regulated collective investment funds increased by 21 from 1,283 to 1,304 over the same period. As at end of the third quarter of 2014, there were 204 unregulated funds of which 133 were active.
  • The total number of consents granted in respect of COBO only Private Placement funds increased by 3 to 30 with a reported total NAV of £696m.

Geoff Cook, Chief Executive, Jersey Finance, commented:

“Jersey’s funds sector is performing particularly well at the moment, with the total number of regulated funds increasing by 21 over the period and there was a £5bn increase in the NAV of funds under administration. The private placement route into the EU, meanwhile, remains a very attractive option for Fund Managers based outside the EU. ESMA recently issued a consultation paper on whether the AIFMD passport should be extended to third countries, which Jersey Finance is co-ordinating a response to together with the Jersey Funds Association.’’

Ben Robins, Chairman, Jersey Funds Association, added:

"The fact that there is a strong upward trend across Jersey’s funds industry in the period since the AIFMD was implemented is very pleasing, both in terms of fund launches, which are well up on last year, and in the value of funds business in Jersey, which has reached the highest level in five years, thanks to strong performance in the core private equity, real estate and hedge fund asset classes and growth in the debt and infrastructure fund spaces. All of these figures demonstrate good, steady growth and point to Jersey’s ongoing appeal for alternative funds business.”

The latest figures for Jersey’s finance industry reflect a particularly strong performance for the funds sector, with the value of funds business in Jersey reaching the highest level in five years.

JFA News
Thursday
4
December 2014

Ongoing Appeal

This article was first published in Real Deals, 4 December 2014.

With the transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, there has been a marked rise in analysis, and some speculative comment, in recent weeks about how it is bedding down in different jurisdictions, what the regulation has meant as far as fund structuring is concerned, and how private equity managers are managing the regulation most effectively.

From a Jersey perspective, far from the AIFMD prompting a re-domiciliation towards onshore locations, something that had been suggested by some corners of the European funds community, in the months since the AIFMD was brought in there has actually been an uptick in the value of private equity fund business being structured through the jurisdiction.

The latest figures, compiled by the Jersey Financial Services Commission (June 2014), show that the total value of funds being administered in Jersey has stayed consistently high, around the £200bn/$330bn mark. Private equity forms a substantial amount of this. In fact, the specific value of private equity assets under administration in Jersey has risen steadily in recent times, almost doubling over the past five years.

Further reflecting the confidence there continues to be in Jersey as an alternative funds domicile, in the real estate funds sector, values under administration in Jersey have grown to their highest since pre-crisis levels.

Moreover, Europe's largest private equity fund raised in recent years enjoyed its final $10bn closing this year from a Jersey management platform, whilst the second largest real estate fund ever to be listed on the London Stock Exchange was structured through Jersey this year and was just two of a number of recent high value Jersey fund launches.

Far from European regulation, including AIFMD, causing a movement away from offshore centres, undoubtedly the trend evidenced across managers in Jersey is one of building significant future management substance.

A number of major alternative fund houses have moved to or expanded their presence in Jersey recently, such as Brevan Howard and Apex Fund Services (Jersey) Limited.

Having opened an office in Jersey in June this year, Carne Group recently received authorisation for an independent AIFMD-compliant management company in Jersey, which is the first to be approved outside the European Union, allowing alternative fund managers, including private equity managers, to comply with the AIFMD regime while maintaining a fund in an offshore, non-EU jurisdiction.

This isn’t a one-off, but reflects a general growth in interest from major alternative fund houses and managers in a Jersey structure of this nature, allowing them to access the European market and meet the requirements of the AIFMD but without the need for an EU domicile.

Thanks to its approach to regulation and specialist alternative fund expertise, Jersey is affirming its position as a leading domicile for European private equity business, including structuring and servicing, both in spite of and as a result of the AIFMD.

Private Placement

The first few months of AIFMD being in play have thrown up some interesting issues. Perhaps of particular interest from a private equity manager’s point of view is the idea that the much hallowed pan-European AIFMD ‘passport’ is not automatically the most suitable choice. Contrary to what some onshore commentators suggest, the private placement option is gaining real traction and providing managers and investors with some real, practical benefits.

Increasingly, private equity managers are finding that the private placement option into Europe offered through Jersey can provide them with the certainty of European market access they need, but with added flexibility and without the headache and costs of reporting under full AIFMD ‘passporting’ compliance.

Figures from the Jersey Financial Services Commission (JFSC) indicate a strong take-up in Jersey's private placement route into Europe. Just months after AIFMD came into play, 176 Jersey funds and 49 Jersey fund managers are already actively marketing into the EU with JFSC authorisation under private placement regimes.

Additional data also shows that the UK remains a key market for Jersey managers and, in indicating which EEA Member States they intended to market into, most managers licensed to carry on fund services business in Jersey say they intend to market their funds into the UK. The fact that the UK remains such a key market is not surprising, given its strong links with Jersey. With the UK Treasury confirming its national private placement regime will be in place until 2018, Jersey will continue to benefit from certainty of access to the hugely important UK investor market.

Interestingly, however, the next most important intended markets for Jersey managers were Sweden, Belgium, the Netherlands, Ireland, Denmark, France, Germany and Luxembourg.

Mixed Reception

Overall, this is a considerable success, reflecting the broad appeal of Jersey within Europe - but it is perhaps not surprising given the mixed reception the passport has been given by managers.

In recent research by IFI Global (‘The Impact of AIFMD’, October 2014), for example, a significant number of managers said the AIFMD’s carrot, the passport, was of ‘little’ to ‘no interest’ to them.

Further, the cost of reporting and compliance under AIFMD through the passport, and the possibility of those costs eating into investor returns, remains a major concern. Research by BNY Mellon and FTI Consulting (July 2014), for instance, highlighted that managers expect regulatory, risk and compliance reporting to account for the majority of ongoing costs associated with AIFMD compliance, with the increased costs in some cases looking set to fall onto individual funds.

The actual value of the AIFMD is being questioned too. The BNY Mellon/FTI Consulting research also suggested that only 39% of managers believe that AIFMD will be either very beneficial or slightly beneficial to their organisation, and the same proportion of respondents believe end investors will benefit from AIFMD.

As far as the European fund structuring landscape is concerned, the IFI Global research reveals that managers hold the general view that AIFMD will not require them to change the domiciliation of their funds, and suggests that, whilst the European alternative fund industry is going through a period of substantial structural change, whether that is down to the AIFMD is debatable.

What the AIFMD will prompt, the research says, is for the European alternative fund industry to become even more institutionalised than it is today, with fewer independent alternative managers left in the EU with AUMs below $1 billion by 2020. The indications are that boutique managers cannot see any real advantages to AIFMD, with a number of them indicating that they might move to centres outside Europe. In such circumstances, Jersey can offer a cost-effective base with European market access guarantees.

Overall, the value, benefits and ease of implementation of the AIFMD passport are far from clear. But the private placement option is an attractive and highly credible alternative. And, because of the work that has gone into future-proofing Jersey’s regime, if the untested AIFMD brand succeeds in the longer term, the availability of an AIFMD-compliant option in Jersey, when third country manager passporting commences in the EU, will only add to Jersey’s appeal across all manager and investor types, and locations.

Longer-Term

Now reluctantly accepted as the unavoidable future regulatory model onshore, the AIFMD brand has provided commentators with an opportunity to second-guess the Channel Islands' dominance in the alternative funds business, but the statistics suggest the offshore model will continue to serve managers extremely well in the long term.

Of course, there is a real need now for private equity managers to move on from a period of intense focus on AIFMD and consider longer-term market developments. With further regulation on the horizon, Jersey is well placed.

Being a non-EU jurisdiction, for instance, Jersey is ring-fenced from the business risks and distractions of unprecedented levels of EU regulatory creep.

From a private equity servicing point of view, there is expected to be significant opportunity for Jersey service providers to support their onshore counterparts as regulatory pressures, including AIFMD, ramp up the volume and complexity of reporting requirements.

Onshore managers are already looking to outsource their administration and governance requirements to dedicated specialists, and Jersey, with its sophisticated network of highly experienced administrators, is ready to meet that demand.

Global

What is encouraging from Jersey’s perspective is that, whilst there has been a noticeable rise in alternative funds being structured through Jersey targeting UK and continental European assets, this has been accompanied by a growing number of promoters making use of Jersey for funds targeting assets and investors in non-European growth markets around the world.

Thanks to its approach to regulation and alternative fund expertise, Jersey is not only affirming its position as a leading domicile for European funds business, but is also strengthening its appeal as a European time-zone centre for global private equity, real estate, infrastructure and hedge fund structuring and servicing.

Growth markets are continuing to offer opportunities from both an asset and investor point of view. India and China will soon resume their places as the largest economies in the world, whilst seven of the ten fastest growing economies of the last few years have been African. A recent PwC asset management survey indicated that the global asset management industry will grow from $65trn to in excess of $100trn by 2020, and that alternative investments will grow from $6.5trn to over $13trn.

Further, a report commissioned by Jersey Finance and published by Capital Economics last month also highlighted that Africa has the opportunity to quadruple living standards by 2040, but to do so it will need to find $11.4 trillion in extra investment over that period. Whilst the report estimates that only around 48% of that can be plugged by a combination of aid, domestic profits and local governments, the remainder, $6.1 trillion, will have to come from foreign direct investment.

By providing protection for investors, expertise and experience, efficient cross-border investment pooling, efficient and robust regulation and tax neutrality, Jersey is well placed to make an important contribution to the economic growth Africa needs. There are clear opportunities for private equity structuring through Jersey against this backdrop.

For this reason, Jersey’s ability to offer a regime that is fully outside the scope of the AIFMD has been crucial, positioning it strongly to cater for a rise in the number of funds targeting growth markets across Russia, Africa and Asia.

Law firm Mourant Ozannes, for instance, recently provided Jersey advice to CVC Capital Partners on the launch of its latest Asia Pacific Fund, which raised $3.5 billion to invest in the Asia Pacific region.

And earlier this year, Appleby’s Jersey office advised on two landmark UK property transactions with a combined value of £2.5bn, both involving Asian investors - Blackstone’s sale of its interest in the Broadgate Estate to Singaporean sovereign wealth fund, GIC, one of the largest real estate transactions in UK history; and the sale of Blackstone’s beneficial interest in the Chiswick Park Estate to the China Investment Corporation (CIC).

Careful consideration

As cross border finance grows, so too will the demand for tax neutral capital raising and pooling centres. With its flexible regulatory regime, structuring expertise, respect for the rule of law, use of a common business language, time zone convenience and protection of property rights, Jersey is extremely well placed to meet this demand, both within and outside of Europe.

For over 25 years Jersey has provided an efficient and familiar, appropriately regulated and tax neutral operational model for the structuring of private equity funds, which has helped deliver safe and stable returns for the industry and its international investors through all economic cycles.

Where Europe is concerned, before private equity managers jump aboard the passporting juggernaut, careful consideration of the options available is required – recent figures, research and business flows all suggest the tried and tested offshore model will continue to support discerning and successful managers and investors for many years to come.

With the transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, there has been a marked rise in analysis, and some speculative comment, in recent weeks about how it is bedding down in different jurisdictions.

JFA News
Thursday
4
December 2014

AIFMD not threatening offshore model

This article was first published in Unquote on 4th December 2014...

The AIFMD was expected to pose a significant challenge to the offshore model – but Jersey's attractiveness as a fund domicile remains strong, writes Jersey Finance chief executive Geoff Cook...

As we near the end of the year, it's a good time to take stock and reflect rationally on how the widespread global shifts in regulation are impacting the private equity landscape, in particular how the EU Alternative Investment Fund Managers Directive (AIFMD) is bedding down in different jurisdictions and how private equity managers are managing the regulation most effectively.

While some speculative comment has emanated from corners of the European funds community suggesting the AIFMD is prompting GPs to return onshore to domicile, from a Jersey perspective, this could not be further from the truth. In fact, in the months since the AIFMD came into play, there has actually been an uptick in the value of private equity fund business being structured through the jurisdiction.

The latest figures (June 2014) compiled by the Jersey Financial Services Commission (JFSC), for instance, reveals the total value of funds being administered in Jersey has stayed consistently high in recent months, around the £200bn/€250bn mark, with private equity forming a substantial proportion of this. In fact, the specific value of private equity assets under administration in Jersey has risen steadily in recent times, almost doubling over the past five years.

Jersey sure

Moreover, Europe's largest private equity fund raised in recent years enjoyed its final $10bn closing from a Jersey management platform, and the second largest real estate fund ever to be listed on the London Stock Exchange was structured through Jersey this year. These are just two of a number of recent high value Jersey fund launches.

A number of major alternative fund houses have moved to or expanded their presence in Jersey recently. Having opened an office in Jersey in June this year, for instance, Carne Group recently received authorisation for an independent AIFMD-compliant management company in Jersey, the first to be approved outside the European Union, allowing alternative fund managers, including private equity managers, to comply with the AIFMD regime while maintaining a fund in an offshore, non-EU jurisdiction.

This isn't a one-off, but reflects a general growth in interest from major alternative fund houses and managers in a structure of this nature, allowing them to access the European market and meet the requirements of the AIFMD but without the need for an EU domicile.

Passport puzzle

The initial response of managers to the AIFMD has been interesting, not least the idea emerging that the much-hyped pan-European AIFMD "passport" may not always automatically be the most suitable choice.

