The Jersey Funds Association (JFA) has confirmed its new committee, following the organisation's Annual General Meeting last week (11th July).

Joel Hernandez (Head of Investment Funds at Mourant) has been appointed as Chair of the JFA, taking over the reins from Michael Johnson, who has come to the end of his three-year term. Dilmun Leach (Partner at Walkers (CI) LP) has been appointed Vice Chair.

The JFA's main committee also includes Robin Wilson (Treasurer), Michael Johnson, Richard Anthony, Mike Byrne, John Riva, Steve Cartwright, Ben Dixon, Stephanie Webb, Robert Milner, Tim Morgan, Simon Page, Tom Powell, Sophie Reguengo, Martin Rowley, Martin Paul, Jon Stevens, Elliot Refson, Chris Patton, Gary Ayres, Alison Gurd, John Everett and Jeffrey Parongan.

Commenting after the AGM, Joel said: ‍

“Reflecting on the past year at our AGM and following the JFA's annual dinner last month, it’s clear there is real positivity across Jersey’s funds industry. Despite geopolitical uncertainty, global fundraising headwinds and liquidity constraints, Jersey’s funds industry remains resilient and continues to grow – however the JFA is cognisant that an increased focus on product innovation and progress is critical if Jersey is to retain its position as a leading funds jurisdiction.”

Speaking on his appointment as Vice Chair, Dilmun added:

“I’m delighted to be taking on the role of Vice Chair of the JFA at what is an important time for our industry. A number of exciting enhancements are in train in terms of product innovation, technology and regulatory changes, and the JFA is committed to driving progress in all these areas. Together with Joel and the wider committee, I’m looking forward to continuing to serve the needs of the industry and ensure Jersey continues its upwards trajectory.”

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Jersey is well positioned to support managers in a landscape where the convergence of the alternative fund and private client sectors remains a key trend – but the industry must focus on innovation if it is to maintain its growth trajectory, according to speakers at this year’s Jersey Funds Association (JFA) annual dinner.

More than 400 people from across the industry, including lawyers, fund administrators, fund managers, compliance experts and accountants as well as politicians and regulatory representatives, attended this year’s dinner, held recently (20 June).

Speaking at the event, Mike Johnson, JFA Chair, told the audience that, in a persistently challenging environment, Jersey had fared well against its competitors. In particular, he pointed to the ongoing success of the Jersey Private Fund (JPF) regime, with the total number of JPFs now standing at 750 – a 5% increase on last year –while the total value of fund assets serviced in Jersey now sits at around £540bn.

Nevertheless, the sector faced several ongoing challenges, particularly around fundraising difficulties in the middle market and broader liquidity constraints. Despite these headwinds, Jersey remains well-positioned to attract new business, thanks to its speed to market, regulatory flexibility, tax neutrality, high-quality service, and familiar legal framework.

Mike also highlighted how liquidity pressures are prompting managers to explore the convergence of the alternative funds and private client sectors. Here too, Jersey stands out, leveraging its longstanding private wealth expertise and international reputation to support this growing trend. He said:

“The continued growth of Jersey’s funds sector, despite geopolitical uncertainty, fundraising headwinds and liquidity constraints, is a clear reflection of the strength and resilience of our proposition. But we cannot be complacent. To remain competitive, we must keep innovating – by evolving our product suite, refining our regulatory approach, and embracing forward-looking priorities such as retailisation and technology.

“We’re fortunate to benefit from a strong, collaborative relationship with government, the JFSC and Jersey Finance, all aligned in our commitment to building a future-ready financial ecosystem.”

In addition, Vice Chair of the JFA and Chair of the Legal & Technical sub-committee, Joel Hernandez, pointed to the rapid pace of change in the sector and the work undertaken by the committee, from consulting across industry on sustainable finance to shaping the future of AIFMD II. He specifically highlighted enhancements on the horizon for the JPF, and the committee’s input into Jersey Finance’s Vision2050 project, aimed at affirming the Island’s future-focussed finance sector. He added:

“The pace of change in our industry is relentless, but what sets Jersey apart is its ability to respond quickly, work collaboratively, and stay ahead of the curve. The efforts of our sub-committees are fundamental to that success, positioning Jersey’s funds industry strongly to thrive in an increasingly complex global landscape.”

