Newsroom

Industry News
Friday
17
July 2020

Jersey anticipates fund migration uptick following amendment to Limited Partnership legislation

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

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

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

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

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

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

Tim Morgan, Chair of the Jersey Funds Association added:

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

A FAQ about the amendments can be found here.

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

A new amendment to Jersey’s legislation will make it significantly easier for managers to migrate limited partnership fund structures to the jurisdiction...

JFA News
Tuesday
09
June 2020

Jersey Funds Association Chair delivers virtual update

With this year’s JFA Annual Dinner being postponed until later this year, Chair Tim Morgan gave a webinar update last week (3 June), when he provided an overview of the current funds landscape, the work of the JFA and also outlined future opportunities for the industry.

Resilience in the face of an uncertain market, including the Covid-19 pandemic, and a stable platform designed to provide the perfect ecosystem for alternative funds should position Jersey strongly in the short and long-term, according to the chairman of the Jersey Funds Association (JFA).

With this year’s JFA Annual Dinner being postponed until later this year, Chair Tim Morgan gave a webinar update last week (3 June), when he provided an overview of the current funds landscape, the work of the JFA and also outlined future opportunities for the industry.

 Pointing to the fact that Jersey’s funds industry recorded a new record high of fund assets being administered last year (£346bn), a figure that included a 19% year-on-year jump in private equity business in particular, Tim commented

“In the first part of 2020, we continued to see a steady demand for Jersey funds, including from existing managers continuing to launch, often with larger, successor funds. Just as importantly, we’ve seen a sustained strong take up of the Jersey Private Fund, with managers converting to the structure and a growing number of smaller, start-up and spin-out managers opting for it too where the JPF's scalability and cost effectiveness, combined with Jersey's opt in approach for EU marketing, makes it a particularly strong choice for new structures. There are now more than 350 JPFs, which is a hugely positive story and a great endorsement of Jersey’s reputation as a specialist centre for alternatives.”

In addition, Tim highlighted some key findings from a recent survey of JFA members, which revealed a widespread positivity around key issues such as Brexit:

“The European market is still grappling with Brexit uncertainty, but actually more than 80% of our members consider that Brexit will have either a neutral or positive impact on business flows – due largely to the success of Jersey’s market access model,including private placement into Europe and seamless global access into other geographies.

“Of course, the coronavirus pandemic remains front and centre of minds at the moment too, but Jersey has shown real resilience, flexed its digital muscle and introduced measures such as enhanced digital filing and electronic powers of attorney, as well as guidelines on meetings during the pandemic to help keep business flowing in difficult times. In fact, with 100% of homes and businesses in Jersey connected to a pure fibre gigabit-speed network which is the fastest of any jurisdiction in Europe, Jersey’s connectivity has supported high service levels and has helped launch some notable funds during the course of lockdown.”

Looking to the future, Tim highlighted that Jersey’s strengths in alternatives would position it ideally against global market trends, with PwC forecasting growth of almost 9% across the asset classes over the coming five years*. He said:

“Our core strengths as an alternative funds centre, particularly across private equity, real estate,infrastructure and credit funds remain the same – our stability, experience, expertise,service levels, cost-effectiveness, legal framework, tax transparency and regulatory standards. However, competition from other centres remains strong and the regulatory environment remains highly complex, so we need to keep innovating and adapting to meet the needs of alternative fund managers.

“To that end, we are focused on enhancing our range of structuring options, and we are focused on promoting our capabilities in the ESG space. We’re also anticipating a rise in co-investment and fund finance activity, a resurgence in the use of Jersey property unit trusts to facilitate investment into the real estate market, and opportunities in outsourced work as managers look for specific support expertise such as governance and compliance, areas where Jersey excels.”

 

*PwC Market ResearchCentre

JFA News
Tuesday
14
April 2020

Jersey Finance supports research into future of fund domiciliation

New research published this month by IFI Global and supported by Jersey Finance shows that the introduction of global regulatory initiatives is set to challenge traditional fund structuring models...

The introduction of global regulatory initiatives is set to challenge traditional fund structuring models, make fund domiciliation much more complex, and heighten the importance of investor buy-in, according to new research published this month by IFI Global and supported by Jersey Finance.

Based on the views of alternative managers, law firms, advisors and some of the world’s largest investors in alternatives, the research, which was carried out between October 2019 and January 2020*, seeks to explore the changing face of fund domiciliation and the drivers behind domicile decisions, given the pace of change in the regulatory landscape.