In contrast, the private placement option is proving popular. Increasingly, private equity managers are finding that the private placement option into Europe can provide them with the certainty of European market access they need, but with added flexibility and without the headache and costs of reporting under full AIFMD "passporting" compliance.

Figures from JFSC indicate a strong take-up in Jersey's private placement route into Europe. Just months after AIFMD came into play we find 176 Jersey funds and 49 Jersey fund managers are already actively marketing into the EU with JFSC authorisation under private placement regimes.

This considerable success reflects the broad appeal of Jersey within Europe but is perhaps not surprising given the mixed reception the passport has been given by managers.

In recent research by IFI Global (The Impact of AIFMD, October 2014), for example, a significant number of managers said the AIFMD's carrot, the passport, was of "little" to "no interest" to them.

The cost of reporting and compliance under AIFMD through the passport remains a major concern too. Research by BNY Mellon and FTI Consulting (July 2014) highlighted that managers expect regulatory, risk and compliance reporting to account for the majority of ongoing costs associated with AIFMD compliance, with the increased costs in some cases looking set to fall onto individual funds.

The value of the AIFMD is also being questioned. The BNY/FTI research also suggested that only 39% of managers believe the AIFMD will be either "very beneficial" or "slightly beneficial" to their organisation.

Shore thing

In the long-term, beyond AIFMD, managers will need to think more and more carefully about the most suitable structures for them. Non-EU "third-country" jurisdictions like Jersey, for instance, can be ring-fenced from the business risks and distractions of unprecedented levels of EU regulatory creep, and this may well form an increasing part of managers' considerations in the future.

Now reluctantly accepted as the unavoidable future regulatory model onshore, the AIFMD brand has provided commentators with an opportunity to second-guess the Channel Islands' dominance in the alternative funds business – but all the statistics suggest the tried and tested offshore model will continue to support discerning and successful managers and investors for many years to come.

The AIFMD was expected to pose a significant challenge to the offshore model – but Jersey's attractiveness as a fund domicile remains strong, writes Jersey Finance chief executive Geoff Cook.

JFA News
Monday
1
December 2014

Jersey Finance Questions ALFI Onshoring Claims

Responding to a recently published report commissioned by the Association of the Luxembourg Fund Industry (ALFI), Jersey Finance and the Jersey Funds Association have disproved ALFI claims that the Channel Islands are “not faring very well” in a post-AIFMD climate, with current data showing Jersey has never been more popular for alternative funds.

Geoff Cook, CEO, Jersey Finance, said:

“The recently commissioned report appears to base its findings on historic data from 2010 to 2013, a period of pre-AIFMD uncertainty before future third country marketing routes into the EU were confirmed, and on ‘estimates’ of the consultant mandated to prepare the report. In fact, official figures since the AIFMD was implemented in July 2013, tell a very different story to that put forward by ALFI.

“As far as new fund launches are concerned, the independent Monterey Insight Fund Report for 2014 confirmed that 171 new funds were launched in Jersey in the period from June 2013 to June 2014, compared to 78 in the same period from June 2012 to June 2013 - more than a 100% increase in the period since AIFMD was implemented. The total value of funds being administered and managed in Jersey has also grown by around 5% year-on-year to stand above the £205bn mark as at September 2014, according to the official statistics of the Jersey Financial Services Commission. The Commission's data also shows the specific value of private equity business has almost doubled over the past five years, whilst Europe's largest private equity fund raised in recent years enjoyed its final $10bn closing from a Jersey management platform. Real estate funds business has risen considerably and consistently too, and by around 50% over the last five years.”

Ben Robins, Chairman of the Jersey Funds Association, added:

“Gaining insight into how the AIFMD is bedding down in Europe is helpful, but it is patently obvious that ALFI's suggestion, based on historic data and ‘estimates’, that Jersey might be ‘not faring very well’ in the new AIFMD environment are unsupported by official, independent statistics available in 2014. It is very important that accurate, up-to-date, data is available to the market.

“Recent statistics also indicate a strong take-up in Jersey's private placement route into Europe since July 2014. 176 Jersey funds and 49 Jersey fund managers are already actively marketing into the EU with authorisation from Jersey’s regulator under private placement regimes, and undoubtedly the trend evidenced across managers in Jersey this year has been one of building significant future management substance. The recent arrival of BlueCrest in Jersey underscores the jurisdiction's continuing appeal to blue chip promoters.

“These facts and figures evidence the positive impact of AIFMD in Jersey, where the operation of EU private placement, our readiness for third country passporting equivalence and our ability to operate outside the AIFMD environment where there is no EU marketing points to something more significant than ‘business as usual’. The statistics demonstrate steady growth and suggest the successful, tried and tested Jersey model will continue to support discerning and successful managers and investors into the future.”

Responding to a recently published report commissioned by the Association of the Luxembourg Fund Industry (ALFI), Jersey Finance and the Jersey Funds Association have disproved ALFI claims that the Channel Islands are “not faring very well” in a post-AIFMD climate.

Friday
21
November 2014

AIFMD Passport and Third Country AIFMs

Together with Jersey Finance, the JFA will be considering and, if felt appropriate, co-ordinating an industry response to a ‘Call to Evidence’ issued by the European Securities and Markets Authority (ESMA) last week.

On 7 November 2014, in preparation for providing its opinion to the European Commission in July 2015, ESMA issued the ‘Call to Evidence’ to gather input on:

  • The functioning of the EU passport under the AIFMD
  • The functioning of the marketing of non-EU AIFs by EU AIFMs in the EU and the management and/or marketing of AIFs by non-EU AIFMs in the EU
  • Whether the passporting regime should be extended to the management and/or marketing of AIFs by non-EU AIFMs and to the marketing of non-EU AIFs by EU AIFMs

ESMA will consider all responses received by 8 January 2015.

Ben Robins, Chair of the JFA, said:

“Clearly this is an important next step as far as European funds regulation is concerned, insofar as this feedback will enable ESMA to consider whether to extend the AIFMD passporting regime beyond just EU AIFs managed by EU AIFMs. We would therefore encourage Jersey firms to reach out to all their clients and intermediary contacts with an interest in securing the best access for Jersey funds and fund managers into the EEA so they can input into the process.”

Jersey firms are encouraged to consider the ‘Call for Evidence’ by 5 December 2014 and provide any preliminary views on approach or practical examples, from an EU or third country perspective, to William Byrne or Tim Morgan.

Together with Jersey Finance, the JFA will be considering and, if felt appropriate, co-ordinating an industry response to a ‘Call to Evidence’ issued by the European Securities and Markets Authority (ESMA) last week.

JFA News
Monday
17
November 2014

Building significant future substance

For many alternative fund professionals, the EU Alternative Investment Fund Managers Directive (AIFMD) has been the main regulatory focus in recent years – and, with the transitional phase for implementing it having finally come to an end this summer, attention has now turned to how it is bedding down in different jurisdictions.

In the months since the AIFMD was brought in, Jersey has actually seen an uptick in private equity funds business being structured through the jurisdiction.

The latest figures show that the total value of funds being administered in Jersey, as at June 2014, has stayed consistently high, around the $330bn mark. The specific value of private equity assets under administration in the Island is rising steadily, and has actually increased by an impressive 97% over the past five years.

Moreover, Europe's largest private equity fund raised in recent years enjoyed its final $10bn closing this year from a Jersey management platform - just one of a number of recent multi-billion dollar Jersey fund launches.

Far from the AIFMD prompting a re-domiciliation towards onshore locations - something that had been suggested by some corners of the European funds community - the trend evidenced across managers in Jersey is undoubtedly one of building significant future management substance.

A number of major fund houses have moved to or expanded their presence in Jersey recently. Having opened an office in Jersey in June this year, for instance, Carne Group recently received authorisation for an independent AIFMD-compliant management company in Jersey - the first to be approved outside the European Union, allowing alternative fund managers – including private equity managers - to comply with the AIFMD regime while maintaining a fund in an offshore, non-EU jurisdiction.

The move signals a general growth in interest from alternative fund managers in a Jersey structure of this nature, which allows them to meet the requirements of the AIFMD without the need for an EU domicile.

Private Placement

If the growing raft of regulation impacting private equity managers does anything, it should make them think carefully about what structures work best for them. Managers are increasingly finding, for instance, that the AIFMD ‘passport’ is not automatically the most suitable choice and that the private placement option into Europe offered through Jersey can provide them with a welcome degree of certainty and flexibility, without the headache and costs of reporting under full AIFMD ‘passporting’ compliance.

Figures from the Jersey Financial Services Commission (JFSC) indicate a strong take-up in Jersey's private placement route into Europe. Just months after AIFMD came into play and 176 Jersey funds and 49 Jersey fund managers are already actively marketing into the EU with JFSC authorisation under private placement regimes.

This is all extremely positive for Jersey, but perhaps not particularly surprising given the mixed reception the passport has been given by managers. Research by IFI Global (‘The Impact of AIFMD’, October 2014), for example, reveals that a significant number of managers feel the AIFMD’s carrot, the passport, is of little to no interest to them.

The cost of reporting and complying with the AIFMD, through the passport, is a concern too. Research by BNY Mellon and FTI Consulting (July 2014) highlights that managers expect regulatory, risk and compliance reporting to lead to significant ongoing costs, with those increased costs in some cases looking set to fall onto individual funds.

The value, benefits and ease of implementation of the AIFMD passport is far from clear, and the private placement option is proving an attractive and highly credible alternative. But, because of the work that has gone into future-proofing Jersey’s regime, if the untested AIFMD brand succeeds in the longer term, the availability of an AIFMD-compliant option in Jersey, when third country manager passporting commences in the EU, will only add to Jersey’s appeal across all manager and investor types and locations.

Future

As we now look forward to a new era of funds regulation in Europe, it’s important to move on from a period of intense focus on AIFMD and consider longer-term developments.

Being a non-EU jurisdiction, of course, Jersey is ring-fenced from the business risks and distractions of unprecedented levels of EU regulatory creep. As a result of this and its flexible approach to AIFMD, the future for Jersey’s private equity business looks bright.

For over 25 years Jersey has provided an efficient and familiar, appropriately regulated and tax neutral operational model for the structuring of private equity funds, which has helped deliver safe and stable returns for the industry and its international investors through all economic cycles.

Figures and recent business flows suggest the tried and tested offshore model will continue to support discerning and successful managers and investors for many years to come.

This article first appeared in PE News' feature on Regulation, published 17th November 2014.

For many alternative fund professionals, the EU Alternative Investment Fund Managers Directive (AIFMD) has been the main regulatory focus in recent years – and, with the transitional phase for implementing it having finally come to an end this summer.

JFA News
Friday
14
November 2014

A nod of approval for private placement

With the transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, attention has now turned to how it is bedding down in different jurisdictions and what private equity managers are doing to manage the regulation in the most effective way.

Far from the AIFMD prompting a re-domiciliation towards onshore locations - something that had been suggested by some corners of the European funds community - from a Jersey perspective, in the months since the AIFMD was brought in there has actually been an uptick in the value of private equity fund business being structured through the jurisdiction.

The latest figures show that the total value of funds being administered in Jersey, as at June 2014, has stayed consistently high, around the $330bn mark. Private equity forms a substantial amount of this, and the specific value of private equity assets under administration in Jersey has risen steadily, almost doubling over the past five years.

Moreover, Europe's largest private equity fund raised in recent years enjoyed its final $10bn closing this year from a Jersey management platform - just one of a number of recent multi-billion dollar Jersey fund launches.

Undoubtedly, the trend evidenced across managers in Jersey is one of building significant future management substance. A number of major fund houses have moved to or expanded their presence in Jersey recently. Having opened an office in Jersey in June this year, for instance, Carne Group recently received authorisation for an independent AIFMD-compliant management company in Jersey. It was the first to be approved outside the European Union, allowing alternative fund managers – including private equity managers - to comply with the AIFMD regime while maintaining a fund in an offshore, non-EU jurisdiction.

This isn’t a one-off, but reflects a general growth in interest from alternative fund managers in a Jersey structure of this nature, allowing them to meet the requirements of the AIFMD without the need for an EU domicile.

Private Placement

If the first few months of AIFMD being in play have shown private equity managers anything, it’s that the much hallowed AIFMD ‘passport’ is not automatically the most suitable choice. Increasingly, managers are finding that the private placement option into Europe offered through Jersey can provide them with the certainty of European market access they need, but with added flexibility and without the headache and costs of reporting under full AIFMD ‘passporting’ compliance.

Figures from the Jersey Financial Services Commission (JFSC) indicate a strong take-up in Jersey's private placement route into Europe. Just months after AIFMD came into play and 176 Jersey funds and 49 Jersey fund managers are already actively marketing into the EU with JFSC authorisation under private placement regimes.

This is a considerable success, but perhaps not surprising given the mixed reception the passport has been given by managers. In research by IFI Global (‘The Impact of AIFMD’, October 2014), for example, a significant number of managers said the AIFMD’s carrot, the passport, is of ‘little’ to ‘no interest’ to them.

Further, the cost of reporting and compliance under AIFMD through the passport remains a concern. Research by BNY Mellon and FTI Consulting (July 2014) highlights that managers expect regulatory, risk and compliance reporting to lead to significant ongoing costs - with those costs often falling onto individual funds.