Meanwhile, attendees at this year’s dinner raised more than £11,000 for local charity Kezia’s Fund, which the JFA had previously pledged to support as part of a three-year commitment, thanks to a raffle held during the evening. Over three-years, the JFA has now raised some £37,000 for Kezia’s Fund, which aims to support mental health among children and young people aged 5 to 25 and their families in Jersey; and provides grants and support to organisations that work to improve children and young people’s mental wellbeing. 

Mike added: “I’m heartened by the fantastic turnout at our annual event and in particular the generosity shown by all those who attended to support the vital work of Kezia’s Fund.”

This year’s Dinner Gold Sponsor was Mourant while Silver Sponsors were IQEQ, BNP Paribas Securities Services, Ogier, B-Flexion and PwC. Champagne Sponsor was Carey Olsen while NextGen Sponsors were KPMG and Gen II, and Technology Sponsor was Allvue.

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The ongoing success of Jersey’s funds industry, which grew to a record £457bn in assets under administration at the end of 2024, is set to be marked at this year’s Jersey Funds Association (JFA) Annual Dinner next month.

Taking place on Friday 20 June at the Trinity Showground, the event aims to be a celebration of success for Jersey’s funds industry over the past twelve months, providing a platform for the JFA committee to showcase the progress the industry has made over the past year as well as a forum for discussion and networking.

Expected to be attended by more than 400 professionals from across Jersey’s diverse funds landscape, the event’s gold sponsor is Mourant whilst silver sponsors are IQEQ, BNP Paribas Securities Services, Ogier, B-Flexion and PwC. Champagne Sponsor is Carey Olsen whilst NextGen Sponsors are KPMG and Gen II, and Technology Sponsor is Allvue.

Guest speaker for the dinner this year will be ‘the UK’s most apologetically posh comedian’ Ivo Graham, whilst the local Jessica Lloyd Band will also be providing musical entertainment.

Michael Johnson, Chairman of the JFA, said:

“Despite ongoing geopolitical uncertainty and difficult fundraising conditions over the past year, Jersey has continued to innovate and enhance its proposition for global managers and investors and grown its business as a result. As an industry and as a jurisdiction, it’s fitting that we should come together to celebrate our shared success, and I’m looking forward to welcoming all those who have contributed to that at our annual dinner this year.”

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A growing number of global fund managers are finding appeal in Jersey’s regulatory platform for accessing EU capital, according to year-end figures.

According to data collated by the Jersey Financial Services Commission (JFSC), 240 alternative investment fund managers (AIFMs) were using Jersey’s national private placement regime (NPPR) to market their funds to the EU investor market at the end of 2024 – a year-on-year increase of 4%.

Those managers were marketing 448 separate funds to EU investors through Jersey’s NPPR route to market – an annual uptick of 8%, spanning the full spectrum of alternative asset classes, including private equity, venture capital, real estate and infrastructure.

The longer-term figures support that upward trend – over five years, the number of managers using Jersey’s private placement regulatory regime has grown by 31%, with the number of funds being marketed into the EU this way growing by 40% (compared to December 2019).

Commenting on the figures, Elliot Refson, Head of Funds, Jersey Finance, said:

“These latest figures reinforce the trend we have been seeing for some years as managers outside of the EU bloc have sought to market their funds effectively to EU investors against the backdrop of the AIFMD and wider complex international regulatory landscape. Jersey’s private placement regime offers those managers a tried-and-tested solution with tax neutrality, regulatory simplicity and cost-effectiveness, all contributing to its appeal.

“Whilst growth has previously been driven by Brexit for UK managers, more recently we have seen interest from managers in other locations outside of the EU – in particular Asia and the US – as managers have responded pragmatically to market conditions to optimise their structuring and operating frameworks where there is an EU nexus. Jersey has been a beneficiary of that.”

Michael Johnson, Chair, Jersey Funds Association, added:

“Alternative fund managers appreciate the experience and expertise Jersey’s ecosystem offers when it comes to global alternative fund distribution – and in the context of European fundraising, its private placement option is a highly efficient and cost-effective means of accessing that EU capital. With EU figures indicating that only around 3% of managers actually need blanket EU coverage and a full onshore presence – and with Jersey’s positive Moneyval assessment last year providing further reassurance – we fully expect Jersey’s private placement option to retain its appeal in the years ahead.”

The figures follow the recent publication of the latest annual Monterey Jersey Fund Report 2024, which shows that the value of Assets Under Administration (AUA) in Jersey’s funds industry grew by 6.1% year on year (as at June 2024) to stand at an all-time high of US$630bn, whilst the number of fund vehicles established in Jersey also rose, with the total number of funds and sub-funds serviced in Jersey up to 2,450 – the most ever recorded in Monterey’s Jersey reports.