Overall, the survey found that key issues including Brexit, BEPS, substance and transparency have shot up the agenda when it comes to domiciliation and are themes that are likely to influence decision making for some years to come. Amongst its other findings were:

- the most important determinant in domicile selection is whether a jurisdiction is well known and respected by investors that are being targeted by a fund manager.

- investors want to allocate to funds that are domiciled in jurisdictions with good infrastructure, considerable local expertise and knowledge of the asset class in question along with well-established regulations.

- there is some investor dissatisfaction at recent increases in costs in international fund jurisdictions as a whole but especially those in the EU - a common complaint is that the drive to develop local substance has increased costs for no particular benefit to investors.

- BEPS will impact all domiciles with alternatives, especially jurisdictions in the EU whose funds rely upon treaties for their tax exemptions.

- alternative investing is expected to continue to grow in the long-term, with jurisdictions that have the skills and experience in domiciling and     servicing alternative funds expected to facilitate that growth.

Whilst the study was undertaken prior to the coronavirus pandemic, Elliot Refson, Director of Funds at Jersey Finance, believes its findings are more pertinent than ever:

 “It’s clear that, with the fund domiciliation landscape becoming more competitive and more complicated than ever, IFCs need to be alive to key trends and have a thorough understanding of what is driving the long-term future of fund structuring, so they can be equipped to continue to support the alternative fund management community going forward.

“Investor buy-in is absolutely vital.Investors want to do business through familiar, robust, high quality and cost-effective environments that are tried and tested and offer no surprises.In a world that was already defined by uncertainty and volatility and is even more so as a result of the COVID-19 outbreak, managers and investors will be drawn towards stability and certainty. Those IFCs that can focus on that,demonstrate real resilience even in times of mass upheaval, and offer a platform of substance built on expertise, specialist skills, compliance with international standards, innovative solutions and consistent levels of good service will be the winners – and Jersey ticks those boxes.”

The research, entitled ‘The Future of International Fund Domiciliation’, can be viewed and downloaded here.

*the research was conducted prior to theCOVID-19 pandemic.

JFA News
Wednesday
08
April 2020

Sustained private placement rise reinforces Jersey alternative fund market access credentials

New figures from the JFSC show that the number of alternative fund managers choosing to market their funds into the EU through Jersey using private placement continued to grow in the second half of 2019...

The number of alternative fund managers choosing to market their funds into the EU though Jersey using national private placement regimes (NPPR) continued to grow in the second half of 2019, according to the latest figures from Jersey's financial services regulator.

Data from the Jersey Financial Services Commission (JFSC) shows that, as at 31 December 2019, there were 183 Jersey-registered managers opting to market into the EU through NPPR, a figure that has risen 6% since June 2019 and by 9% year-on-year.

Meanwhile, the total number of Jersey alternative funds being marketed into the EU through NPPR also increased to stand at 320, representing a 3% increase since June 2019 and an annual rise of 2%.

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

“Reflecting the period in the immediate run-up to the UK’s formal exit from the EU, these are really positive figures reinforcing just how attractive the private placement route to market is for non-EU managers wanting to access EU investor capital. We’ve seen a sustained and consistent rise in the number of alternative managers and funds making use of private placement through Jersey over the past few years. It is a tried and tested route that provides certainty and flexibility and that is cost-effective, and those qualities are hugely attractive – particularly in the current challenging market.”

The figures follow shortly after the publication of the latest quarterly statistics for Jersey’s funds industry. They showed that the total net asset value of regulated funds under administration in Jersey grew by 8% over 2019 to stand at £345.7bn, a new record high, with private equity and venture capital driving growth, increasing by 19% over the year.

 Tim Morgan, Chair, Jersey Funds Association, added:

"Our alternatives sector continued to perform extremely strongly in 2019, reflecting the ideal ecosystem we have created in Jersey, and our market access and distribution capabilities are very much a part of that. The fact that we’ve seen a growing number of private equity, venture capital, real estate,infrastructure and debt funds opt for a private placement route to market through Jersey is testament to just how well it works. We expect this figure to continue to rise as managers look for robust and straightforward solutions to help navigate the complex and uncertain global environment we all now find ourselves in.”

JFA News
Friday
06
March 2020

Recent industry figures underline appeal of Jersey’s ecosystem for alternatives

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

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

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

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

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

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

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

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

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

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

JFA News
Thursday
05
December 2019

Jersey Funds Association presents findings of annual member survey

The findings of the second annual survey of the Jersey Funds Association’s (JFA) members will be instrumental in informing the organisation’s future direction and strategy, according to Chair Tim Morgan.

The findings of the second annual survey of the Jersey Funds Association’s (JFA) members will be instrumental in informing the organisation’s future direction and strategy, according to Chair Tim Morgan.