Overall, the value, benefits and ease of implementation of the AIFMD passport are far from clear. But the private placement option is an attractive and highly credible alternative. And, because of the work that has gone into future-proofing Jersey’s regime, if the untested AIFMD brand succeeds in the longer term, the availability of an AIFMD-compliant option in Jersey, when third country manager passporting commences in the EU, will only add to Jersey’s appeal across all manager and investor types, and locations.

Regulatory Creep

Moving on from a period of intense focus on AIFMD and considering longer-term market developments is now vital for private equity managers and, with further regulation on the horizon, Jersey is well placed.

Being a non-EU jurisdiction, for instance, Jersey is ring-fenced from the business risks and distractions of unprecedented levels of EU regulatory creep.

For over 25 years Jersey has provided an efficient and familiar, appropriately regulated and tax neutral operational model for the structuring of private equity funds, which has helped deliver safe and stable returns for the industry and its international investors through all economic cycles.

Before jumping aboard the passporting juggernaut, managers should carefully consider the options available to them – recent figures, research and business flows all suggest the tried and tested offshore model will continue to support discerning and successful managers and investors for many years to come.

This article was first published on PE International on 14th November 2014.

With the transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, attention has now turned to how it is bedding down in different jurisdictions and what private equity managers are doing to manage the regulation.

JFA News
Tuesday
11
November 2014

As the Dust Settles

Geoff Cook, chief executive at Jersey Finance talks to HFMWeek about Jersey’s strong position to meet increased business demands in the wake of AIFMD’s installation...

With the much-hyped transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, attention has now turned to how it is bedding down in different jurisdictions.

Jersey has long held significant appeal as a domicile for the management and administration of alternative funds and, in the months since the regulation was brought in, there has actually been an uptick of alternative funds business being structured through the jurisdiction.

The latest figures show that the total value of funds being administered in Jersey, as of June 2014, have stayed consistently high, most recently breaking through the £200bn ($330bn) barrier. In particular, the value of hedge fund assets under administration in the island has stayed consistently high over recent years, representing a significant proportion of Jersey’s funds business.

Far from the AIFMD prompting a re-domiciliation to other locations - something that had been suggested by some corners of the European funds community - the trend evidenced across managers in Jersey is undoubtedly one of building significant future management substance here. A number of major fund houses, such as Brevan Howard and Apex Fund Services (Jersey) Limited, have moved to or expanded their presence in Jersey recently.

Thanks to its approach to regulation and specialist alternative fund expertise, Jersey is affirming its position as a leading domicile for European hedge fund business, including structuring and servicing, both in spite of and as a result of the AIFMD.

Managers are increasingly finding that the much–hyped AIFMD ‘passport’ is not always automatically the most suitable choice and that the private placement option into Europe, offered through Jersey, can provide them with a welcome degree of certainty and flexibility, without the headache and costs of reporting under full AIFMD ‘passporting’ compliance.

Figures from the Jersey Financial Services Commission (JFSC) indicate a strong take-up in Jersey's private placement route into Europe. Just months after AIFMD came into play, 176 Jersey funds and 49 Jersey fund managers are already actively marketing into the EU with JFSC authorisation under private placement regimes.

Additional data from the JFSC also shows that the UK remains a key market for Jersey managers. As of June 2014, in indicating which EEA Member States they intended to market into, most managers licensed to carry on fund services business in Jersey said they intended to market their funds into the UK. The next most important intended markets were Sweden, Belgium, the Netherlands, Ireland, Denmark, France, Germany and Luxembourg.

This is all extremely positive for Jersey, proving that its approach to European regulation remains appealing where managers are concerned.

Costs and value

All this is not particularly surprising, given how attractive the private placement option is as a means of accessing Europe and the passport getting a mixed reception from managers.

The cost of reporting and complying with all aspects of the AIFMD, through an AIFMD passport, is a particular concern. Research by BNY Mellon and FTI Consulting (July 2014), for instance, highlights that managers expect regulatory, risk and compliance reporting to account for the majority of ongoing costs associated with AIFMD compliance, with the increased costs in some cases looking set to fall onto individual funds.

The actual value of the AIFMD is being questioned too. The BNY Mellon/FTI Consulting research also suggested that only 39% of managers believe that AIFMD will be either ‘very beneficial’ or ‘slightly beneficial’ to their organisation, and the same proportion of respondents believe end investors will benefit from AIFMD.

Further research by IFI Global (‘The Impact of AIFMD’, October 2014), meanwhile, reveals that a significant number of managers feel the AIFMD’s carrot, the passport, is of little to no interest to them.

As far as the European fund structuring landscape is concerned, the IFI Global research shows that managers hold the general view that AIFMD will not require them to change the domiciliation of their funds.

However, the same research suggests that, whilst the European alternative fund industry is going through a period of substantial structural change, how much of that is down to AIFMD is open to question.

What the AIFMD will prompt, the research says, is for the European alternative fund industry to become even more institutionalised than it is today, with fewer independent alternative managers left in the EU with AUMs below $1bn by 2020. The report also indicates that boutique managers cannot see any real advantages to AIFMD, with a number of them indicating that they might move offices to centres outside Europe. In such circumstances, Jersey can offer a cost-effective base with European market access guarantees.

As the dust settles, the value, benefits and ease of implementation of the AIFMD passport is far from clear, and the private placement option is proving an attractive and highly credible alternative. But, because of the work that has gone into future-proofing Jersey’s regime, if the untested AIFMD brand succeeds in the longer term, the availability of an AIFMD-compliant option in Jersey, when third-country manager passporting commences in the EU, will only add to Jersey’s appeal across all manager and investor types and locations.

Future

Now reluctantly accepted as the unavoidable future regulatory model onshore, the AIFMD brand has provided commentators with an opportunity to second-guess the Channel Islands' dominance in the alternative funds business, but the statistics suggest the tried and tested offshore model will continue to support discerning and successful managers and investors for many years to come.

It’s important, as we now look forward to a new era of funds regulation in Europe, to move on from a period of intense focus on AIFMD and consider the longer-term market developments. Being a non-EU jurisdiction, of course, Jersey is ring-fenced from the business risks and distractions of unprecedented levels of EU regulatory creep and, as a result, the future for Jersey’s hedge fund management and servicing industry looks bright.

From an administration point of view, for instance, there is expected to be significant opportunity for Jersey service providers to support their onshore counterparts as regulatory pressures – including AIFMD - ramp up the volume and complexity of reporting requirements. Onshore managers are already looking to outsource their administration and governance requirements to dedicated specialists, and Jersey, with its sophisticated network of highly experienced administrators, is ready to meet that demand.

For over 25 years Jersey has provided an efficient and familiar, appropriately regulated and tax neutral operational model for the structuring of hedge funds, which has helped deliver safe and stable returns for the industry and its international investors through all economic cycles.

Against a backdrop of continuing local political stability, regulatory certainty and fiscal efficiency and with a commitment to flexibility, expertise and guaranteed market access, Jersey is extremely well placed to provide hedge fund managers with a compelling, long-term and future-proof solution in Europe.

This article was first published in HFMWeek on 11 November 2014.

Geoff Cook, chief executive at Jersey Finance talks to HFMWeek about Jersey’s strong position to meet increased business demands in the wake of AIFMD’s installation.

JFA News
Monday
6
October 2014

Sailing Forward

With the much-hyped transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, attention is now turning to how the European regulation is bedding down in different jurisdictions.

In Jersey, contrary to speculation earlier this year from some onshore commentators, in the months since the regulation was brought in there has actually been an uptick of alternative funds business being structured through the jurisdiction.

The latest figures show that the total value of funds being administered in Jersey, as at June 2014, have once again broken through the £200bn ($330bn) barrier. The latest quarterly figures also reveal that Jersey continues to assert its strengths in the alternative asset classes, with real estate funds performing particularly well, growing over the quarter by almost 20%.

All eyes in recent months have been on the impact of the AIFMD, and understandably so. But what is encouraging from Jersey’s perspective is that, whilst there has been a noticeable rise in alternative funds being structured through Jersey targeting UK and continental European assets, this has been accompanied by a growing number of promoters making use of Jersey for funds targeting assets and investors in non-European growth markets around the world.

Thanks to its approach to regulation and specialist alternative fund expertise, Jersey is not only affirming its position as a leading domicile for European funds business, but is also strengthening its appeal as a European time-zone centre for global private equity, real estate, infrastructure and hedge fund structuring and servicing.

Beyond AIFMD

As far as Europe is concerned, figures from the Jersey Financial Services Commission (JFSC) indicate a strong take-up in Jersey's private placement route into Europe. As at the end of July 2014, more than 160 Jersey funds had so far been registered to market into the EU under the AIFMD through Jersey’s private placement regime. The latest quarterly figures show that in the second quarter of the year alone, consent was granted to 27 such funds, with a reported total net value approaching £600m ($1bn).

At the same time, according to the JFSC, 57 alternative investment fund managers have confirmed their authorisation under Jersey’s AIFMD private placement regime.

This is a considerable initial success for Jersey, proving that its regime and approach to European regulation is continuing to prove competitive. Managers are clearly showing that they like the benefit Jersey offers in providing market access into Europe but with minimal additional AIFMD disclosure and reporting requirements, subject to the applicable requirements of the relevant EU/EEA Member State.

Additional data from the JFSC also shows that the UK remains a key market for Jersey managers. As at 30 June 2014, in indicating which EEA Member States they intended to market into, most managers licensed to carry on fund services business in Jersey said they intended to market their funds into the UK. The next most important intended markets were Sweden, Belgium, the Netherlands, Ireland, Denmark, France, Germany and Luxembourg.

The fact that the UK remains such a key market is not surprising, given its strong links with Jersey. With the UK Treasury confirming its national private placement regime will be in place until 2018, Jersey will continue to benefit from certainty of access to the hugely important UK investor market.

Meanwhile, Jersey has seen a number of landmark European-focused funds being structured through the jurisdiction recently. The Jersey offices of Carey Olsen and Crestbridge, for instance, have worked on the largest real estate fund to be listed on the London Stock Exchange since the downturn, the Kennedy Wilson Europe Real Estate fund, which raised around £1 billion and will target investments in European real estate linked assets.

As we now look forward in a new era of funds regulation in Europe, beyond AIFMD, what will be interesting is how offshore structures work alongside onshore European structures. Rather than competing against each other, the expectation – and the evidence so far – is that offshore and onshore structures can work in parallel, offering managers a range of options that can satisfy differing investor requirements.

With this in mind, a number of managers are expected to relocate to Jersey in the coming months to give them an offshores presence of substance, adding to the major fund houses that have either moved or expanded their presence in Jersey recently, such as Brevan Howard and Apex Fund Services (Jersey) Limited.

In addition, from an administration point of view, there is also expected to be significant opportunity for Jersey service providers to support their onshore counterparts. In the face of increasingly complex reporting requirements under the AIFMD, onshore managers are likely to want to outsource their administration and governance requirements to dedicated specialists and, as a centre that has a genuinely sophisticated network of highly experienced administrators, Jersey fits the bill.

Globally Focussed

At the same time, however, there is still significant potential in non-European markets and Jersey remains globally focused.

Growth markets are continuing to offer opportunities from both an asset and investor point of view. India and China will soon resume their places as the largest economies in the world, whilst seven of the ten fastest growing economies of the last few years have been African. A recent PwC asset management survey indicated that the global asset management industry will grow from $65trn to in excess of $100trn by 2020, and that alternative investments will grow from $6.5trn to over $13trn.

This was reinforced at the Jersey Finance Annual London Funds Conference earlier this year, where the audience of fund professionals indicated that most opportunities would come from outside of Europe, with 37% suggesting Asia was the most likely growth market, followed by Africa and Latin America (26% each).

For this reason, Jersey’s ability to offer a regime that is fully outside the scope of the AIFMD has been crucial, positioning it strongly to cater for a rise in the number of funds targeting growth markets across Russia, Africa and Asia.

Sophisticated investors in the Middle and Far East, for example, are increasingly looking at major infrastructure and property investment opportunities and there has been a noticeable increase in the volume of non-UK and non-European fund activity being channelled through Jersey recently.

Mourant Ozannes, for instance, recently provided Jersey advice to CVC Capital Partners on the launch of its latest Asia Pacific Fund, which raised $3.5 billion to invest in the Asia Pacific region.

In addition, Appleby’s Jersey office recently advised on two landmark UK property transactions with a combined value of £2.5bn, both involving Asian investors - Blackstone’s sale of its interest in the Broadgate Estate to Singaporean sovereign wealth fund, GIC, one of the largest real estate transactions in UK history; and the sale of Blackstone’s beneficial interest in the Chiswick Park Estate to the China Investment Corporation (CIC).

As cross border finance grows, so too will the demand for tax neutral capital raising and pooling centres. With its flexible regulatory regime, structuring expertise, respect for the rule of law, use of a common business language, time zone convenience and protection of property rights, Jersey is extremely well placed to meet this demand.

Long-Term

It’s important that Jersey keeps an eye on the long-term, however, and there are a number of regulatory, legislative and product innovations in train to further support growth across its funds industry.

Of particular interest in Europe will be the route for third countries in obtaining an AIFMD ‘passport’, which are expected to be made available to third countries in 2015.

As the first third country to offer managers a fully compliant AIFMD option, Jersey is ahead of the game. It has an anticipated ‘opt-in regime' for managers wishing to comply fully with AIFMD requirements when marketing to European investors, meaning that satisfying the criteria for obtaining an AIFMD passport is not expected to be a problem. Nevertheless, the wider picture and how private placement evolves in Europe will be interesting to monitor.