Members of the JFA’s Legal and Technical and Risk and Compliance Sub-Committees provided an update to professionals from across Jersey’s funds sector recently, at a briefing that explored the current landscape and some of the measures the industry is taking to maintain Jersey’s leading position as a centre for alternative investment funds.

Setting the scene, Joel Hernandez, Vice Chair of the JFA and Chair of the JFA Legal and Technical Sub-Committee, highlighted the pressure the funds industry has seen over the past year.

He also pointed out that competition between international finance centres remains intense and that Jersey's continued attractiveness as a fund domicile relies on it continuing to have jurisdictional stability, effective regulatory options and tax simplicity. Considerations such as service quality, talent retention, being digitally enabled and cost-effectiveness are key to differentiating Jersey from other IFCs in the coming years.

Joel also highlighted the progress the JFA has made in supporting changes across Jersey’s funds sector. Notably this has included the JFA's work with the Jersey Financial Services Commission (JFSC) and Jersey Finance on the recent updates to the Jersey Private Fund (JPF) Guide, as well as the recent JFSC guidance issued on the Tokenisation of Real-World-Assets.

Commenting on the event, Joel Hernandez, Vice Chair of JFA and Chair of the JFA Legal and Technical Sub-Committee, said:

“There’s no doubt the past year has been challenging for the  funds industry at large. Part of the JFA's role has been to help industry respond to these challenges by progressing developments through collective innovation with the JFSC and Jersey Finance."

“Despite the challenges, there is good reason for Jersey's funds industry to remain positive given its strong position. It's also pleasing to also see industry, government and the regulator collectively moving towards a "growth mindset" and a renewed focus on innovation. This will be critical to the future success of the Jersey funds industry."

Jon Stevens, Chair of the JFA Regulatory and Compliance Sub-Committee, added:

“Against that backdrop, asserting Jersey’s relevance as a robust, expert and progressive centre is critical. Offering regulatory choice, delivering on speed to market and tax simplicity with a familiar rule of law and good access to EU investor capital will all be important as we move into 2025 – all whilst maintaining a close eye on cost effectiveness.”

This year, the Jersey Expert Fund regime marks 20 years since its inception. Here, members of the Jersey Funds Association give their thoughts on how the regime has galvanised Jersey’s proposition in the alternative investment space, and why the structure remains such a popular solution amongst fund managers today …

Q: The Jersey Expert Fund Regime came into being in 2004 - what was the thinking back then in introducing such a product?

Joel Hernandez, Vice-Chairman of the Jersey Funds Association and Chair of the JFA Legal & Technical Sub-Committee (JH): The Jersey Expert Fund regime can best be described as an innovative leap forward for the Island’s funds industry back in 2004. It was introduced to allow more flexibility for fund and asset managers as well as to provide a genuine speed-to-market advantage.

It did this by relaxing a number of policies and rules on the structure and operation of the fund with the aim of creating an attractive and popular route for abroad range of asset classes, including private equity, property and hedge funds as well as other funds investing in alternative asset classes.

Q: What did the Expert Fund Regime add to Jersey’s funds landscape, and what impact did it have on managers and investors?

Daniel Birtwistle, Managing Partner - Jersey, Mourant (DB): Having acted on the very first Jersey Expert Fund back in 2004, it was clear that a key element of the new regime was its ability to authorise a regulated investment fund within 72 hours.

Michael Johnson, Chair of the Jersey Funds Association (MJ): Previously, that authorisation process might have taken weeks. It was a fundamental change and truly a game changer for Jersey. As a testament to the regime, hundreds of Jersey Expert Funds have been launched over the past 20 years, and this includes some of the world's largest investment funds.

‍DB: It’s certainly the case that, twenty years later, there are still very few jurisdictions that can match the speed and flexibility of Jersey's Expert Fund regime.

Q: How significant was the introduction of such a regime for Jersey?

JH: It was an immediate success. A significant number of real estate funds we relaunched after its introduction and many of those funds continue to this day. More recently, Jersey Expert Funds have been used for sizeable private equity fund launches, with subscriptions reaching into the billions.