Highlighted to an audience of industry professionals at a presentation held at the Jersey Museum last week (28th November), the survey explored key opportunities and issues for Jersey’s funds industry and the sentiment of practitioners.

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

Members were also very positive in terms of their growth outlook, with 84% saying they were confident or very confident of growth, a significant increase from last year.

In addition, in respect of technology the survey indicated a clear trend, with over 56% of respondents saying that they had employed automation technology over the past year.

Tim commented: “The past year has posed a number of significant challenges, including Brexit and the introduction of substance legislation however we really shouldn’t underestimate just how positive the outcome of Jersey's work around these issues has been for our industry. The recognition from the EU at the beginning of the year has shown without doubt that as a jurisdiction we are serious about cooperation and global standards, and that has translated into good business flows. The fact that our industry now administers in excess of £340bn of assets – a record high - is no accident. That buoyancy really comes through in our survey this year.

“We are pragmatic as an industry too, though. What our survey shows us is that our members are keen to maintain a growth trajectory by looking at innovation, continuing to source the best talent, engaging with stakeholders, and differentiating ourselves through service quality, ease of doing business and stability.

“These findings will be vital in informing how we continue to enhance our funds ecosystem, and I’d like to thank our membership for their time and support in putting their views forward.”

JFA News
Sunday
06
October 2019

Jersey in good shape six months on since introduction of CGT rules

Six months on since new rules on the application of Capital Gains Tax (CGT) for overseas investors in UK commercial property came into play, Stephanie Henwood-Darts, Director at JFA member firm JTC, looks at how the market looks and why Jersey remains a good option.

Six months on since new rules on the application of Capital Gains Tax (CGT) for overseas investors in UK commercial property came into play, Stephanie Henwood-Darts, Director at JFA member firm JTC, looks at how the market looks and why Jersey remains a good option for supporting UK-bound real estate investment…

Q: In the six months since their introduction, have the new CGT rules had much of an impact on real estate fund structuring? Or is activity being ore influenced by other factors, such as Brexit?

A: There was an initial impact following the announcement, with tax advice pointing to, and therefore new funds being set up, onshore and through Luxembourg due to it having a favourable double tax treaty (meaning the UK does not currently have taxing rights over Luxembourg entities).

However, we are still seeing JPUTs due to the favourable elections that can be made (transparency election/exemption election) and the fact that the JPUT is a familiar structure which our clients already know and like. There is also the pull that we do not rely on double tax treaties but employ a tax transparent regime which means that tax is paid where the investment activity is and where investors are, which is completely appropriate.

Brexit is certainly having an impact on overall investment levels but there is an expectation that activity will increase once there is more certainty around the terms and timing of the UK’s exit.  

Q: In terms of how Jersey is positioned, has Jersey seen much of a swing in terms of fund activity targeting UK real estate assets since the new rules were introduced?

A: Although heads were initially turned, institutional investors are still favouring Jersey as a preferred jurisdiction through which to invest into UK commercial real estate. Now that there is a full understanding of the available elections for Collective Investment Vehicles (CIVs), it is expected that activity levels for Jersey funds will further increase.

Jersey is well placed to provide a tax neutral environment with an appropriate regulatory framework for investment funds raising global capital and investing in real estate all around the world, and this still includes UK commercial real estate.

Q: How do Jersey structures succeed in meeting the exemption options? Do the well-used JPUT and REIT structures continue to work well under the new rules?

A: Jersey structures work well under the exemption options which is largely due to the involvement of many Jersey professionals who ensured that they submitted detailed responses to the consultation and HMRC’s desire to protect the value of pension funds along with the attraction of the UK as a property investment jurisdiction.

Most JPUTS have been favouring the transparency election. This was designed by HMRC with JPUTs in mind and means that the JPUT will be transparent (just like it is for income tax purposes) and all investors will be taxed in accordance with their own profile. REITS are also a good alternative as they benefit from HMRC’s approved regime where the disposal of UK commercial property is treated as exempt from corporation tax and sales of shares also benefit from this exempt status.

However, all advice that we have seen in respect to REITS has been caveated with the fact that reporting requirements will be onerous. A Jersey REIT will automatically be UK tax resident so although there would be no tax benefit from structuring a REIT through Jersey, the benefit of regulatory flexibility (and certainty) and local expertise where any reporting can be handled in an effective and efficient manner should mean they increase in popularity.

Q: What about funds targeting other non-UK geographical markets? Are you seeing consistent RE activity elsewhere through Jersey?

A: We haven’t noticed a material increase in new funds targeting non-UK geographical markets but a number of clients with existing Jersey structures have added to them by including non-UK (mostly European) assets.