Meanwhile, from a legislative point of view, Jersey is always keen to make sure its funds regimes are as competitive and attractive as possible. Reviewing its products and regimes to ensure this manifests itself in the market will continue to be a priority.

Recent activity provides evidence that, with its ability to offer attractive solutions both in and outside of Europe, Jersey remains extremely attractive and well placed to maintain its position as a leading alternative fund domicile with a truly global dynamic.

This article was first published in Private Funds Management magazine's Fund Domiciles Guide, October 2014.

With the much-hyped transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) having finally come to an end this summer, attention is now turning to how the European regulation is bedding down in different jurisdictions.

JFA News
Monday
29
September 2014

Jersey claims Best Fund Administration Centre award

For the second consecutive year, Jersey has been named ‘Best Fund Administration Centre’ in the awards of leading investment management publication, Investment Week.

Jersey, which was once again shortlisted in the Investment Week Fund Services Awards alongside Luxembourg and Dublin, was announced the winner at a dinner ceremony in London on 23rd September, following Investment Week’s two-day Fund Management Summit.

The awards are designed to recognise those service providers and jurisdictions who can demonstrate the knowledge, drive and expertise to provide solutions for the fund management industry in a seamless, efficient and innovative way. Winners were selected through a combination of online voting and by a panel of independent judges.

Commenting on Jersey winning the award, Deborah Benn, chair of the judging panel, said:

"The judges felt the passion and commitment to fund services clearly shone through in Jersey’s submission. In particular, the judges felt that Jersey demonstrated leadership in its aims to become a key jurisdiction for alternative investment funds. Messages and intentions on industry issues need to be transparent and explicit, which Jersey does extremely well."

Geoff Cook, CEO, Jersey Finance Limited, said:

“For Jersey’s fund administration services to be recognised not only by a leading and long established investment publication like Investment Week but also against some heavyweight EU competition for the second year in a row is naturally extremely welcome for our funds industry, which continues to perform strongly. The market has reacted well to Jersey’s approach to international regulation, whilst fund creation volumes and net asset values are growing. This, backed up by this latest accolade, which was awarded at a ceremony attended by London’s leading investment professionals including many of the UK’s major fund service providers, is extremely encouraging for our funds industry.”

Ben Robins, Chairman of the Jersey Funds Association, added:

"At a time when unprecedented regulatory change is causing fund promoters to re-assess fund domiciles, this award serves as a timely reminder of perhaps the most important factor they should consider - will your fund and its investors receive the consistently high levels of service they demand? This award is an excellent reflection of the long-standing quality, depth and experience of Jersey’s fund administrators and it's notable that a significant number of service providers with a presence in Jersey are recognized in other categories in these awards too."

For the second consecutive year, Jersey has been named ‘Best Fund Administration Centre’ in the awards of leading investment management publication, Investment Week.

JFA News
Monday
8
September 2014

Funds value passes GBP200 billion mark during stable quarter

The latest figures for all sectors of Jersey’s finance industry show stability and signs of new growth, led by the funds sector where the value of funds business passed through the £200 billion mark for the first time since June last year.

The statistics highlight that the net asset value of funds increased by £5.1 billion in the second quarter of 2014 to just over £200 billion, with the increase most notable in real estate funds which shows growth of nearly 20% during the quarter. Geoff Cook, chief executive, Jersey Finance Limited, described the picture overall as showing ‘clear signs of recovery’.

The latest statistics, collated and prepared by the Jersey Financial Services Commission, are for the three month period ending 30th June, 2014. Headline figures include:

•    The net asset value of funds under administration increased by £5.1bn from £195.3bn to £200.4bn during Q2 2014.  The total number of regulated collective investment funds decreased by 54 from 1,337 to 1,283 over the same period.

•    Consent was granted in respect of 27 COBO only Private Placement funds with a reported total NAV of £593m.
•    The total number of unregulated funds increased by 3 from 199 to 202 during the second quarter.
•    The value of total funds under investment management decreased slightly by £0.4bn from £22.2bn to £21.8bn during the second quarter of 2014.
•    The total number of live companies increased by 506 to 33,207 at the end of Q2 2014.

Geoff Cook, Chief Executive, Jersey Finance, commented:

‘The latest statistics show another quarter of stability in the performance of the finance industry.  The increase in funds business is due to the general improvement in market conditions, specifically in property fund valuations. The increase also takes into account a number of new fund launches established in the last few quarters reporting for the first time, while the reduction in the number of regulated funds relates to relinquished certificates for funds which have become inactive.

He added:

“It was encouraging to see an increase in the number of Jersey companies, now the highest number of company incorporations since 2008 and with the recent introduction of innovations to our companies law on the statute, Jersey is an even more attractive proposition for investment structuring, asset holding and a wide variety of other purposes. The strength of the industry continues to be in its diversity and it is very encouraging to see clear signs of recovery across a range of sectors.”

The latest figures for all sectors of Jersey’s finance industry show stability and signs of new growth, led by the funds sector where the value of funds business passed through the £200 billion mark for the first time since June last year.

JFA News
Monday
1
September 2014

Focused on Global Opportunities

The much hyped transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) has, finally, come to an end. For Jersey, contrary to some speculation from some onshore commentators, the deadline has actually been welcomed with a noticeable rise in high value private equity and real estate funds being structured through the jurisdiction targeting UK and continental European assets.

Figures from the Jersey Financial Services Commission (JFSC) indicate a strong take-up in Jersey's private placement route into Europe. In total, as at the end of July 2014, more than 160 Jersey funds have so far been registered to market into the EU under the AIFMD through Jersey’s private placement regime, whilst 57 alternative investment fund managers have confirmed their authorisation under Jersey’s AIFMD private placement regime.

Equally as encouraging is that, at the same time, promoters are also making use of Jersey structures for their real estate and infrastructure funds targeting assets and investors in non-European markets around the world.

Thanks to its approach to EU regulation together with its specialist global real estate expertise, Jersey is affirming its position as the leading domicile for real estate funds business in Europe.

European Growth

It is with good reason that Jersey's AIFMD regime is proving incredibly competitive. Under Jersey’s AIFMD framework, managers can benefit from the market access that private placement under AIFMD brings but with minimal additional AIFMD disclosure and reporting requirements, subject to the applicable requirements of the relevant EU/EEA Member State.

Through Jersey, there are options to gain regulatory approval to market into Europe, through private placement, ranging from a same day turnaround to up to ten working days, depending on the type of fund being registered.

In comparison with onshore, according to a recent survey of firms in Europe, the US and Asia by BNY Mellon and FTI Consulting, more than two-fifths of asset managers had not received AIFMD authorisation of their alternative investment funds from their local regulator within the EU ahead of the 22 July AIFMD deadline.

Meanwhile, additional data from the JFSC also shows that the UK remains a key market for Jersey managers. As at 30 June 2014, in indicating which EEA Member States they intended to market into, most managers licensed to carry on fund services business in Jersey said they intended to market their funds into the UK. The next most important intended markets were Sweden, Belgium, the Netherlands, Ireland, Denmark, France, Germany and Luxembourg.

The fact that managers are primarily intending to target the UK market is not surprising, given Jersey’s strong links with the UK. In fact, there has been a spike in recent months in the number of high value private equity, real estate and infrastructure funds being routed through Jersey into the UK. Moreover, with the UK Treasury confirming its national private placement regime will be in place until 2018, Jersey will continue to benefit from certainty of access to the hugely important UK investor market.

Meanwhile, Jersey has seen a number of landmark European-focused funds being structured through the jurisdiction recently. The Jersey offices of Carey Olsen and Crestbridge, for instance, worked on the largest real estate fund to be listed on the London Stock Exchange since the downturn, the Kennedy Wilson Europe Real Estate fund, which raised around £1 billion and will target investments in European real estate linked assets – with Crestbrige now handling the local on-going administration work for the fund.

In a further development, major fund houses, such as Brevan Howard and Apex Fund Services (Jersey) Limited, have moved to or expanded their presence in Jersey, adding to Jersey’s alternative investment fund community and reflecting a real confidence in Jersey as an alternative funds domicile.

In addition, in the face of increasingly complex reporting requirements under the AIFMD, there is also likely to be a growing demand from onshore managers to outsource their administration and governance requirements to a centre like Jersey that has a sophisticated network of highly experienced administrators.

Meanwhile, Jersey was the first third country to offer managers a fully compliant AIFMD option, which means that it has an anticipated ‘opt-in regime' for managers wishing to comply fully with AIFMD requirements when marketing to European investors, with the use of an EU-wide passport expected from July 2015.

This recent data provides evidence that offshore centres still have a key role to play in Europe, and that real estate fund managers are finding genuine appeal in establishing their funds in Jersey, thanks to its flexible and less onerous private placement regime compared to the onshore full passporting route, its property fund governance expertise, and its close ties with the UK market.

Global

Meanwhile, there is still significant property fund potential and activity in non-European markets. At the Jersey Finance Annual London Funds Conference held earlier this year, not only did 33% of the audience of fund professionals indicate that real estate was the biggest growth area for them, they also said that most opportunities would come from outside of Europe, with 37% suggesting Asia was the most likely growth market, followed by Africa and Latin America (26% each).

India and China will soon resume their place as the largest economies of the world, whilst seven of the ten fastest growing economies of the last few years have been African. A recent PwC asset management survey indicated that the global asset management industry will grow from $65trn to in excess of $100trn by 2020, and that alternative investments will grow from $6.5trn to over $13trn.

As cross border finance grows, so too will the demand for tax neutral capital raising and pooling centres. Top of the wish list for investors in growth markets are jurisdictions with structuring expertise, respect for the rule of law, use of a common business language, time zone convenience and protection of property rights, and Jersey is well placed to meet this demand and these criteria.

London is amongst their favourite investment destinations, and a report by Capital Economics published last year showed that Jersey acted as a conduit for £1/2trn of foreign investment into the UK. The Shard, Battersea Power Station, and significant chunks of Canary Wharf are just three examples of this capital flow translating into iconic London investments structured through Jersey, and this trend is growing.

Recently, Appleby’s Jersey office advised on two landmark UK property transactions with a combined value of £2.5bn. The first was Blackstone’s sale of its interest in the Broadgate Estate to Singaporean sovereign wealth fund, GIC, one of the largest real estate transactions in UK history. The second was the sale of Blackstone’s beneficial interest in the Chiswick Park Estate to the China Investment Corporation (CIC).

Meanwhile, with the US residential and commercial real estate markets also proving increasingly popular targets for investors in growth markets and with a growing amount of property and infrastructure investment into Asia too, it has been important for Jersey to continue to offer a ‘business as usual’ regime for non-EU funds that are fully outside the scope of the AIFMD framework, offering potentially lower operational costs.

Mourant Ozannes, for instance, recently provided Jersey advice to CVC Capital Partners on the launch of its latest Asia Pacific Fund, which raised $3.5 billion to invest in the Asia Pacific region.

Examples like these reflect that Jersey’s regulatory approach as well as its deep knowledge of the private equity and real estate sectors, including its experience in asset servicing and its governance expertise, are giving fund managers a great deal of confidence. With its ability to offer attractive solutions both in and outside of Europe, Jersey remains extremely well placed to maintain its position as Europe’s leading real estate fund domicile with a truly global dynamic.

This article first appeared in Private Equity Real Estate's Fund Service Guide in September 2014.

The much hyped transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) has, finally, come to an end.

JFA News
Monday
28
July 2014

AIFMD Comes Into Force

The transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) has come to an end and, contrary to some speculation from some onshore commentators, the offshore world remains very active indeed where marketing private equity funds into Europe is concerned.

Figures from the Jersey Financial Services Commission (JFSC) indicate a very strong take-up in Jersey's private placement route into Europe.

In total, according to the JFSC, more than 160 Jersey funds have so far been registered to market into the EU under the AIFMD through Jersey’s private placement regime, whilst 57 alternative investment fund managers have confirmed their authorisation under Jersey’s AIFMD private placement regime, and there are three depositaries in Jersey offering AIF Depositary services, with others in the pipeline.

This is incredibly encouraging, particularly with recent reports suggesting that the AIFMD has not been fully transposed by a third of EU Member States, and that a significant number of alternative fund managers have not yet applied for AIFMD authorisation, with such authorisation in some Member States taking months to finalise.

In comparison with onshore, Jersey's AIFMD regime is proving incredibly competitive, and with good reason. Jersey's framework under the AIFMD means that there are options to gain regulatory approval to market into Europe, through private placement, ranging from a same day turnaround to up to ten working days, depending on the type of fund being registered.

The application fee for a fund or a fund services business to be registered with the JFSC to privately place into Europe under the AIFMD is £1,000, with exceptions for Certified Funds or Recognized Funds and fund services businesses registered under Article 2(10) of the Financial Services Jersey Law or Recognized Fund Functionaries, which are not required to pay an AIF application fee.

Moreover, with the UK Treasury confirming its national private placement regime will be in place until 2018, Jersey will continue to benefit from certainty of access to the hugely important UK investor market.

Given Jersey's specialist expertise in fund governance, we expect this trend to continue as managers marketing into Europe look to avail themselves of Jersey's attractive private placement option. As cross border finance grows, so too will the demand for tax neutral capital raising and pooling centres, and Jersey is well placed to meet that demand.