The regime helped solidify Jersey's reputation as a market-leading funds domicile, particularly in the alternatives space. When combined with the flexibility of fund vehicle choice – whether it be a Jersey unit trust, corporate entity or partnership - and experienced Jersey fund administrators, it’s a regime that continues to provide fund managers with all the key ingredients for the success of their investment fund. In a sense, it was a regime that was ahead of its time.

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Q: How has use of the regime evolved over the last two decades?

JH: The regime has withstood the test of time with very little change needed to refine it over the last 20 years and it continues to be a product-of-choice for some of the world's largest fund managers.

The regime did however need to evolve following the introduction of the Alternative Investment Fund Managers Directive (AIFMD). As another clever solution, Jersey's regulatory framework was adjusted to provide for an additional regulatory "overlay" to allow Jersey Expert Funds to be marketed to EEA investors under the various European national private placement regimes under AIFMD. These amendments ensured that Jersey continued to have a place with European investors who could still benefit from investing in Jersey Expert Funds.

Q: So how does the regime sit now within Jersey’s full armoury of fund regimes?

MJ: The Jersey Expert Fund regime continues to be one of the Island’s cornerstone products for fund and asset managers. It is an example of Jersey’s forward-thinking and innovative approach, and ability to being products to market to meet demand.

Overall, the regime tends to suit larger investment funds with 50 or more investors orthose fund managers looking for a fund product with non-intrusive fund regulation. It also perfectly complements Jersey's other success story, the Jersey Private Fund regime, which provides for 50 or fewer investors, with both products forming key elements of Jersey's compelling offering.

Although 20 years old this year, there’s plenty of life left in the regime yet.

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Attendees at this year’s Jersey Funds Association (JFA) Annual Dinner have helped raise a significant sum in aid of Kezia’s Fund as part of its ongoing commitment to support the local charity.

More than 400 people from across the industry attended this year’s Dinner, held at the Trinity Showground on 28^th June, between them helping to raise £14,420 towards Kezia’s Fund, thanks to a raffle held during the evening.

The fundraiser forms part of a three-year commitment on behalf of the JFA to support Kezia’s Fund, which is managed by the Jersey Community Foundation. The latest effort means that the JFA has helped raise almost £27,000 for the charity over the past two years, whilst it will also be helping at the Run for Kezia event in September this year and encouraging its members to participate.

Kezia’s Fund aims to support mental health among children and young people aged 5 to 25 and their families in Jersey; and provides grants and support to organisations that work to improve children and young people’s mental wellbeing. 

Michael Johnson, JFA Chair, said:

“I’m really pleased that the generosity of those who attended our Dinner this year have helped once again to raise such a good sum to support the work undertaken through Kezia’s Fund. These efforts form part of our wider commitment on behalf of the JFA to support the charity and the vital, amazing work it undertakes.”

Anna Terry, CEO of Jersey Community Foundation, added:

“The JFA has made a very welcome commitment to help continue the legacy of Kezia's Fund, including through this latest fundraising effort, and we are extremely grateful to all those who helped raise such a fantastic total once again this year. These substantial funds will go towards helping to address the critically important and prevalent issue of children and young people’s mental health in Jersey.”

Donations to Kezia’s Fund can be made at: www.kezias-fund.raisely.com.

Professionals from across Jersey’s growing funds industry came together last month to explore the key trends shaping the cross-border funds landscape and celebrate Jersey’s achievements over the past year.

More than 400 people from across the industry, including lawyers, fund administrators, fund managers, compliance experts and accountants as well as politicians and regulatory representatives, attended this year’s Jersey Funds Association (JFA) Annual Dinner, held at the Trinity Showground on 28^th June.

Speaking at the event, Michael Johnson, JFA Chair, told the audience that, in a challenging year globally for the sector, Jersey had held its position well. In particular, he pointed to the ongoing success of the Jersey Private Fund (JPF) regime, with the total number of JPFs now standing at just over 700 – an increase of 100 since last year – whilst the total assets under administration in Jersey now sits at £520bn.

Nevertheless, he pointed to the need to maintain momentum if Jersey was to retain its leading position as a European funds domicile with global ambitions. He said:

“After five continuous years of growth, the performance over the past year was largely flat, which is a first for Jersey, but not unexpected given the incredibly difficult fundraising environment we have seen over the past year at a global level. The outlook remains calm but not stable, and we need to be alive to the macro conditions shaping our industry.”