However, it is expected that there may be a spike in investment outside of the UK following Brexit. If this occurs, Jersey should be well placed to continue to be the home of fund vehicles and we see investment funds and structures being placed in Jersey which have global investment strategies, whether it's a London-centric special opportunities fund, a pan-European real estate fund or RE investment in Canada or the US.

Q: Looking forward to the coming 6 months, what do you see as the key influences on the global real estate market, and in terms of UK-focused activity?

A: We can’t escape discussing the ‘B’ word when talking about the next six months. Investors are already pricing in the cost of a potential no-deal Brexit and a dramatic decrease in the price of UK commercial property is predicted should this occur.

On the flip side, the weakness of the GBP could boost attraction towards the UK real estate market, in particular from US, Middle-East and Far-East investors. However, they may be put off by the potential difficulty in securing long-term (or any type of) leases, such was the initial sentiment in the aftermath of the Brexit vote. Communication with investors in respect of outlining the logic of decisions and clear strategic planning will be key to the success of funds navigating the post-Brexit landscape.  

Overall, Jersey has a great opportunity to promote its independence from the EU in respect of structuring it this time of uncertainty. Why structure through the EU for holding UK commercial property which will very shortly be outside of the EU? Jersey is already outside of the EU for regulatory purposes and is very much open for business!

JFA News
Friday
20
September 2019

New record high for Jersey’s funds sector as private equity soars

The value of regulated funds serviced in Jersey rose by 7% to a new record high in the first half of 2019, according to the latest figures to be collated by the jurisdiction’s financial regulator the Jersey Financial Services Commission (JFSC).

The value of regulated funds serviced in Jersey rose by 7% to a new record high in the first half of 2019, according to the latest figures to be collated by the jurisdiction’s financial regulator the Jersey Financial Services Commission (JFSC).

Figures for the second quarter of 2019 (ending 30 June 2019) show that the net asset value of regulated funds under administration in Jersey grew by £22.1bn over the first six months of the year to stand at £342.1bn, a new record high and a figure that has grown by more than 70% over the past five years.

The alternative asset classes continued to perform strongly, recording a combined rise over the first six months of 2019 of 6% to represent 85% of Jersey’s total funds business. Once again private equity was pivotal in driving the growth, rising by an impressive 14% over the six-month period. There was also growth in real estate (up 2.5%) whilst infrastructure, credit and debt funds rose collectively by 2% and hedge funds decreased by 3%.

The latest quarterly figures come shortly after it was announced at Jersey Finance’s Annual London Funds Conference earlier this month that the number of registered Jersey Private Funds (JPF) had grown by 25% over the half year to 257, with assets under management of £43bn – more than double the value at the end of 2018 (£19.4bn). The figures for JPFs, a structure that was introduced in 2017 to cater for the needs of small groups of sophisticated investors, are in addition to the numbers in the quarterly statistics.

Meanwhile, figures from the JFSC also reveal positive news in the banking sector, where the value of deposits held in Jersey grew 5% in the first half of the year to stand at £129.3bn, the highest figure since 2015.

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

“It’s particularly pleasing that we have succeeded in maintaining our momentum from last year into 2019 with a really strong set of figures. At our conference in London earlier this month, we set out clearly why Jersey continues to prove an attractive option for alternative fund structuring and the fact that we have reached new heights midway through the year is compelling evidence of that. The stability Jersey can provide, together with its expertise, cutting-edge regulatory framework and global market access is clearly resonating with managers.

“The fact that our banking sector remains so resilient is hugely positive too. It is a key component of our financial services industry and is continuing to evolve to meet the increasingly sophisticated, global and digital demands of investors now and in the future.

Tim Morgan, Chair, Jersey Funds Association, added:

“These figures demonstrate that the private equity sector sees real benefits in using Jersey and that the Jersey Private Fund (JPF) is fast becoming the go-to structure for investors. Managers are continually looking for reliable, cost effective solutions to support their investors’ needs and Jersey’s funds offering provides the perfect solution for the long-term.”

The full set of quarterly statistics is available here.

Industry News
Monday
16
September 2019

Further upbeat fund figures revealed at London Funds Conference

Further positive figures about the size of the funds industry in Jersey were unveiled at Jersey Finance’s London showcase conference for the funds sector last week.

Further positive figures about the size of the funds industry in Jersey were unveiled at Jersey Finance’s London showcase conference for the funds sector last week.

Elliot Refson, Business Development Director - Funds at Jersey Finance, said that the number of Jersey Private Funds (JPF) had increased 25% in six months, highlighting the success of Jersey’s government, regulator and industry working together to create the best possible environment for attracting innovative, quality funds business.

