Firms in Jersey are rightly proud of the work they do in supporting businesses, governments and families with their high quality international investments, generating returns, and creating wealth and jobs in communities far beyond our shores.
Sometimes, bringing that to life is a challenge, which is why Jersey Finance has continued to commission independent research to help illustrate that not only is the work done here valid, but that it’s actually doing good in economies around the world.
Whilst media coverage in recent weeks may well have left the warped impression that the activity done here is relevant to and benefits only big business and the very wealthy, the latest (and tenth) addition to our library of research does much to turn that myth on its head, concluding that work done here actually benefits at least 60m people - ordinary, hard-working people - around the world by generating returns for their retirement pots.
The study, ‘Jersey for Institutional Investing: a clear choice’, carried out by Europe Economics, shows that a really big part of our business here is helping pension funds from around the world grow. In total around £160 billion of pension fund assets are invested through Jersey, either through funds (£39bn) or corporate structures (£120bn).
So why Jersey for these investors?
First, the tax neutral environment is ideal for them - pension funds are generally exempt from paying tax anyway, they just need an environment which won’t add another layer of tax when investing in different countries, and enables them to diversify their investment opportunities.
Tax neutrality is a necessary but not a sufficient condition to attract funds and investors to Jersey. A proactive approach, quality governance and a deep pool of highly skilled individuals are all factors that the research participants, such as fund managers and lawyers, cite as the added value Jersey offers.
The research also pointed to why Jersey is likely to have an even bigger part to play in supporting investment in an increasingly fragmented post-Brexit Europe.
It revealed, for instance, that the vast majority (60%) of pensions fund assets administered in Jersey is invested in private equity and venture capital, and a further 19% in real estate, and that Jersey’s regulatory regime and specific alternative assets expertise are highly beneficial in attracting this business here.
This is against the backdrop of the global world we live in – the report found that almost half (£18bn) of the pension fund assets administered in Jersey originate in the EU, excluding the UK, whilst 13% (£5bn) comes from the UK, less than 10% (£4bn) from North America and 32% (£12bn) from the rest of the world, including Switzerland and China.
This global dynamic is important. It is currently far from clear what trade deals are likely to be in place between the UK and EU come 29th March 2019 – ‘Brexit Deadline Day’ – but the reality is that the break-up of the single market is going to make investment activity between the UK and EU that much more difficult.
The reality is, though, that funds will need to continue to be marketed into the EU and into the major UK investor markets, whilst the overarching trend is towards global strategies - Preqin figures (Q3 2017 Quarterly Updates) suggest that the proportion of private equity investors targeting vehicles with a global mandate has increased from 35% to 41% in the past year.
Jersey can play a big part in resolving this and ensuring investment flows – including the kind of pension flows identified in the research - can carry on uninterrupted. Jersey has well-established links with the UK and accessing UK investors will remain just as it is today. The EU investor market remains important for Jersey too - around a third of Jersey’s funds activity touches the EU. As a third-country in relation to the EU, Jersey’s private placement (NPPR) route into the EU is tried and tested - figures show that the number of alternative fund managers marketing into Europe in this way has grown 14% annually. And, of course, Jersey can market its funds all around the world, efficiently and outside the scope of AIFMD. It’s best of all worlds, and that must be to everyone’s benefit.
I believe this most recent report reaffirms the positive role Jersey plays in driving investment between economies, whilst also highlighting the high quality legal and administrative services required if institutional clients, such as pension funds, are to invest effectively across the world.
And in a world that is likely to become increasingly complex, particularly against a Brexit backdrop, there will be a growing need for centres like Jersey that can minimise disruption and upheaval and help deliver good returns on investments to benefit the UK, EU and communities around the world.