In particular, Michael highlighted that alternatives – including private equity, real estate and venture capital - continue to represent 90% of Jersey’s total funds business, a model that has created a stable platform of long-term capital. However, there was now a risk of that model being buffeted by global trade-winds, with Michael urging caution in the face of increased competition as market conditions improve:

“There are brighter times on the horizon but we cannot be complacent. Investors are continuing to apply pressure and are focusing new commitments on a narrow swathe of funds. Equally the activity related to the mountain of dry powder available remains stunted by historical standards. It’s vital that Jersey recognises that these macro-economic and political circumstances are out of our control and finds ways to ensure it can keep its wheels turning.

“It’s critical that we focus acutely as a jurisdiction on what managers really care about when it comes to choosing a fund domicile and assert our core strengths – our speed and our high-quality service levels in particular. By embracing innovation and being agile, we can also enhance our product and service range, including exploring the introduction of a Jersey ELTIF solution and clarifying our virtual assets proposition, for instance.”

Vice Chair of the JFA Joel Hernandez pointed further to the need for targeted innovation, and the significant volume of technical issues the JFA had addressed over the past year. In particular, he highlighted updated guidance to the JPF and progress being made in the virtual assets space:

“The recently published updated JPF Guide will help evolve and modernise that product further. This includes widening the categories for eligible investors, mutual recognition for carry schemes that have an element of team co-investment and widening the categories for family and employment connections. A similar approach is also being taken to update the JFSC's guidance to industry on virtual assets, specifically the tokenisation of real-world assets. This is a clear trend and it’s vital that Jersey maintains its reputation for good practical guidance to secure its future in this space.”

Gold sponsor for the evening was Mourant and silver sponsors were IQEQ, PwC, Ogier and BNP Paribas whilst the champagne reception was sponsored by Carey Olsen and the NextGen table was hosted by Gen II and KPMG.

The Jersey Financial Services Commission (the JFSC) has announced a number of updates to its Jersey Private Fund Guide (the JPF Guide).

A copy of the updated JPF Guide together with a consolidated redline is available on the JFSC website: https://www.jerseyfsc.org/jersey-private-fund-guide/.

The updates are the product of significant collaboration between the JFSC and the Jersey Funds Association (JFA), the Jersey Association of Trust Companies, Government and Jersey Finance Limited. The JFA was represented by Joel Hernandez, Vice Chair and Chair of the JFA's Legal & Technical Sub-Committee and Jon Stevens, Chair of the JFA's Regulatory & Compliance Sub-Committee.

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Updates to the Jersey Private Fund Guide

The Jersey Private Fund regime provides fund promoters with a cost effective, fast-track (48 hour) regulatory approval process for their Jersey private fund (a JPF) which can be offered to up to 50 investors that meet certain eligibility requirements.

The updates are designed to further improve the JPF Guide and the JPF regime. They include:

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1. Carry and/or co-investment vehicles

A recognition that co-investment can, in some cases, form part of a fund's carry/incentive arrangement. Previously, carried interest vehicles were not counted as an investor, however the amendments extend this principle to co-investment arrangements that meet the requirements in the JPF Guide.
 

2. Investor eligibility

General: clarification that investor eligibility is satisfied upon admission. That eligibility can continue to be relied upon despite a status change, for example a departing 'employee, director, partner or expert consultant’.

Transfers (for example death or bankruptcy):for any involuntary transfer, such as on death or bankruptcy, there is no requirement for the transferee to qualify through the same criteria as the transferor, but the transferee will (itself) need to meet the investor eligibility requirements as defined in the JPF Guide.

Service providers: an expansion of the categories of ‘professional investor’ for the benefit of the JPF's service providers, by:

1. replacing 'senior employee' with 'financially sophisticated employee' to take a more inclusive approach to the changing demographics within JPF fund management and/or advisory teams,
 
2. including a reference to     'expert consultant' for added flexibility.

3. Governing Body

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The JFSC has clarified its expectation that there should be at least one or more Jersey resident directors appointed to a JPF board or to its governing body. The JPF annual compliance return will request additional data by asking how many Jersey resident or non-Jersey resident directors are on the board of the JPF or its governing body and how many of those directors are employees of the Jersey based designated service provider (DSP) or a group entity of the DSP.

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4. Arrangements that fall outside of JPF

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Changes have been made to the section that deals with arrangements that are not to be treated as JPFs. These include certain family (including family office) arrangements as well as some incentive arrangements (for example carry and/or co-investment vehicles).