Figures from the Jersey Financial Services Commission (JFSC) showed that the number of JPFs, a structure introduced in 2017 to cater specifically for the needs of small groups of sophisticated investors, had reached 257 by 30 June 2019, up from 205 at the end of 2018, with assets under management of £43 billion.



Joe Moynihan, CEO of Jersey Finance, described Jersey as positioned perfectly to act as a quality filter to manage international financial flows: “As investors look for stable IFCs that offer specialist expertise, Jersey can be a voice of reason among the noise, ready to support investor ambitions.”

Furthermore, irrespective of the outcome of Brexit, Jersey was able to bridge the gap between the UK and Europe thanks to the bilateral agreements that were in place with the EU alongside its long standing relationship with the UK, boosted by a recently signed Memorandum of Understanding between the JFSC and the UK Financial Conduct Authority which gave fund managers added certainty around accessing UK investor capital through Jersey in the build up to Brexit.

Entitled ‘Beyond Boundaries’, the annual Jersey Finance funds conference 2019 (on September 10) attracted more than 350 delegates and a range of industry leading speakers and panellists who discussed the impact of regulation and governance, the trends in the alternative funds sector, and further examples of innovation and trailblazing by fund managers, lawyers and administrators who were using Jersey for their fund structuring.



The event was also an opportunity to flag up how Jersey had become a clear choice for socially responsible investing (SRI) and especially impact investing, with Mr Moynihan noting that there were already more than 30 SRI funds under administration in Jersey with assets valued at US$7.4 billion.

He also highlighted Jersey’s increasing global footprint pointing to the fact that Jersey became the first IFC to be permitted to open an office in the Dubai International Finance Centre last year. Further, next month, Jersey will formally open its first office in New York, partly to support the growing demands from US promoters choosing Jersey evidenced by US promoter assets under administration in Jersey increasing by 148% over the past five years.**

Meanwhile, the Island’s rapid investment in technology – it is the first place in the world to have full fibre telecom networking delivering speeds of 1 Gbps (gigabits per second) – had positioned the jurisdiction at the forefront of fintech investment fund services.

The conference, at the Royal Lancaster Hotel, included keynote addresses from Todd Buchholz, former Director of Economic Policy at the White House and current managing director of the US$15 billion Tiger hedge fund, and Dan Snow, BAFTA award-winning broadcaster and popular figure on BBC television presenting historical topics.

A total 18 industry experts from London and Jersey contributed to four breakout sessions which were entitled ‘New Alternatives’ moderated by Alice Murray, founding editor of The Drawdown; ‘Solutions for Fund Managers – Governance, Substance and Location’, with moderator Tim Morgan, Partner, Mourant and Chairman of the Jersey Funds Association; ‘Building Global Bridges’ moderated by Nicholas Neveling, editor, Real Deals; and ‘The Evolution of Real Estate’ with moderator Sophie Reguengo, Partner, Ogier.*



They debated factors affecting the alternatives market, pinpointing the strengths of the Jersey offering, drawing on the use of case studies outlined by managers, while also examining how the funds sector was responding to the technical and regulatory challenges it faced and Jersey’s role in providing solutions.

Summing up the Jersey offering, Joe Moynihan added: “Having one of the largest communities of finance industry and legal specialists of any IFC, combined with our speed to market, adoption of the latest standards in transparency, our tax neutral status and mature environment for funds business and with increasing numbers of local firms and advisers operating across multiple jurisdictions, we have all the hallmarks to remain the jurisdiction of choice.”

JFA News
Monday
08
July 2019

New JFA Chair points to Jersey's strength in alternatives

Jersey’s ability to offer a quality service in the alternative investment space will ensure ongoing growth of its funds industry, according to Tim Morgan, the new Chair of the Jersey Funds Association (JFA).

Jersey’s ability to offer a quality service in the alternative investment space will ensure ongoing growth of its funds industry, according to Tim Morgan, the new Chair of the Jersey Funds Association (JFA).

Elected into the position of Chair at the recent AGM (28 June) of the trade association that represents Jersey’s funds industry, Tim, a Partner at offshore law firm Mourant, has practised in Jersey since 2003 advising promoters, investors, boards, regulators and service providers across asset classes including private equity, credit, real estate, hedge and liquid securities.

Prior to Jersey, Tim originally trained with Taylor Wessing in London and Brussels, before going on to practise as a corporate lawyer at PwC Legal and then at Dresdner Kleinwort Wasserstein in London and New York, advising on private equity sponsored transactions.