Overall, Jersey's expectation is to see ‘offshore-onshore' structures become more commonplace, with some managers choosing to run an onshore EU fund actively marketed in the EU for those investors that demand full AIFMD compliance,  alongside a more cost-effective and flexible offshore option for other investors.

In fact, Jersey has seen a number of landmark funds being structured through the jurisdiction recently, such as the largest ever real estate fund to be listed on the London Stock Exchange (the Kennedy Wilson Europe Real Estate fund, which raised around £1 billion and will target investments in European real estate linked assets) and funds targeting assets such as Scandinavian medium size firms, commercial property in the UK and Europe, cleantech and energy.

In the face of increasingly complex reporting requirements under the AIFMD, there is likely to be a growing demand from managers to outsource their administration and governance requirements to a centre like Jersey that has a sophisticated network of highly experienced administrators.

There are more than 300 registered resident directors in Jersey who are able to take on actual portfolio management and risk supervision duties and 1,400 regulated funds, which means that on average each director is overseeing less than five funds, so demonstrating substance for a Jersey manager is extremely straight forward.

We are also seeing a rise in the number of managers considering establishing a presence in Jersey - major fund houses, such as Brevan Howard and Apex Fund Services (Jersey) Limited, have moved to or expanded their presence in Jersey recently.

It will be of considerable comfort to managers that the familiar onshore EU adviser/offshore manager model still works in Jersey too, without risk of an EU onshore adviser being regulated as a manager onshore.

Meanwhile, Jersey was the first third country to offer managers a fully compliant AIFMD option, meaning that it has an anticipated ‘opt-in regime' for managers wishing to comply fully with AIFMD requirements when marketing to European investors, with the use of an EU-wide passport expected from July 2015.

Flexibility, expertise and clarity remain key for private equity managers and the evidence so far is that, with the AIFMD now in place, offshore is proving to be an attractive solution for managers within the European marketplace.

This article was first published in PE News 'AIFMD Comes Into Force' feature on 28 July 2014.

The transitional phase for implementing the EU Alternative Investment Fund Managers Directive (AIFMD) has come to an end and, contrary to some speculation from some onshore commentators, the offshore world remains very active indeed where marketing private equity funds into Europe is concerned.

JFA News
Thursday
24
July 2014

Surge in Jersey private placement registrations as AIFMD transitional period comes to an end

A strong surge in applications in the lead up to the end of the AIFMD transitional phase has seen the number of funds notifying the Jersey Financial Services Commission (JFSC) of their intention to privately place into Europe under AIFMD rules break through the 150 mark.

Figures collated by the JFSC show that, as at 22 July, a total of 164 funds had opted to make use of Jersey’s private placement route into Europe.

In addition, 57 alternative investment fund managers have confirmed their authorisation under Jersey’s AIFMD private placement regime, and there are three depositaries in Jersey offering AIF Depositary services as well as others in the pipeline.

Figures from the JFSC also show that the UK remains a key market for Jersey managers. As at 30 June 2014, 32 managers licensed to carry on fund services business in Jersey completed a notification form in which they indicated which of the EEA Member States they intended to market into (which was often more than one EEA Member State). Of the 32 notifications, 28 managers said they intended to market into the UK, 15 into Sweden, 14 into Belgium, 13 into the Netherlands, 11 into Ireland, and 10 each into Denmark, France, Germany and Luxembourg.

Under Jersey’s AIFMD framework, managers can gain regulatory approval to market into Europe through a range of different options depending on the type of fund being established, with those funds benefiting from the market access, subject to the applicable requirements of the relevant EU/EEA Member State, that private placement under AIFMD brings but with minimal additional AIFMD disclosure and reporting requirements.

According to a recent survey of firms in Europe, the US and Asia by BNY Mellon and FTI Consulting, more than two-fifths of asset managers had not received authorisation of their alternative investment funds from their local regulator within the EU ahead of the AIFMD deadline, while nearly a fifth had not got a required AIFMD structure in place in time for the 22 July implementation date.

Jersey has also already put in place the option of a fully-compliant AIFMD regime to permit Jersey managers to avail themselves of the third country manager marketing passport throughout the EU as soon as it is introduced.

Geoff Cook, CEO of Jersey Finance, said:

“These figures for Jersey provide strong evidence that Jersey’s private placement route is being warmly received by the market as an attractive, flexible, robust and cost-effective option. It is hugely encouraging that managers are using Jersey and routing their European funds through the jurisdiction, and the expectation is that Jersey’s approach will become even more attractive thanks to the certainty it brings and the speed of authorisation the regulator can offer. In addition, we anticipate an uptick in fund servicing business from European managers who now have considerably more complex AIFMD reporting requirements.”

Ben Robins, Chairman, Jersey Funds Association, added:

“The fact that managers are primarily intending to target the UK market is not surprising, given Jersey’s strong links with the UK. In fact, we have seen a spike in recent months in the number of high value private equity and real estate and infrastructure funds being routed through Jersey into the UK. What is also interesting is that Jersey funds are intending to be marketed widely across Europe, as well as in non-EU countries, and are not concentrated in a small number of markets, which demonstrates Jersey’s broad appeal and the fact that its private placement option is offering a truly viable alternative.”

A strong surge in applications in the lead up to the end of the AIFMD transitional phase has seen the number of funds notifying the Jersey Financial Services Commission (JFSC) of their intention to privately place into Europe under AIFMD rules break through the 150 mark.

JFA News
Tuesday
1
July 2014

Through the Storm

This article was first published in a Special Report on Regulation in Private Fund Manager, July 2014.

Not only has Jersey come through the regulation hurricane that is AIFMD unscathed, the offshore fund domicile is actually one of few countries that can offer locals both safe harbor from the full impact of the EU directive as well as an investment vehicle designed to pass EU regulators’ smell test on outside managers wanting in.

by NICHOLAS DONATO

Ben Robins says he doesn’t worry about the EU’s Alternative Investment Fund Managers Directive (AIFMD) as much as he once did.

As chairman of the Jersey Funds Association it’s part of his job to monitor regulatory developments on the EU mainland and elsewhere around the world that can impact the offshore island’s funds industry. And so as EU policymakers and individual member states begin placing the final touches on the AIFMD – Europe’s grand project to harmonize and strengthen fund regulation across the continent that goes into effect this month– Robins has been keeping close watch.

His assessment today? “Things will be business as usual here in Jersey.”

That certainly wasn’t the case a short four years ago. Back then EU policymakers were writing the first drafts of the directive in the wake of a financial crisis that stirred politicians and regulators into a frenzy. At the time there was a real concern that overregulation would effectively erect a ring-fence between EU investors and outside managers seeking their capital, an alarming possibility for Jersey’s funds industry, which is just 85 miles south of the English coast.

“Fortunately cooler heads prevailed and we now sit in a position where Jersey can offer GPs some optionality on their European marketing,” Robins tells pfm in a keynote interview on the topic.

Robins explains that Jersey’s own policymakers underwent a number of preparations and new rulemaking to keep pace with the directive’s requirements as it was advancing along the EU’s cumbersome legislative process. By the end of it all Jersey was able to create an "opt-in" regulatory  regime for managers wanting to market in Europe under full AIFMD compliance to obtain a Europe-wide marketing passport. The happy result then is Jersey can offer GPs a tax neutral platform – something uncontroversial but important to LPs of different tax profiles – and still all but guarantee access to European investors in the new AIFMD era.

Or, alternatively, as a non-EU country Jersey “can be a safe haven for GPs struggling to meet the directive’s requirements,” says Robins. “That’s because Jersey funds for the time being can continue using individual member states’ private placement regimes for marketing purposes in compliance with the directive's transparency provisions.”

ON THE HORIZON

But Jersey isn’t exactly in the clear on everything just yet. For one, GPs based in Jersey that go through the hassle of becoming fully AIFMD-approved won’t receive immediately the main benefit of doing so: a pan-EU marketing passport. It’s not until July 2015 that EU regulators will actually consider allowing non-EU managers the ability to seamless hop across EU borders during fundraising, operating in full compliance with the directive.

And then there’s the risk that certain EU member states will “gold-plate” the directive, meaning make it tougher, when transposing its language into national law. However, like the entire directive itself, Robins says initial fears here were overblown too. “The good news is we haven’t seen much evidence of member states making their private placement regimes more difficult to access or going much above and beyond the directive’s original text.”

Looking ahead Robins warns that may change, specifically citing France and Germany as two countries that may “possibly show some divergence” from the UK which is positioning itself as an “enlightened” regulator on AIFMD. One possible  result of that, if so, is third country managers, like those in Jersey, having to appoint a depositary to oversee their fund's procedures and safe-keep assets where they market in Germany, even though they aren’t (yet) provided that EU-wide marketing passport gift for doing so.

Then again it’s “not a huge burden” if this does end up happening, says Robins. “Jersey has plenty of fund administration firms, both institutional and independent, that the directive suggests could act as depositaries for closed-ended funds like private equity and real estate. It’s really by no means an insurmountable task.”

The other big question on the horizon relates to how non-EU countries regulate their own funds industry. What EU regulators want to a certain extent is for their counterparts around the world to match the AIFMD's requirements or keep their fund managers out of Europe.

This, says Robins, is “where Jersey may have an incredible advantage over other larger and less nimble third-countries like the US, Singapore and Hong Kong.” Because Jersey has already created the option of a fund regime that completely mirrors the AIFMD, they’re sure to pass this regulatory “equivalency test”.

It’s also a big question that seems to have been given little thought, at least for now. But next year it’s these types of issues EU regulators will be wrestling with, says Robins, and it’s not exactly safe to assume that major economies like the US will be given a free pass because of their reputation and size.

“Yes the US now tells its private fund advisors to register with its Securities and Exchange Commission. But that doesn’t, for example, mean they meet the AIFMD’s requirement for managers to appoint a depositary. It would seem incredible that the EU blocks US funds because of any failure to meet this equivalency test, but you’re going to see a lot of GPs in Luxembourg, Ireland and elsewhere in Europe cry foul that they that they have to meet these strict AIFMD requirements where GPs coming in from the US or Hong Kong don’t. It would place them at a significant competitive disadvantage.”

Either way, one thing third-country regulators will absolutely have to do is sign cooperation agreements with each EU member state they wish to provide their local managers access to. Many non-EU countries are still in the process of finalizing these agreements but Jersey has “these agreements in place with the vast majority of EU member states save for some small gaps,” says Robins. “And those gaps are in places like Spain and Italy where there is no current private placement regime anyway. Instead GPs will seek to rely on the status quo of reverse solicitation to admit investors from those countries.”

Lastly, Jersey managers have achieved their “business as usual” status due to their ability to demonstrate substance, notes Robins. Fund managers looking to escape the directive’s reach that set up shop in Jersey must, for local regulatory purposes, actually be able to prove the fund is controlled and managed in the Channel Islands and not just be a “letter-box entity”, he explains.

Jersey-based managers demonstrate this in a few ways, not least of which is the requirement that a regulated fund’s managing board features at least two experienced Jersey resident directors. What’s more is that these directors have primary responsibility for actual portfolio management and risk supervision duties, says Robins and delegation of functions to third party service providers is monitored.

“If you take a look at the hard numbers we’ve got about 1400 regulated funds in Jersey and around 385 individuals locally who, personally or through a financial services employer,  are regulated and able to act as fund directors. On a crude, notional application of that ratio of local directors to funds  each director is overseeing fewer  than four funds. These are real directors, vetted by the local regulator, who know and understand the asset class well.”

Looking down further ahead in the AIFMD timeline Robins say’s the next major milestone date comes in 2017, “the time when ESMA reviews the market and decides if private placement regimes are eliminated.” And while he doesn’t believe this will turn out to be the case, he says with a note of confidence that “Jersey will be sure to monitor and prepare for” whatever regulatory moves its mainland neighbor takes.

EVCA statistics for European buy-out fund marketing in 2013 versus 2012 indicate increased fund raising from investors in the UK, U.S., Asia and the rest of the world and declining fund raising in Germany, France and other western European countries. Against that backdrop, being entirely unfettered by AIFMD restrictions when marketing outside Europe only underlines Jersey's continuing appeal as a domicile for GPs.

Not only has Jersey come through the regulation hurricane that is AIFMD unscathed, the offshore fund domicile is actually one of few countries that can offer locals both safe harbor from the full impact of the EU directive as well as an investment vehicle designed to pass EU regulators’ smell test.

JFA News
Friday
27
June 2014

Strong uptake in Jersey private placement regime in run up to end of AIFMD transition

With less than one month to go until the transitional phase of the EU Alternative Investment Fund Managers Directive (AIFMD) comes to an end, Jersey is seeing a strong take-up in its private placement route into Europe.

Figures from the Jersey Financial Services Commission (JFSC) show that more than 70% of the 52 funds registered so far this year in Jersey have been approved to market into the EU under the AIFMD through Jersey’s private placement regime.

In addition, according to the JFSC, a total of 43 funds have so far been registered to market into the EU whilst 38 fund service providers have also been approved to conduct AIFMD related business under the regime.

Recently it was reported that the AIFMD has not been fully transposed by a third of EU Member States, whilst at the end of the third quarter of the year it was reported that more than half of UK alternative fund managers had not applied for AIFMD authorisation.