The definitions of employees and family connections (including the term 'relative') have been widened and now include trusts established for a person satisfying the wider definition of 'family connection' (not just for a specific person or their dependents).

The JFSC has also clarified its expectation that JPFs should be:

1. established in Jersey and/or,
 
2. to have its governing body and management and control in Jersey.

Where a JPF is established in a country or territory outside of Jersey, having its governing body and management and control outside of Jersey, post authorisation the JFSC will request additional data on the JPF from the DSP, to establish the JPF’s indirect but relevant nexus to Jersey.

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5. Additional key changes

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Certain consequential changes/references to the Money Laundering (Jersey) Order2008 and the JFSC's Outsourcing Policy have been added to the JPF Guide.

Vice-Chair of the JFA, and Chair of the JFA's Legal & Technical Sub-Committee, Joel Hernandez, said:

'We're pleased to see the JFSC's commitment to work with the funds industry to refine the JPF regime. The JPF regime continues to provide an excellent solution for the global market through its effective, streamlined and proportionate regulation for a private investment fund. The speed and ease with which a JPF can be launched underlines the effectiveness of the regime.'

Chair of the JFA, Michael Johnson, added:

'The Jersey Private Funds regime has been an enormous success for our funds industry. Since its introduction in 2017, over 700 private funds have been launched, further reinforcing Jersey's reputation as a funds domicile. The latest updates mark another positive step forward for our industry.'

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Emerging trends in the digitalisation of fund operations and the opportunities presented by a burgeoning tokenisation and virtual assets industry were amongst the issues explored at a recent event hosted by the Jersey Funds Association.

The event, held last month in Jersey, brought together a number of industry leaders and discussed the challenges facing organisations set against a backdrop of continued economic and political upheaval before considering the opportunity presented by digital assets and blockchain, the potential of AI to be transformative, and the pace of change in digital innovation.

Experts in their field also provided updates to more than 100 delegates on specific developments relevant to the funds sector, highlighting in particular the emerging use cases for AI within a cross-border funds context, such as digital ID and asset diversification, before questions were opened up to the audience.

Following an introduction from BDO Director Manik Memon, E&Y Partner Leo Boessenkool discussed the emerging trends in funds digital operations, underlining the role of AI in undertaking manual tasks within the sector to boost productivity, while Walkers Senior Counsel, Sarah Townsend, took a deep dive into Jersey’s position regarding fund tokenisation, pointing to the launch of Jersey’s first tokenisation platform earlier this year and imminent updates to Jersey’s ICO guidance notes .

Following were C5 Alliance Director John Gamble, who explored how to practically approach AI, highlighting in particular the importance of focusing on training AI on good quality data and addressing fairness and bias in integrating AI, whilst PwC Director David O’Brien talked the audience through operations powered by generative AI across private markets functions, including the application of Gen AI in preparing DDQs, portfolio reporting and legal document drafting.

Commenting, JFA Chairman Michael Johnson, said: “Market conditions over the past 12 months, combined with added pressures such as the retention of talent and increased regulatory and compliance demands, have created a complex picture within which the cross-border funds sector operates. There’s no doubt that the integration of digital solutions forms a key part in addressing some of those major challenges, from enhancing productivity and improving client experience to opening up new and diverse opportunities to grow our proposition.

“Jersey has a great track record in embracing digital solutions, but it’s clear that the pace of change is relentless and we need to continue to move faster and faster if we are to remain competitive and at the forefront of the global alternative funds space. With that in mind, I was really pleased to see such interest at out latest JFA seminar in how Jersey is applying digital solutions to bolster its funds capabilities and support investors and managers with their increasingly digital ambitions.”

Funds Europe recently held a roundtable looking at Jersey's growing expertise and experience in tokenisation and digital assets.

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Specialists from across Jersey's funds sector explored the shift towards a rising importance of digitalisation within the private markets, and how Jersey is innovating to meet that demand

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Read the full roundtable here.

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Members of the Jersey Funds Association reflect on the changing US regulatory landscape for private funds, what it means for fund managers, and how the changes are providing an opportunity for managers to re-think their structuring solutions to suit investor demands…

Regulatory shifts in the US private funds market have certainly created a huge amount of discussion in recent months, with managers continuing to get to grips with what the changes mean.

The US Securities and Exchange Commission (SEC) announced last year a set of amendments to the 1940 Investment Advisers Act – a lengthy set of proposals relevant to private fund advisors, the implications of which have taken sometime to filter through to the US manager community.