Also on the new-look JFA committee are Michael Johnson, who has been appointed Vice Chair and who heads one of the largest fund services businesses in the Island, as well as a number of other appointments to ensure the committee reflects the different aspects of the developing funds industry. Chris Marshall continues as treasurer, Niamh Lalor as chair of the legal and regulatory subcommittee, Martin Paul as the chair of education and Steve Cartwright as the chair of the marketing subcommittee. Caroline Harrington also remains as Secretary.

Tim replaces former Chair Mike Byrne, who has been at the helm of the JFA for the last three years and was thanked at the AGM for his hard work on behalf of Jersey’s funds industry.

Following his election to the role of JFA Chair, Tim said: “Jersey’s funds industry operates in an increasingly complex market, but it is an environment that Jersey thrives in. With investors continuing to show an appetite to allocate to alternatives – Jersey’s sweet spot – and thanks to its ability to adapt, its deep pool of expertise and highly effective relationships between the regulator, government and industry, Jersey is in an extremely strong position to continue to assert its strengths on the international stage.

“In recent years we have seen numerous challenges to our industry but time and again we have responded adeptly, most recently through the implementation of economic substance legislation, underlining our commitment to governance and international standards. In recent months we have achieved record levels of fund servicing business, stellar growth in alternatives, big-ticket fund launches and rising numbers of managers choosing Jersey to bring their funds to market.

“To maintain our momentum, we must be brave, ambitious and clear about our capabilities as a jurisdiction that specialises in global fund structuring and distribution, and to that end I’m looking forward to working with the committee and stakeholders on and off-island as the JFA looks to support the ongoing success of our industry.”

Figures for Jersey’s funds industry show that, at the end of 2018, the net asset value of funds administered in Jersey rose to £320bn, the highest level ever recorded, with alternatives, including private equity, real estate, hedge, infrastructure and private debt funds, now representing 86% of that business.

An active trade association representing companies with Jersey offices operating in the funds sector, the JFA has over 100 members, including organisations spanning from niche independent Jersey-owned companies to global leaders.

JFA News
Thursday
23
May 2019

Substance rules will strengthen fund management proposition

New Guidance Notes were published last month (26 April), designed to provide clarity around recently introduced ‘economic substance’ legislation in Jersey and how that legislation, which came into play in January this year, should be interpreted.

New Guidance Notes were published last month (26 April), designed to provide clarity around recently introduced ‘economic substance’ legislation in Jersey and how that legislation, which came into play in January this year, should be interpreted.

As the JFA acknowledged last month, the legislation was introduced to meet the requirements of the EU's Code of Conduct Group for Business Taxation around appropriate levels of substance for certain tax resident entities in Jersey, following an assessment by the EU that ultimately saw Jersey formally recognised as a cooperative jurisdiction.

With that in mind, these guidance notes are helpful, providing interpretations of how the law should be applied by Jersey-based fund managers, and highlighting what it means for service providers and fund structures – particularly in terms of reporting and the tests the law provides for around governance, income generating activities, and physical office and staff presence.

It’s sensible of course that fund managers will look at this guidance and assess the structures they have in place to make sure they can amply meet the necessary criteria.

However, although this legislation underlines unequivocally that Jersey is committed to best practice and international cooperation, it is also worth noting that, from a fund management perspective, it is further evidence of the direction of travel Jersey has been pursuing for some time and reflective of Jersey’s ongoing commitment to nurturing a substance-driven environment for fund managers.

It’s no coincidence that the number of fund promoters in Jersey has almost doubled in the last five years to more than 250, whilst Jersey has a community of more than 20 hedge fund managers – a figure that continues to rise.

Managers spanning the full range of asset classes and sizes have in recent years, for instance, been bulking out their operations in Jersey through staff and premises to the point that Jersey now has a significant on-the-ground management community, whilst we can also boast a considerable and growing infrastructure of experienced directors and risk management, administration and compliance experts.

Jersey has established a reputation as a centre for fund management precisely because it has long been a jurisdiction of substance with a regulatory environment that is internationally-recognised and that is already in tune with global thinking on substance.

Crucially, the new rules absolutely work with Jersey’s existing regime and the majority of fund managers will not perceive them as creating an additional layer. Jersey was, for instance, an early mover on the OECD’s BEPS project, which had a focus on substance, and in 2017 became only the third jurisdiction in the world to have completed domestic ratification of the BEPS agreement.

In addition, the significant work Jersey has done around the AIFMD over the past decade has positioned it well as a jurisdiction that is focused on supporting managers and giving them a solid platform for growth.

As a result, the new substance legislation should not come as a shock to managers operating in Jersey.

