Friday, December 21, 2018
A Positive Outlook for 2019
By Mike Byrne, Chair, JFA
With the 100-day countdown to Brexit now firmly on, Jersey is finishing 2018 on a real high and there’s every reason to look to 2019 with confidence.
To finish the year with the most recent figures showing that our funds business is at an all-time high, breaking through the £300bn barrier in Q3, is a fantastic achievement. Just as impressive is the performance of the individual asset classes - private equity has grown by 41% year-on-year, hedge by 18%, real estate by 11%, and infrastructure/credit/debt funds by 26%.
In fact, in recent times, we’ve seen some of the largest funds ever raised in Jersey – Softbank’s Vision Fund, CVC Fund 7, and Nordic 9 to name just a few – whilst Man Group, the world’s largest listed asset management firm, opted to establish a presence here.
It’s a challenging environment but the clear evidence is that fund managers in the UK, Europe and markets further afield are putting their faith in Jersey. And they have every reason to do so - as I look back over the past twelve months, I think we can be proud of what we’ve achieved as an industry.
In particular, we’ve seen Jersey assert its position as a centre that can offer seamless market access – and that’s absolutely key in light of Brexit and global protectionist policies more widely. With the likelihood of the UK crashing out of the EU without a deal still hanging in the balance, managers are quite rightly looking to mitigate the impact on their fund structures. Jersey has proved to be a popular choice of jurisdiction for UK managers, offering cost-effectiveness and flexibility through private placement.
Mid-year figures showed that the number of Jersey managers marketing into the EU through private placement rose 23% year-on-year whilst the number of funds being marketed into the EU this way increased by 11% over the same time frame. The expectation is that these figures will continue to rise around Brexit as managers look for certainty and stability.
With that in mind, I was really pleased that the JFA was able to bring to life just how well private placement is working by collating a series of real life case studies this year - it’s proving to be a valuable piece of work.
We’ve also successfully managed to deliver innovations to the market – the Jersey Private Fund, only launched in 2017, has come to the fore as the go-to product for small groups of sophisticated investors. Speed to market has become crucial for managers and the JPF has been able to meet those demands, offering impressively fast regulatory approval - as at June this year, 130 JPFs had been established holding combined total assets under management of almost £20bn. The rate of establishment is so fast, the 200 mark should be passed fairly quickly in 2019.
Whilst the JPF has proven to be an attractive vehicle in itself in 2018, Jersey also made applications for the JPF online only this year, making the process even quicker. It really is revolutionary and a real statement of Jersey’s intent in the digital space as we look to ‘go paperless’ in the years ahead.
We’ve also worked hard this year to make Jersey’s commitment to high standards of governance and substance absolutely clear. In particular, we worked together with Jersey Finance to produce a factsheet outlining our position on the OECD’s BEPS project – the overriding message is that the action points outlined under BEPS have not altered Jersey’s position as a leading, forward-thinking centre for the domiciliation, management and servicing of funds.
It’s actually a year ago this month that Jersey became only the third jurisdiction in the world to ratify BEPS into domestic law, putting Jersey in a better place to respond to it than many other jurisdictions. And fittingly, this December Jersey approved economic substance legislation, further underlining our position as a responsible, high quality jurisdiction.
So what can we expect looking forward to the coming twelve months?
First of all, the high-level trends are right on Jersey’s sweet spot, with global allocation to alternatives continuing to increase. That’s good news right across the private equity, hedge, private debt, real estate and infrastructure asset classes, and there’s a real opportunity for Jersey to provide a home to a growing number of managers, as well as funds, as they look for a stable location to operate from. In 2018, Man Group chose
We’ll see greater global opportunity – UK managers will continue to be a core market for Jersey, but we also have a real opportunity to support managers elsewhere with fund distribution. The Monterey Insight Jersey Fund Report 2018 suggests an increasingly global picture for Jersey’s funds sector already, with the number of Jersey funds with US promoters growing 165% over the past five years. I expect this trend to continue into 2019.
Innovation will remain key – speed to market, flexibility and cost-efficiency will remain vital, and we are in a strong position to satisfy those needs through our ongoing work to deliver both the right products to the market and a digital infrastructure that appeals to managers and investors.
But just as there is opportunity, there is plenty of competition too. In 2019 more than ever, we need to continue to bring the Jersey proposition to life and develop clear and compelling messages.
I strongly believe we have the very best ecosystem for a funds industry – not only does that include having a first-class physical, digital, regulatory and legislative infrastructure in place, it also means having the best people too. Time and again, we hear that service quality is what matters when it comes to jurisdictional selection. Our people are at the very heart of delivering that and will be what continues to set us apart in the year ahead.
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