Aimed at creating a fairer environment with improved fee transparency, the rules – which follow those already in place for hedge funds - introduce enhanced regulation for private fund advisors and added rules around portfolio transparency and ‘democratising’ fee structures, representing a significant shift in private market industry practice.

Amongst the various provisions in those amendments, for example, is a requirement for quarterly reporting, something that may not be as straightforward as some managers had initially thought.

The changes have heralded calls from managers for further guidance on issues where further clarification is needed, and where some of the rules have the potential to create additional complexity for private fund advisors and added compliance costs. From an investor perspective, there is also the potential for preferential rates being offered to their peers, presenting further associated issues.

The result is a divided US private fund landscape, with as many groups, trade bodies and associations supporting the new rules as there are opposed to them – and there is a chance that the changes might be the end of it, if calls to reconsider are met with open ears.

Domiciles in Focus

In the wake of the rule changes, US managers have undoubtedly increased their enquiries relating to their domicile choices, taking the view that they can mitigate their administrative burden by revisiting their administration, structuring and governance frameworks.

“This is a period of concern for US managers and domiciles have come into focus as part of manager considerations,” says JFA committee member and Mourant Partner Alistair Horn.

“When it comes to transparency requirements, particularly around fees, they want certainty, security and guarantees from their domiciles that their structures can stand up to international regulatory scrutiny – and in some cases, stress tests with the more traditional existing jurisdictional partners in the Caribbean have not filled them with confidence.”

Jersey’s Solution

From Jersey’s point of view, this has provided an opportunity to remind US managers that it can provide advantages over other jurisdictions for private fund structures, including those in the Caribbean, in particular when it comes to high standards of governance and an ability to demonstrate genuine substance.

Key advantages include:

·        Lower cost of formation and maintenance, with no requirement for a Jersey Private Fund (JPF) to appoint an auditor. This makes the JPF regime cost-effective and quick to set up compared to Private Fund regimes in other jurisdictions.

·        Tax neutrality and great credentials on compliance with international standards

·        An internationally respected regulatory environment for funds, with robust and clear requirements around appointing directors and service providers

·        Investor familiarity, especially when marketing into the EU

Further detail around the Jersey Private Fund regime compared to other domiciles can be found here.

To bring this further to life, in 2023, the net asset value of regulated funds under administration in Jersey grew to almost US$600bn, while the Jersey Private Fund continued cemented its position as  a go-to vehicle for professional investors, with 645 registered in total.

The jurisdiction also continued to see an ever-increasing community of managers fully resident in the island across private equity, hedge fund, venture capital, debt and real estate with these managers bringing a real depth and diversity to the industry at a time when substance remains high on the agenda.

Jersey’s platform as a gateway to EU investor capital through private placement has also remained strong. Today more than 200 non-EU managers –including those in the US and UK - are using the private placement route through Jersey to access Europe. It’s a figure that has grown by around 60% in five years, without the hassle and expense of full onshore AIFMD compliance.

“The SEC rule changes have acted as a prompt for US managers to take stock, re-evaluate and look elsewhere for opportunities, and, as all the indicators, data and figures reflect, Jersey is absolutely able to meet that call. In fact, it is already doing so,” explains Michael Johnson, JFA Chair and Group Head of Institutional Services at Crestbridge.

In particular the issue of governance remains pivotal, says Dilmun Leach, JFA Committee member and Partner at Walkers:

“At the heart of all this is depth of expertise, substance and governance, and this is where Jersey really excels. Ultimately what managers want is peace of mind, and Jersey delivers on that. The JPF is incredibly quick and cost-effective to set up, the regulatory environment is clear and unambiguous, and the expertise available, including a number of one-stop shops who can hand-hold managers through the process, is truly market leading. For many US managers, it’s proving a breath of fresh air.”

What Next

The US regulatory landscape will no doubt continue to evolve this year –but regardless of whether these latest SEC rule changes are maintained in full, in portion or not at all, the change has already prompted managers to revisit their structures, question the status quo and begin to ask questions as to whether their existing positions are the best possible solutions for investors.

Given its well-established governance and substance credentials, its global distribution capabilities and its finely honed regulatory ecosystem, Jersey is well placed to support those US managers looking for an alternative and viable solution that can support them with both their global compliance obligations and their investor aims in the long run.