Jersey’s framework under the AIFMD means that there are options to gain regulatory approval to market into Europe ranging from a same day turnaround to up to ten working days, depending on the type of fund being registered. The application fee for a fund or a fund services business to be registered with the JFSC to privately place into Europe under the AIFMD is £1,000, with exceptions for Certified Funds or Recognized Funds and fund services businesses registered under Article 2(10) of the Financial Services Jersey Law or Recognized Fund Functionaries, which are not required to pay an AIF application fee.

At Jersey Finance’s Annual London Funds Conference this year, 33% of attendees indicated that they anticipated particular growth in real estate this year whilst 27% said they saw most potential in private equity. This picture is manifesting itself in Jersey with the uptake of European-focused funds including a number of landmark funds, such as the largest ever real estate fund to be listed on the London Stock Exchange (the Kennedy Wilson Europe Real Estate fund, which raised around £1 billion and will target investments in European real estate linked assets).

Jersey law firms and service providers have also reported registering funds targeting assets such as Scandinavian medium size firms, commercial property in the UK and Europe, cleantech and energy.

Geoff Cook, CEO of Jersey Finance, said:

“Even at this late stage, managers are still cautious about the AIFMD and its impact on their operations and cost-base, and these figures from the JFSC provide evidence that Jersey’s private placement route is being warmly received by the market as an attractive flexible, robust and cost-effective option. Given Jersey’s specialist expertise in fund governance, we expect this trend to continue as those managers marketing into Europe look to avail themselves of Jersey’s attractive private placement option beyond 22 July.

We are also seeing a rise in the number of managers considering establishing a presence here. There are more than 300 registered resident directors in Jersey who are able to take on actual portfolio management and risk supervision duties and 1,400 regulated funds, which means that on average each director is overseeing less than five funds, so demonstrating substance for a Jersey manager is extremely straight forward.”

With less than one month to go until the transitional phase of the EU Alternative Investment Fund Managers Directive (AIFMD) comes to an end, Jersey is seeing a strong take-up in its private placement route into Europe.

JFA News
Tuesday
17
June 2014

Competitive edge highlighted with award win

Jersey’s expertise and reach as an International Finance Centre (IFC) has been recognised by being named ‘Best International Financial Centre’ in the Professional Adviser International Fund and Product Awards 2014.

Now in their 15th year, the Awards, which are organised by leading international media group Incisive Media, are designed to reward and recognise the groups and centres which are at the cutting edge of distributing financial products and services internationally.

Winners, which were announced this week (16th June) were assessed by an independent panel of judges, who took into account a number of features including commitment to target market, appropriateness of product range and services, transparency, and levels of service and support.

Commenting on Jersey's achievement, Deborah Benn, chair of the judging panel, said:

“Jersey uses a combination of expertise and speed to come up with effective solutions, particularly in the alternative investment sector. Overall, this year marks Jersey out as having an excellent competitive edge.”

Geoff Cook, CEO of Jersey Finance, added:

“Over the past 12 months it has been crucial for IFCs to respond quickly and appropriately to the market, and winning this award is further evidence that Jersey has done that successfully. We are always looking to highlight the quality and range of fund services Jersey has to offer and its commitment to pursuing high standards of regulation and co-operation, particularly in this new era of AIFMD compliance, so it is encouraging when Jersey’s strengths are acknowledged in this way."

Full details on the winners of the International Fund and Product Awards can be found at www.offshoreawards.com.

Jersey’s expertise and reach as an International Finance Centre (IFC) has been recognised by being named ‘Best International Financial Centre’ in the Professional Adviser International Fund and Product Awards 2014.

JFA News
Monday
16
June 2014

Jersey: an ongoing role in Europe

Jersey has long held significant appeal as a domicile for the management and administration of alternative funds and, despite some talk about the Alternative Investment Fund Managers Directive (AIFMD) having a ‘concentration effect’ in Europe involving just a handful of EU countries hosting and servicing European-focused funds, Jersey’s experience and expectation is very different.

Fund values are performing well, with the net asset value of funds being administered or managed in Jersey standing at around £200bn as at the end of the first quarter of 2014, and the number of funds registered in Jersey rising to well over 1,500.

With the global asset management industry expected to grow from $65trn to in excess of $100trn by 2020 (PwC, ‘Asset Management 2020: a Brave New World’, February 2014) and alternative investments to grow from $6.5trn to over $13trn, there is positive news for the alternative asset servicing industry. As cross border finance grows, so too will the demand for tax neutral capital raising and pooling centres, and Jersey is well placed to meet that demand.

With the end of the transitional period for implementing the AIFMD now imminent (22 July 2014), there are incredibly encouraging signs that the enormous amount of hard work that has gone into establishing Jersey’s ‘future proof’ model in relation to the AIFMD is being very well received, including where hedge funds being marketed into Europe are concerned.

In fact, research suggests that around 70% of EU fund managers are considering setting up an offshore solution in response to the AIFMD (KNEIP, June 2013), with Jersey’s private placement option into Europe providing managers with a welcome degree of certainty and flexibility without the headache of reporting under full AIFMD ‘passporting’ compliance. It’s why a number of major fund houses, such as Brevan Howard and Apex Fund Services (Jersey) Limited, have moved to or expanded their presence in Jersey recently.

Offshore Solution

Where marketing into the EU is concerned, ‘offshore’ is very much alive, and a combination of certainty and flexibility has been borne in mind in Jersey’s response to the AIFMD that allows funds to be marketed into the EU through national private placement regimes, with the option of an EU-wide passport as anticipated from July 2015, or to the rest of the world through existing regimes outside the scope of the AIFMD.

Having signed 27 bilateral cooperation agreements with EEA countries in 2013, including the UK, Germany and France, Jersey’s regulator, the Jersey Financial Services Commission (JFSC), is now granting licenses for fund managers actively targeting European markets through private placement arrangements, with limited AIFMD reporting and disclosure requirements.

In addition, Jersey was also the first third country to offer managers a fully compliant AIFMD option, meaning that Jersey has an anticipated ‘opt-in regime’ for managers wishing to comply fully with AIFMD requirements when marketing to European investors, with the use of an EU-wide passport as expected from July 2015.

In comparison with onshore, Jersey’s AIFMD regime is incredibly competitive, with regulatory approval for accessing Europe through private placement under AIFMD including options which can take from between just three and ten days, depending on the structure. This can be juxtaposed with the waiting time for funds being granted full AIFMD authorisation reportedly stretching to months in some EU countries.

Moreover, with recent reports suggesting that AIFMD has not yet been fully transposed into law by a third of all EU countries, and that around half of all managers have not yet applied for authorisation under AIFMD, Jersey’s private placement route is expected to prove incredibly effective and popular as a means of guaranteeing hedge fund managers with a seamless route into Europe.

This expectation is being translated into reality too – approaching 50% of all funds registered in Jersey in the past six months have been authorised for private placement under AIFMD and, with a BNY Mellon survey earlier this year suggesting that 20% of fund managers would apply for their AIFMD passport during the final three month period prior to the 22 July deadline, there is real potential for the private placement option to give managers marketing into Europe another option and some welcome breathing space. In so doing, they can take time to assess the full impact of the AIFMD in a safe, secure, familiar environment before committing to the onshore requirements under the AIFMD.

In particular, and importantly, with the UK Treasury confirming its national private placement regime will be in place until 2018, Jersey will continue to benefit from certainty of access to the hugely important UK investor market.

Structuring

In setting up a hedge fund within the EU, there are real opportunities for Jersey. As far as structuring is concerned, as we near the end of the transitional period, Jersey’s expectation is to see ‘offshore-onshore’ structures become more commonplace, with some hedge fund managers choosing to run an onshore EU fund actively marketed in the EU,  alongside a more cost-effective and flexible offshore option for other investors.

Meanwhile, in the face of increasingly complex reporting requirements under AIFMD, managers getting high quality governance and back-office experience and expertise will be key. With that in mind, there is likely to be a growing demand from hedge fund managers to outsource their administration and governance requirements to a centre like Jersey that has a sophisticated network of highly experienced administrators.

Managers can draw on Jersey's deep experience in fund administration, asset servicing, tax advice, and accounting, and have fast access to real governance expertise. The long-standing ability for Jersey to field local directors and officers of management entities with risk and portfolio management skills, and Jersey's ever-growing pool of skilled non-executive directors means there is little risk of Jersey management entities being discounted as mere ‘letterbox entities’.

This sort of long-standing expertise has created a genuine offering of substance in Jersey and a model that is attractive for EU-focused hedge funds. It will be of considerable comfort to managers that the familiar onshore EU adviser/offshore manager model still works in Jersey too, without risk of an EU onshore adviser being regulated as a manager onshore.

Future Proof

As we look beyond the end of the AIFMD transitional phase next month, the future for Jersey’s hedge fund management and servicing industry looks bright, both within Europe and outside of it.

Despite the onslaught of complex regulation and managers still being cautious about the full impact of AIFMD, there are real solutions. Flexibility, expertise and clarity are absolutely key for hedge fund managers and Jersey is extremely well placed to offer these qualities and provide managers with a compelling, long-term, future-proof solution within Europe.

This article was first published in HFMWeek's 'How to Start A Hedge Fund in the EU 2014' Guide, published June 2014

Jersey has long held significant appeal as a domicile for the management and administration of alternative funds.

JFA News
Monday
2
June 2014

Expertise Underlines Enduring Strength of Jersey

Jersey has long held significant appeal as a domicile for the management and administration of alternative funds, and there has been a noticeable rise in recent months in high-value private equity funds being structured through Jersey.

With the end of the transitional period for implementing the Alternative Investment Fund Managers Directive (AIFMD) now imminent (22nd July 2014), managers have been exploring the long-term options open to them. There are incredibly encouraging signs that the enormous amount of hard work that has gone in to establishing Jersey’s ‘future proof’ model in relation to the AIFMD is being very well received, particularly in targeting sophisticated investors wanting to make global private equity and infrastructure investments.

In fact, when asked at our Annual Funds Conference in London earlier this year where they saw most opportunities for growth, the audience of funds professionals indicated that they were most optimistic about the real estate (33%) and private equity (27%) asset classes, both areas where Jersey has significant fund servicing strength.

An encouraging response from the private equity community has seen a number of major asset management businesses and service providers establish a presence or expand in the Island recently.

Moreover, a number of landmark private equity and real estate funds have been structured through Jersey, involving both European and non-European assets and investors, including the largest ever real estate fund to be listed on the London Stock Exchange.

With the global asset management industry expected to grow from $65trn to in excess of $100trn by 2020 (PwC, ‘Asset Management 2020: a Brave New World’, February 2014) and alternative investments to grow from $6.5trn to over $13trn, there is positive news for the alternative asset servicing industry and Jersey in particular, where we are already seeing a post-crisis surge in new funds.

As cross border finance grows, so too will the demand for tax neutral capital raising and pooling centres. Jersey is well placed to meet that demand, which is why we are seeing this surge and why organisations as diverse as the Scandinavian Private Equity Industry and Asian Sovereign Wealth funds are structuring through Jersey.

Offshore Solution

It’s clear that, in a post-AIFMD landscape, what managers require above all else from their domicile is a combination of certainty and flexibility. This has been borne in mind and is reflected in Jersey’s three-pronged response to the AIFMD that allows funds to be marketed into the EU through national private placement regimes, with the option of an EU-wide passport as anticipated from July 2015, or to the rest of the world through existing regimes outside the scope of the AIFMD.

Where marketing into the EU is concerned, ‘offshore’ is very much alive. Jersey’s regulator, the Jersey Financial Services Commission (JFSC), is currently granting licences for fund managers actively targeting European markets through private placement arrangements, with limited AIFMD reporting and disclosure requirements.

Jersey was also the first third country to offer managers a fully compliant AIFMD option, meaning that Jersey has an anticipated ‘opt-in regime’ for managers wishing to comply fully with AIFMD requirements when marketing to European investors, with the use of an EU-wide passport anticipated from July 2015.

In comparison with onshore, Jersey’s AIFMD regime is incredibly competitive, with regulatory approval for private placement under AIFMD including options which can take from between just three and ten days, depending on the structure. A survey conducted in January this year by BNY Mellon found that less than a fifth of global AIFs had submitted their application for an EU-wide passport, which can take months to secure.

Moreover, and importantly, with the UK Treasury confirming its national private placement regime will be in place until 2018, Jersey will continue to benefit from certainty of access to the hugely important UK investor market.

From a fund servicing point of view, there are real opportunities for Jersey. Managers getting the right sort of governance and back-office experience and expertise will be key in the face of increasingly complex reporting requirements under AIFMD. With that in mind, there is likely to be a growing demand from managers to outsource their administration and governance requirements to Jersey’s highly experienced administrators.

Complementing this, there is also potential for UK fund promoters to use Jersey as part of a ‘wait and see’ strategy, giving them time to assess the full impact of the AIFMD in a safe, secure, familiar environment before committing to the onshore requirements under the AIFMD.

Flexibility

Meanwhile, managers are also of course adopting global strategies and raising capital in growth markets, sophisticated investors in the Middle and Far East, for instance, are increasingly looking at major infrastructure and property investment opportunities and there has been a noticeable increase in the volume of non-UK and non-European fund activity being channelled through Jersey recently.

As wealth is created in the growth markets, investors are looking for jurisdictions with structuring expertise, respect for the rule of law, use of a common business language, time zone convenience and protection of property rights.