And if it is concluded that a manager needs to change its arrangements, the expertise is already readily available in Jersey to take on any extra work. Reporting is a case in point - in some instances, for example, older agreements might have delegated reporting arrangements to another entity in the group based outside Jersey. Under these new rules, reporting is a core income generating activity for a Jersey fund manager and if a manager concludes that it will be responsible for reporting as one of its core activities, reporting must be carried out by or on behalf of the manager in Jersey. Because the intellectual capital and capacity is in Jersey to service reporting functions, any change to the group's contractual framework to facilitate reporting from Jersey should be straightforward.

As a result, the expectation is that not only will managers here be able to meet the new criteria as set out by the new legislation, but that the new parameters will actually prove to be a natural next step that will further bolster Jersey’s appeal as a centre that is ready and willing to provide the perfect ecosystem for fund management activity.

The infrastructure is here, the connectivity is here, and the market access is here, and that should be a compelling proposition.

JFA News
Monday
20
May 2019

JFA chair underlines importance of continuing to adopt a “brave approach”

Jersey’s focus on alternative funds and its growing status as a centre for fund management is positioning it positively but sustained bravery is essential to Jersey’s future success, according to the Chairman of the Jersey Funds Association (JFA).

Jersey’s focus on alternative funds and its growing status as a centre for fund management is positioning it positively but sustained bravery is essential to Jersey’s future success, according to the Chairman of the Jersey Funds Association (JFA).


Speaking at this year’s annual JFA Dinner (3rd May) held at the Royal Jersey Showground, Mike Byrne told an audience of over 450 funds professionals, senior politicians and regulatory representatives that “Jersey’s funds industry looks in excellent health” with figures for the end of 2018 indicating that the total net asset value of funds under administration in Jersey stood at a record high of more than £320bn, up 15% year-on-year.

Pointing to rising levels of business across the alternative asset classes, Mike, who completes his third and final year at the helm of the JFA this summer, commented:

“It’s been a very successful year for our funds industry, both in the funds and the fund manager space, with our focus on alternative funds creating a very stable platform of long-term capital that is largely insulated from short term market sentiment.

“That focus is very well placed, with pensions, sovereign wealth funds and institutional investors all continuing to allocate to private equity, private debt, real estate and infrastructure funds. With a record £320bn of fund assets now being serviced across our regulated funds space and a further £20bn now held in Jersey Private Funds, there is a clear picture of an extremely healthy jurisdiction.”

In addition, Mike pointed to how Jersey’s growing status as a fund management centre is positioning it well in light of new economic substance rules:

“Our industry has faced a number of challenges over the past year but we have come out the other side very successfully. In particular, the past year has seen an almost unprecedented level of cross-industry work to ensure that we responded to economic substance requirements by developing a law that demonstrates our commitment to meeting global standards and reflects the true substance which we know exists in our industry.

“In fact, we are seeing an ever-increasing community of fund managers fully resident in the island, across private equity, hedge, debt, real estate and crypto funds. These managers are bringing a real depth and diversity to our industry at a time when the issue of substance is so high on the agenda.”

Looking to the future, Mike underlined the importance of Jersey adopting a bold approach if it is to continue to be successful:

“We must continue to adopt a brave approach in how we operate, in the markets we serve and in the products we offer. We need to think creatively, for instance, about how we bring to life the Jersey proposition and the positive solutions we can provide for both EU and non-EU investors. And, whilst discussions around the AIFMD and passports now seem long in the past, the fallout from Brexit continues to have unintended consequences on many fund jurisdictions, including Jersey, and we must be prepared for that.”

Lead sponsor for the evening was Mourant and silver sponsors were BNP Paribas Securities Services, IQ-EQ, Ogier, Praxis IFM and PwC, whilst the champagne reception was sponsored by Carey Olsen

JFA News
Thursday
14
March 2019

Private equity drives growth as Jersey funds business reaches new all-time high

The value of regulated funds serviced in Jersey saw double digit growth to reach a new all-time high while bank deposits also increased over the course of 2018, according to the latest figures to be collated by the jurisdiction’s financial regulator the Jersey Financial Services Commission (JFSC).

The value of regulated funds serviced in Jersey saw double digit growth to reach a new all-time high while bank deposits also increased over the course of 2018, according to the latest figures to be collated by the jurisdiction’s financial regulator the Jersey Financial Services Commission (JFSC).

Figures for the final quarter of 2018 (ending 31 December 2018) show that the net asset value of regulated funds under administration in Jersey grew 10% annually to stand at £319.9bn, the highest recorded figure to date, while the value of bank deposits held in Jersey grew 4% to stand at £122.9bn, the highest figure since 2016.