Figures recently published by Monterey Insight show that the value of Assets Under Administration (AUA) in Jersey’s funds industry grew by 1.4% year-on-year to stand at US$593.5bn as at June 2023, highlighting the appeal of Jersey’s stable platform for alternatives against a backdrop of challenging market conditions.

Published recently (29 January) in the 29th Monterey Jersey Fund Report, the figures paint a picture of sustained growth not only in AUA but also in terms of fund vehicles, with the number of serviced schemes increasing by 16% year-on-year to 1,883 and the total number of sub-funds recorded also up to 2,390, representing a 12% increase.

Significantly during the period, over 210 newly launched and newly serviced sub-funds were accounted for, reaching US$39.4bn for new products of domiciled and non-domiciled funds. 

In its analysis of asset classes, the report confirmed that growth continued to be driven by private equity and venture capital fund activity, accounting for a total ofUS$424bn of assets, followed by real estate funds with US$68bn. Private debt funds saw the highest growth in net assets, with a 21% increase compared to 2022.

The figures also reflect the increasingly diverse nature of Jersey as a global funds hub, with the industry supporting fund assets originating from not only the UK ($117.5bn) but also Luxembourg ($76.1bn), Japan ($60.3bn), the US ($52bn) and Sweden ($32.5bn).

Commenting on the report’s findings, Jersey Finance’s Head of Funds Elliot Refson said:

“The Monterey report provides a useful insight into the performance and make-up of Jersey’s funds sector. The key takeaway this year is that, against an inflationary and high interest rate environment that has significantly hampered global fundraising and deal flow, Jersey has nevertheless continued to remain attractive.

“We’ve seen growth in the value of assets serviced by firms here, but significantly we’ve also seen the industry help bring new funds to market at a healthy rate, in difficult conditions. That’s a strong reflection of the stable and certain platform Jersey provides for private equity, venture capital, real assets and other alternative funds. These figures should send out a clear message of confidence as the alternatives sector looks to ramp up activity in 2024.”

Jersey’s funds industry has continued to perform well against a challenging macro environment but needs to remain agile and place a genuine emphasis on innovation in key areas to meet the competitiveness of an evolving industry, according to speakers at a recent Jersey Funds Association (JFA) Chairman’s Update event.

Held at the Pomme d’Or earlier last month (16 January), the event saw Chairman Michael Johnson discuss the current landscape and set out the organisation’s priorities for 2024, while Vice Chairman Joel Hernandez provided a legal and technical update.

Highlighting the robustness of the Island’s funds sector, Michael pointed to the £525bn net asset value of the sector and the continued success of the Jersey Private Fund (JPF), with 664 JPFs formed since the product was launched, making it the go-to product for sophisticated investors.

He also highlighted that the alternative asset classes now make up 81% of Jersey’s total funds business with private equity and venture capital accounting for the lion’s share.

Meanwhile, private placement continued to prove a popular access route to EU capital through Jersey, with 391 funds now being marketed by 213 fund managers, while the industry is also supporting an increasingly broad geography of managers, from Asia and Africa to the US, highlighting the jurisdiction’s global capabilities.

Commenting, Michael said: “The continued strength of our funds sector is testament to our offering, particularly our stable and no-change proposition when positioned against the wider backdrop of global market uncertainty. 2023 was a difficult year for both managers and investors, but despite that prevailing complex geopolitical and economic picture, Jersey saw a number of significant fund launches and we have a robust pipeline of new funds and managers.

“It remains vital, however, that we stay cognisant of what is an evolving environment whether that be from a regulatory, ESG, technological or geopolitical perspective in order to maintain our attractive ecosystem for alternative funds.”

That message was reinforced by Joel, who highlighted product innovation, including around the tokenisation of assets, as a key focus for the next 12 months. In particular, Joel, who is also head of the legal and technical sub-committee, pointed to the work the JFA was currently doing with the Jersey Financial Services Commission (JFSC) to modernise guidance for funds and special purpose vehicles with exposure to virtual assets.

He added:

“It has been another busy year for the legal and technical committee with sizeable collective efforts being undertaken regarding our AML/CFT framework, guidance around virtual assets, a response to what has been coined the ‘retailisation’ of alternatives, and improvements to our successful JPF regime. The coming months are set to be no quieter, but we are fortunate to have a collegiate approach that will ensure Jersey remains competitive based on what it has become known for - cost, speed to market and quality - all underpinned by an innovative mindset.”

 At the event, the JFA’s annual dinner was also confirmed to take place on 28 June this year. Further information can be found via the JFA website.

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