Among their favourite investment destinations is London and, given Jersey’s strong connection to the City of London, it is not surprising that significant deals and investments are being made through the Island - The Shard, Battersea Power station, and significant chunks of Canary Wharf are just three examples of capital flow translating into iconic investments structured through Jersey.

This was reflected in a further poll at our London funds Conference this year, which indicated that senior funds professionals see most alternative fund opportunities (42%) coming from outside of Europe, particularly Asia, in the coming months.

For this reason, it has been important for Jersey to offer a regime that is fully outside the scope of the AIFMD too, which can cater for an anticipated rise in the number of Jersey funds targeting growth markets across Russia, Africa and Asia this year.

It’s important that Jersey keeps an eye on the long-term, however, and there are a number of further regulatory, legislative and product innovations in train to further support growth across our funds industry.

In particular, following an amendment to the relevant legislation, Jersey is now able to offer Limited Liability Partnerships (LLPs) to private equity advisors for use in their structures, an option that is expected to become increasingly popular in the context of UK Limited Partnerships. The change means that Jersey can now offer licensed LLPs as managers or general partners for private equity funds, which can be bolted on as an additional GP or in substitution for an existing GP. It’s a move that reflects Jersey’s commitment to evolving its private equity landscape.

As we look beyond the end of the AIFMD implementation phase next month, the future for Jersey’s private equity fund management and servicing industry looks bright. Recent figures show that Jersey’s funds volumes have scaled their pre-crisis peak and that new structures are being formed at the fastest rate since 2008.

Despite the onslaught of complex regulation and managers still being cautious about the full impact of AIFMD, there are real solutions. Flexibility, expertise and clarity are absolutely key for private equity managers and Jersey, as the recent pick-up in high value private equity activity demonstrates, is extremely well placed to offer these qualities and provide managers with a compelling long-term solution.

This article first appeared in Private Equity International's 'Fund Administration and Technology Guide 2014', published June 2014.

Jersey has long held significant appeal as a domicile for the management and administration of alternative funds, and there has been a noticeable rise in recent months in high-value private equity funds being structured through Jersey.

JFA News
Wednesday
28
May 2014

Signs of stability and sector growth in latest quarterly figures

The latest figures for all sectors of Jersey’s finance industry show resilience, with the funds industry growing in size.

The statistics show that the net asset value of funds increased by £3 billion in the first quarter of 2014 to £195 billion and there was a small increase in the number of funds overall, demonstrating Jersey’s continuing attractiveness for fund structuring and administration.

The latest statistics, collated and prepared by the Jersey Financial Services Commission, are for the three month period ending 31st March 2014. Headline figures include:

  • The net asset value of funds under administration increased by £3.2bn from £192.1bn to £195.3bn during Q1 2014.
  • The total number of regulated funds increased by 3 from 1,334 to 1,337 over the same period. Consent was granted in respect of 25 COBO only Private Placement funds with a reported total NAV of £458m.
  • The total number of unregulated funds increased by 2 from 197 to 199 during the first quarter.
  • The value of total funds under investment management remained at £22.2bn during the first quarter of 2014.

Geoff Cook, Chief Executive, Jersey Finance, commented:

“Generally, the latest figures show a steady position although information from our member firms indicates the new business pipeline is building well and business activity overall is picking up.  For example, the latest figures from Jersey’s Business Tendency Survey suggested that the finance sector was positive about its long-term prospects at the start of 2014, with firms reporting the highest levels of optimism about future business activity, profitability and employment since 2011."

The latest figures for all sectors of Jersey’s finance industry show resilience, with the funds industry growing in size.

JFA News
Thursday
10
April 2014

Jersey positioned strongly in face of growing competition

The way Jersey’s funds industry has pulled together to overcome global regulatory challenges and open up new opportunities has helped position it strongly compared to competitor jurisdictions, according to the chairman of the Jersey Funds Association.

Speaking at this year’s annual JFA Dinner, Ben Robins told an audience of over 450 funds professionals, senior politicians and representatives of the regulator that, despite a dichotomy between strong indications of growth in the global asset management industry on the one hand and rafts of new international regulation on the other, Jersey was in an extremely good place to grow its alternative funds sector and assert its position as a leading funds domicile.

Pointing to an uptick of Jersey listed funds so far this year and recent examples where Jersey has been the domicile of choice for structuring landmark private equity and real estate funds, he also highlighted the need to avoid complacency.

“Despite our unique ‘team Jersey’ approach to confronting global regulatory and political challenges and our strong reputation amongst funds professionals, there is undoubtedly growing competition between domiciles and for that reason having strong local political support behind our industry and a will to explore new products and markets is vital for our long-term success.”

“There is also a pressing need to address our domestic funds regime to ensure it is proportionate and competitive, and I am pleased that, in line with the recommendations of the Finance Industry Jurisdictional Strategic Review published last year, there are already moves to make the changes necessary to strike a better balance between appropriate levels of regulation and operational efficiency.”

Held on Friday 4th April at the Royal Jersey Showground, the event, whose lead sponsor was Kleinwort Benson, featured top British impressionist Jon Culshaw as guest speaker, who was kindly sponsored by JTC Group, whilst a champagne reception was sponsored by IPES. Silver sponsors were BNP Paribas, JP Morgan, Moore, and Mourant Ozannes.

Tim Morgan, Vice Chairman of the JFA and who also provided an introduction at the dinner, added:

“We have much to be proud of in terms of how we have helped position Jersey amid global regulatory shifts and growing competition, and the dinner was a fantastic opportunity to celebrate our industry’s successes. Our thanks go to all those involved in organising this year’s event, including all our sponsors.”

The way Jersey’s funds industry has pulled together to overcome global regulatory challenges and open up new opportunities has helped position it strongly compared to competitor jurisdictions, according to the chairman of the Jersey Funds Association.

JFA News
Monday
7
April 2014

Leading European domicile for property fund structuring

Jersey has long held significant appeal as an alternative investment funds domicile, but there has been a noticeable rise in recent months in high-value real estate funds targeting UK and continental Europe that are being structured through Jersey.

Sophisticated investors are making more use of Jersey structures for their global real estate and infrastructure investments. This is due, in no small part, to Jersey’s approach to EU regulation, particularly the EU Alternative Investment Fund Managers Directive (AIFMD), as well as its specialist real estate expertise.

With the end of the transitional period for AIFMD implementation in sight, there are a number of real estate funds already being structured through Jersey. These utilise its attractive and future-proof funds offering to structure some of the most ground-breaking transactions completed in recent times, involving a combination of European and non-European assets and investors. For example:

  • Carey Olsen advised on the establishment of the largest ever real estate fund to be listed on the London Stock Exchange – the Kennedy Wilson Europe Real Estate fund plc, a closed-ended collective investment fund incorporated in Jersey, which announced a capital raise of up to £1 billion through its IPO on the LSE's Main Market; and
  • Appleby advised on two major landmark UK property transactions with a combined value of £2.5bn. The first was Blackstone’s sale of its interest in the Broadgate Estate to Singaporean sovereign wealth fund, GIC, one of the largest real estate transactions in UK history. Appleby also advised Blackstone on the sale of its beneficial interest in the Chiswick Park Estate to the China Investment Corporation (CIC).

Examples like these reflect Jersey’s flexibility and expertise, and provide evidence that Jersey’s approach to regulation, and the AIFMD in particular, is proving very attractive to UK, EU and non-EU fund managers.

From Jersey’s perspective, the AIFMD is fast proving something of an opportunity. Within Europe, Jersey offers an EU private placement option, with limited AIFMD reporting and disclosure requirements for Jersey funds marketing into the EU, and a fully AIFMD-compliant option for Jersey funds marketing throughout the EU once third country passporting becomes available.

There are real opportunities for real estate fund managers to draw on Jersey’s specialist expertise and outsource their administration requirements, to help facilitate complex AIFMD reporting requirements. Jersey’s deep knowledge of the real estate sector, including its experience in asset servicing, tax, accounting and filing, its network of qualified surveyors and its governance expertise, can give real estate fund managers a great deal of confidence.

Growth

The signs are that this trend is set to continue. At the Jersey Finance Annual London Funds Conference held last month, 33% of the audience of fund professionals indicated that real estate was the biggest growth area for them.

Attendees also thought that most opportunities would come from outside of Europe, with 37% suggesting Asia was the most likely growth market, followed by Africa and Latin America (26% each).

For this reason, Jersey continues to offer a ‘business as usual’ regime for funds marketing outside the EU that is fully outside the scope of the AIFMD framework, offering potentially lower operational costs.

Jersey is seeing the tangible results of this trend first hand. Whilst it remains a popular domicile for real estate funds targeting the UK commercial and the wider European property market, a significant amount of non-European real estate investment activity is also being channelled through Jersey. This includes funds targeting the US residential and commercial real estate markets and investors in the Middle and Far East.

Flexibility, expertise and clarity are key for real estate fund managers. With its ability to offer attractive solutions both in and outside of Europe, Jersey is extremely well placed to sustain this high value real estate fund growth and maintain its position as Europe’s leading real estate fund domicile.

This article was first published in Estates Gazette, Finance Report, April 2014.

Jersey has long held significant appeal as an alternative investment funds domicile, but there has been a noticeable rise in recent months in high-value real estate funds targeting UK and continental Europe that are being structured through Jersey.

JFA News
Sunday
6
April 2014

2014 Annual Dinner Raffle Prize Information

440 guest attended the 2014 JFA Annual Dinner on Friday 4 April at the Royal Jersey Showground.  A great night was had by all who were entertained by Jon Culshaw who managed to do a very good impression of the Vice-Chairman of the JFA, Tim Morgan amongst many more!  The guests were also entertained by Joe Stilgoe and his band who performed both during and after dinner.

This year the dinner supported The Stroke Association and with the fantastic generosity of all those attending, a massive £6,200 was raised for this very worthwhile cause.  The top 3 prizes were drawn at the dinner and these were all claimed on the night and a full list of prizes and ticket numbers can be viewed below.  Any member lucky enough to win can collect their respective prize by visiting the offices of The Stroke Association who are located at Shop B, Les Jardin du Soleil, La Route es Nuaux, St Helier (opposite the supermarket at First Tower).


First Prize - Ticket Number 0614 - IPad Donated by PWC

Second Prize - Ticket Number 1395 - Case of Champagne donated by Fairway Fund Services

Third Prize - Ticket Number 1451 - 3 Month Gym Membership donated by Grand Hotel & Spa

Fourth Prize - Ticket Number 0185 - £200 Ball Gown Voucher donated by Affinity

Fifth Prize - Ticket Number 1664 - 1 Month Gym Membership donated by Carrefour

Sixth Prize - Ticket Number 1340 - 1 Month Gym Membership donated by Carrefour

Seventh Prize - Ticket Number 1313 - Gloss Cut & Blow Dry donated by Elmina

Eight Prize - Ticket Number 0059 - Cocoon Spa Experience donated by La Roche Spa

Ninth Prize - Ticket Number 0074 - Trip for two to the L'Ecrohous donated by Seafari Tours

Tenth Prize - Ticket Number 0507 - Table D'Hote Lunch for 2 donated by Sommerville Hotel

Eleventh Prize - Ticket Number 2279 - Cut & Blow Dry donated by Blades

Twelth Prize - Ticket Number 1497 - £25 Experience Voucher donated by Creepy Valley

Thirteenth Prize - Ticket Number 1638 - £25 Tanning Voucher donated by The Tanning Zone

Many thanks to all organisations who kindly donated the above prizes.

440 guest attended the 2014 JFA Annual Dinner on Friday 4 April at the Royal Jersey Showground. A great night was had by all who were entertained by Jon Culshaw who managed to do a very good impression of the Vice-Chairman of the JFA, Tim Morgan amongst many more!

JFA News
Thursday
3
April 2014

A future proof approach to AIFMD

With the end of the transitional period for AIFMD implementation now in sight, it’s a critical time for fund structuring in Europe. As we look forward into 2014, the outlook for the global funds industry is looking more positive and Jersey’s funds industry is certainly in a strong position.

This strength is reflected in Jersey’s most recent statistics – at the end of 2013, the net asset value of Jersey funds had stayed firm around the £200 billion mark, actually showing a year-on-year increase of 2.5%. The figures also show that Jersey remains a particularly strong contender in the alternative asset classes, with hedge, real estate, and private equity funds representing the majority of assets under administration.

This only underlines just how important a robust response to AIMFD has been for Jersey. Whilst across Europe there are still uncertainties around the exact impact of AIFMD, with many alternative fund managers and service providers still trying to come to terms with what the detail means to them, from Jersey’s perspective its future as a fund domicile looks bright.

Jersey’s approach to the AIFMD is appealing to UK, EU and non-EU managers with a number of high value funds being structured through Jersey recently.  In particular, an increasing number of asset and investment management businesses are establishing a presence on the island, and major service providers such as Apex Fund Services (Jersey) Limited. Additionally, established managers on the island, including one of the world's largest hedge fund managers, Brevan Howard, have recently built out and enhanced their existing considerable local presence.

