Monday, March 04, 2019
Deal or No Deal: No Problem
By Mike Byrne, Chair, Jersey Funds Association
Recent political manoeuvring in Westminster has done little to resolve the feeling of uncertainty amongst private equity, real estate, infrastructure and other alternative fund managers around the long-term solution to capital raising within the EU.
It won’t be until mid-March now – just weeks before the UK’s expected departure from the UK – that we will have a better idea as to whether the UK is looking at a cliff-edge no deal exit, whether a new deal will be given the green light, or whether the agony will be prolonged by extending Article 50.
Yes, there may be transitional measures in place for fund managers between the UK and European regulators for now, but it’s hardly a satisfactory long-term answer for UK managers looking to access EU investor capital. And with 90% of alternative managers in Europe being in either the UK or Switzerland, that’s a lot of non-EU managers looking for a better solution.
The good news is Jersey continues to play a vital role in supporting managers looking to market vehicles in all or parts of continental Europe, regardless of the outcome of Brexit – deal, no deal or deadline extension.
We’re continuing to see private placement as a very viable and attractive option for managers, with figures announced recently indicating that the number of AIFs marketing into the EU this way through Jersey grew by 8% over 2018, whilst the number of managers doing so rose by 13%. That’s a real demonstration of faith in Jersey’s model.
You can see how private placement is being used in practice here - across all asset classes and fund sizes.
There’s good reason for this confidence. Jersey is already a third country in relation to the EU, with all relevant agreements in place to support private placement across Europe. That means Jersey can continue to operate seamlessly irrespective of the outcome of Brexit.
Doing so is also more targeted – EU figures show that only 3% of managers in Europe actually blanket market to more than three EU countries. In 97% of cases, it makes much more sense to opt for a private placement solution.
In addition, the set-up process for managers is a lot quicker than onshore solutions and a lot more efficient and cost-effective, whether that’s relocating fully or partially to Jersey through, for instance, a Jersey ManCo structure.
There’s long-term security for managers too - changes to the private placement regime are unlikely, but if they do happen, private placement will still be in place for three years from that date, by which time Jersey will have access to the AIFMD passport in any case.
It’s a pretty compelling proposition for UK, and other non-EU managers, looking to market into the EU, and the industry agrees – according to current figures, the value of funds administered in Jersey broke through the £300bn mark in 2018 to reach the highest ever level – any perceived uncertainty around Brexit certainly hasn’t hampered the growth of Jersey’s funds sector.
The message is clear – whatever happens at the end of March, Jersey is ready to play a key role in enabling managers to continue to market their funds to and generate returns for EU investors. No problem.
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