Within the funds industry, the statistics show particularly strong performances in the alternative asset classes, which now represent 86% of Jersey’s total funds business recorded a year-on-year increase of 23%. Specifically, private equity fund values rose by 38% over the year to cross the £100bn mark for the first time ever and finish the year standing at £114.5bn.

Meanwhile, the combined total value of infrastructure, credit and debt funds also showed impressive growth, increasing by 28% to stand at £64.8bn while the value of real estate funds grew by 10% to £41.4bn and hedge funds increased by 3% to £52bn.

JFSC data also shows that there were 205 Jersey Private Fund (JPFs) registered in Jersey at the end of December 2018, although the value of assets they manage, which totaled £19.4bn according to the latest statistics reported by the JFSC, is not included in these quarterly figures.

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

“These are really strong figures for the 2018, clearly demonstrating that Jersey is continuing to provide a solid, resilient platform for international investors and an attractive proposition for fund managers. Over the past five years, Jersey’s funds business has grown some 66% to reach a new all-time high at the end of 2018, which is a fantastic achievement and reflective of the fact that managers are finding long-term appeal in Jersey’s regulatory standards, the global market access it can offer, its specialist expertise, and its forward-thinking approach.

“In addition, our banking sector, the backbone of our finance industry, is also going through a significant evolution to ensure it can support the aspirations of investors, and the evidence of these figures is that this is clearly working and positioning us strongly for the future.”

Mike Byrne, Chairman of the Jersey Funds Association added:

“The private equity asset class was the stellar performer and the driver of growth in our funds industry last year, with a number of big-ticket fund launches, while we’re also seeing strong performances across the alternatives spectrum. It’s a fantastic endorsement of Jersey, particularly in the lead up to Brexit, as we continue to work with managers to give them some much-needed support and certainty.”

The full set of quarterly statistics is available here.

JFA News
Tuesday
12
March 2019

Ready to support managers around new UK CGT rules

As well as the 29 March, the 6 April 2019 is another fast-approaching date of note – the date from which non-resident capital gains tax (“NR CGT”) will be payable on both commercial and residential property disposals, whether direct or indirect.

As well as the 29 March, the 6 April 2019 is another fast-approaching date of note – the date from which non-resident capital gains tax (“NR CGT”) will be payable on both commercial and residential property disposals, whether direct or indirect.  

There is a rebasing to market value or historic cost if this provides a better outcome which given current valuations may be the case.

These changes will affect all offshore entities that derive at least 75% of their gross asset value from UK land. Rules will be introduced to avoid inter-company artificial boosting of non-land assets. For investors with less than 25% ownership disposing of their interest in the property holding entity for two years preceding the sale there is no tax consequence.
Jersey collective investment entities have key decisions on two elections that need to be fully considered.  These options stem from a period of positive consultation between the UK authorities and a range of industry stakeholders, including the JFA, and are designed to prevent the potential for multiple layers of tax in structures.

Transparency election

Current entities such as Jersey Property Unit Trusts (“JPUTs”) can elect to become transparent for NR CGT.  This means there will be no tax at the JPUT level but there will be for unitholders. This will clearly benefit those investors that qualify for an exemption from UK tax such as pension funds.

Exemption election

Provided not ‘close’ and having to abide by certain reporting requirements, then a collective investment vehicle and the structure beneath can elect to all be exempt for NR CGT.  

This will prevent multiple layers of tax within a structure, irrespective of the investors’ tax standing. Currently, there is no threshold and all investors, unless exempt, would be taxed on a disposal of their interest.

There now needs to be a period of consideration of the pros and cons of the elections and reporting requirements balanced with the tax profile of the investors and their anticipated exit from an investment.  

Meanwhile, it should be noted that a further change will be Corporation Tax returns from 6 April 2020 with the need to consider interest deductibility and year ends ahead of the change.

Jersey offers a range of regulated structures all able to utilise these elections, which can be used by investors (whether exempt for UK tax or not) to invest collectively in UK real estate.

For this reason, it is fully expected that Jersey, which has developed huge experience and expertise and created a highly sophisticated regulatory environment for cross-border real estate investment over many years, will continue to provide a compelling proposition for UK-focused real estate fund structuring.

Indeed, the expertise Jersey can offer will be absolutely vital in supporting managers with the new rules and advising them around the options now open to them.

According to figures from the Jersey Financial Services Commission, the net asset value of real estate assets held in Jersey fund structures was £40.7bn as at 30 September last year, reflecting growth of 79% over the past five years.

Industry News
Monday
04
March 2019

Deal or No Deal: No Problem

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.

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.

#JerseyForFunds