Opportunity

Rather than it being an obstacle, Jersey looks upon AIFMD as an opportunity, responding to its implementation by offering stakeholders three potential options:

  • The ‘business as usual’ option, with no AIFMD impact for Jersey funds marketing outside the EU or whose EU marketing has been completed
  • An EU private placement option with limited AIFMD reporting and disclosure requirements for Jersey funds marketing into the EU
  • The third option of a fully AIFMD-compliant Jersey fund for marketing throughout the EU as soon as third country passporting becomes available

All this is down to a great deal of hard work, ensuring that Jersey has a ‘future proof’ model. The regulatory infrastructure is already in place in Jersey to cater for these three options, with no other EU or third country jurisdiction able to offer that range of options.

When it comes to marketing into Europe, managers want confidence that their funds are being appropriately serviced. There has been some talk of the AIFMD having a ‘concentration effect’ in Europe involving just a handful of onshore EU countries, but Jersey’s experience is different. In fact, research suggests that around 70% of EU fund managers are considering setting up an offshore solution in response to the AIFMD (KNEIP, June 2013), and Jersey is well placed to capitalise on that.

Where EU marketing is concerned, offshore is very much alive, with Jersey managers still able to access EU markets. Having signed 27 bilateral cooperation agreements with EEA countries in 2013, including the UK, Germany and France, Jersey’s regulator (the Jersey Financial Services Commission) is now granting licences for hedge fund managers actively targeting European markets through private placement arrangements.

In addition, as the first third country to offer managers the option of a fully compliant AIFMD framework, Jersey has created an ‘opt-in regime’ for managers wishing to comply fully with AIFMD requirements when marketing to European investors. This provides regulatory equivalence compared to onshore EU locations and will be of particular interest to managers from July 2015, when fully compliant third country managers anticipate the use of an EU-wide marketing passport.

Jersey is in a very strong long-term position to continue to market hedge funds into Europe – and, with the UK Treasury confirming its national private placement regime will be in place until 2018, Jersey will continue to enjoy easy access to the UK investor market.

Global Solution

Meanwhile, managers want to retain an element of flexibility and need a cost effective solution where they manage funds targeting investors in non-European growth markets. A greater amount of non-UK and non-European hedge fund activity is currently being channelled through Jersey and an increase in the number of Jersey alternative funds targeting assets and investors in growth markets across Russia, Africa and Asia are anticipated this year.

As a non-EU jurisdiction, Jersey offers a regime that is fully outside the scope of the AIFMD for managers who don’t require EU capital, whilst using a non-EU jurisdiction that has the expertise to handle global hedge fund business is highly attractive too.

Using Jersey’s broad and familiar range of structures offers clear benefits to managers seeking lower operational costs outside of Europe, with the ability to avoid the depositary requirement, leverage restrictions, regulatory capital burdens and remuneration rules that are found within the AIFMD.

Offering a regime that is both fully AIFMD compliant and outside the scope of the AIFMD is something that EU countries and most IFCs aren’t able to match, and puts Jersey in a very strong position.

Governance

One key talking point surrounding AIFMD in recent months has been the particularly vexed issue of achieving a management entity's operational efficiency whilst demonstrating an appropriate degree of substance.

In fact, establishing a Jersey manager entity, with an appropriate degree of substance, can be relatively simple and cost-effective. Jersey’s regulator is able to offer a fast-track licencing process that is the envy of many onshore locations, where there are instances of managers taking months to get an AIFMD licence.

Managers can draw on Jersey's deep experience in fund administration, asset servicing, tax advice, and accounting, and have fast access to governance expertise. The long-standing ability for Jersey to field local directors and officers of management entities with risk and portfolio management skills, and Jersey's ever-growing pool of skilled non-executive directors means there is little risk of Jersey management entities being discounted as mere ‘letterbox entities’. This sort of long-standing expertise has created a genuine offering of substance in Jersey.

It will be of considerable comfort to hedge fund managers that the familiar onshore EU adviser/offshore manager model still works in Jersey too, without the risk of an EU onshore adviser being regulated as a manager onshore.

The last few years have been something of a whirlwind for hedge fund professionals and it is understandable that, particularly in the coming few months, managers will be looking for a blend of flexibility, certainty and excellent service delivery.

Jersey has turned the AIFMD into an opportunity, enabling managers to establish all their management entities in Jersey and meet EU requirements while at the same time serving the rest of the world in a lower cost non-AIFMD compliant environment. The feeling in Jersey is that there is a specific opportunity for UK fund promoters to use Jersey as part of a ‘wait and see’ strategy, giving them the opportunity to continue their business as usual whilst assessing the full impact of the AIFMD.

With a number of successful managers already putting their faith in Jersey by relocating in recent months, its future as a specialist centre for hedge fund servicing and management in a post-AIFMD world is very strong indeed.

This article first appeared in HFMWeek's AIFMD Report 2014, published April 2014.

With the end of the transitional period for AIFMD implementation now in sight, it’s a critical time for fund structuring in Europe. As we look forward into 2014, the outlook for the global funds industry is looking more positive and Jersey’s funds industry is certainly in a strong position.

JFA News
Monday
3
February 2014

A Future Proof Solution

Looking back over the past few years, it is clear that regulation, in various guises, has been a key pre-occupation for private equity and real estate fund managers. Amongst those with European interests, nowhere has this been more apparent than in relation to preparations for the EU Alternative Investment Fund Managers Directive (AIFMD).

With the AIFMD's transitional implementation phase coming to an end this summer, we are currently in an interesting period as far as fund structuring decision making is concerned. While EU countries have been bringing the AIFMD into national law at their different paces, many private equity and real estate fund managers and service providers are still trying to come to terms with exactly what the detail of the AIFMD means to them.

In numerous conversations we have had, there remains a real sense of uncertainty and, in some cases, a realisation and some serious concern that the decisions made in the next few months will have significant long-term implications for the operation of fund managers and the performance of their funds.

When it comes to marketing into Europe, managers want confidence that their funds are being effectively and appropriately serviced. Equally, managers want flexibility and a cost effective solution where they manage funds targeting investors in non-European growth markets.

For those International Finance Centres (IFCs) that are established specialist funds jurisdictions, getting this balance right has been crucial. Given its persistent strength in the alternative investment funds market this is very much the case in Jersey - over 70% of all of Jersey’s funds business is in alternative asset classes.

Based on an understanding that managers want both regulatory certainty and flexibility, Jersey has sought to adopt a ‘future proof’ model. This means that a Jersey manager is able to establish funds marketed in the EU through available national private placement regimes (with only the AIFMD's transparency and reporting burdens to contend with) and, as from 2015, through the option of an EU-wide passporting route (in full compliance with AIFMD). At the same time, Jersey funds can also target investors in the rest of the world, completely outside the scope of the AIFMD.

Lower Costs

Although the UK remains our core market, an ever greater amount of non-UK and non-European real estate investment activity is currently being channelled through Jersey. The future looks to be improving in the US - particularly in residential and commercial real estate markets – while sophisticated investors in the Middle East and Far East are continuing to look seriously at global property and private equity investment.

As a result, managers are adopting global strategies and raising capital in growth markets around the world where wealth is being created and global investment opportunities are sought after.

For this reason, using a non-EU jurisdiction with the maximum EU accessibility that has the experience and expertise to handle global private equity and real estate business is highly attractive. As a non-EU jurisdiction, Jersey also offers a regime that is fully outside the scope of the AIFMD for managers who don’t require EU capital.

Using Jersey’s broad and familiar range of limited partnership, unit trust, or corporate (including cell) structures, this optionality offers clear benefits to managers and investors seeking lower operational costs, with the ability to avoid the depositary requirement, leverage restrictions, regulatory capital burdens and remuneration rules that are found within the AIFMD. If, however, investors require full AIFMD compliance, that option is available too.

The possibility of reduced regulatory compliance costs in appropriate cases means that a Jersey manager can offer enhanced return prospects to investors, and at the same time they can have confidence that it is being serviced by experts in a well-respected European time-zone jurisdiction.

The appeal of this approach to European and UK managers is reflected in the findings of Multifonds’ research published in June 2013, which found that 77% of EU managers may choose to set up an offshore structure as a result of AIFMD.

Europe

Meanwhile, where the EU marketing is concerned, 'offshore' is still very much alive, and Jersey managers can still access EU markets. Recent activity suggests that, for real estate funds targeting the buoyant UK commercial property market and the wider (though still relatively flat) European market, Jersey remains a popular choice.

Having signed 27 bilateral cooperation agreements with EEA countries in 2013, including the UK, Germany and France, Jersey’s regulator (the Jersey Financial Services Commission, ‘JFSC’) is now granting licenses for fund managers actively targeting European markets through private placement arrangements.

In addition, Jersey is the first ‘third-country’ to offer managers the option of a fully compliant AIFMD framework, thanks to regulations introduced in Jersey that mirror the Directive's requirements. This has created an ‘opt-in regime’ for managers wishing to comply fully with AIFMD requirements when marketing to European investors, providing regulatory equivalence compared to onshore EU locations and of particular interest to managers from July 2015, when fully compliant third country managers can seek the EU-wide marketing passport.

This essentially means that Jersey not only offers private placement regimes under the AIFMD, but has also already implemented, ahead of time, the necessary framework to achieve an EU-wide AIFMD marketing passport from 2015.

In particular, with HM Treasury confirming that its private placement regime will be in place until 2018, we expect Jersey to continue to prove an attractive and cost-effective location for UK-focused real estate funds, providing access to the major UK real estate and investor market, with which it already has strong connections and experience.

In addition, due to its straightforward structuring process and an administration network that understands core financing and accounting requirements, Jersey’s model is attractive for EU-focused real estate funds, particularly European single asset funds and an increasing number of sovereign wealth funds investing in real estate.

Substance

One of the key themes to emerge from the AIFMD is the requirement for managers to have greater substance, and the vexed issue of achieving a management entity's operational efficiency whilst demonstrating an appropriate degree of substance.

With Jersey’s regulator able to offer a fast-track licensing process that is the envy of many onshore locations, where there are instances of managers taking months to get an AIFMD licence, establishing a Jersey manager entity for private equity and real estate funds can be relatively simple and cost-effective.

Meanwhile, it will be of considerable comfort to managers that the familiar onshore EU adviser / offshore manager model still works in Jersey too, without risk of an EU onshore adviser being regulated as a manager onshore. The long-standing ability for Jersey to field local directors and officers of management entities with real risk and portfolio management skills and Jersey's ever-growing pool of skilled non-executive directors means there is little risk of properly-run Jersey management entities being discounted as mere ‘letterbox entities’.

Being able to draw on Jersey's deep experience in fund administration, asset servicing, tax advice, and accounting is vital for managers, as is having access to real governance expertise. Having precisely this sort of long-standing expertise has created a genuine offering of local substance in Jersey in the context of private equity and (in light of Jersey's network of qualified surveyors) commercial real estate activity, backed-up by the immediate availability, in the context of any managers opting for full AIFMD compliance, of a fully compliant depositary regime and a pool of local depositaries of all types.

As far as fund structuring is concerned, as we near the end of the crucial transitional period, we also expect to see parallel ‘offshore-onshore’ structures, with some managers choosing to run an onshore EU fund actively marketed in the EU,  alongside a more cost-effective  and flexible offshore option for other investors.

We also see an opportunity for UK fund promoters to use Jersey management entities as part of a ‘wait and see’ strategy, giving promoters the opportunity to continue their business as usual whilst stepping back and assessing the full impact of the AIFMD, without rushing in and committing immediately to the more costly and burdensome  compliant option.

Opportunity

AIFMD has posed a significant regulatory challenge for Jersey, as it has for many jurisdictions, but, unlike most locations, Jersey has turned it into a real opportunity to offer the maximum flexibility to users of the jurisdiction. Promoters can establish all their management entities in Jersey and meet EU requirements while at the same time serving the rest of the world in a lower cost non-AIFMD compliant environment. Offering both options will not be possible in onshore EU locations, nor in all IFCs.

With a number of successful managers already putting their faith in Jersey by relocating in recent months, Jersey’s future as a specialist centre for real estate fund servicing and management looks very strong indeed.

This article was first published in Private Equity Real Estate magazine's feature on Regulation in February 2014.

Looking back over the past few years, it is clear that regulation, in various guises, has been a key pre-occupation for private equity and real estate fund managers.

JFA News
Wednesday
22
January 2014

Jon Culshaw announced as Guest Speaker at forthcoming JFA Annual Dinner

The JFA recently announced that Jon Culshaw will be the guest speaker at the forthcoming annual dinner that will take place on Friday 4 April at the Royal Jersey Showground.  Jon's visit to the event is kindly being sponsored by JTC Group.

Main Sponsor of the event is Kleinwort Benson,

Silver Sponsors include BNP Paribas, JP Morgan, Moore & Mourant Ozannes.

A champagne reception will take place at the event and this is being sponsored by IPES.

Tickets for the event cost £75.00 per person and bookings can be made with Caroline Harrington by emailing enquiries@jerseyfunds.org.

The JFA recently announced that Jon Culshaw will be the guest speaker at the forthcoming annual dinner that will take place on Friday 4 April at the Royal Jersey Showground. Jon's visit to the event is kindly being sponsored by JTC Group.

JFA News
Wednesday
22
January 2014

Annual Funds Conference

The 2014 JFA/JFL London Funds Event will take place on Wednesday 19 March at 8 Northumberland Place.  Full details on the content of the event along with how to book places can be found by clicking on the following link
http://www.jerseyfinance.je/events/the-jersey-finance-annual-funds-conference-2014

The 2014 JFA/JFL London Funds Event will take place on Wednesday 19 March at 8 Northumberland Place.