We often talk about Jersey’s appeal in relation to Europe and the UK. But, what are the benefits for those further afield, such as in North America, of domiciling their fund across the Atlantic?
On the face of it, it’s the usual story; Jersey’s substance and mature regulatory framework offer unrivalled security and confidence in the quality of business undertaken on island.
Jersey’s abundance of risk management expertise, structuring options and robust but flexible regulation is, in particular, attracting hedge fund managers interested in relocating all or part of their business. From start ups to well-established hedge funds, managers are attracted by Jersey’s wide pool of quality service providers and accommodating fiscal regime that complements the Island’s pro-business environment.
Notably, Jersey’s access to a wealth of non-executive directors with expertise across the full spectrum of asset classes is one of the Island’s unique selling points when compared to other international financial centres. Other jurisdictions simply do not have access to such a large talent base locally.
In addition to Jersey’s renowned risk management expertise for funds, new international governance requirements for hedge funds also make Jersey an ideal place from which to conduct business.
The Dodd-Frank Wall Street Reform and Consumer Protection Act changed the landscape for hedge funds significantly in the US, whilst in Europe the Alternative Investment Fund Managers Directive (AIFMD) introduced stringent governance requirements for hedge fund managers and their funds. Jersey offers a model environment for hedge funds set against the backdrop of both these pieces of legislation. For instance, in the US, hedge fund managers and advisers must comply with relevant parts of the Investment Advisers Act 1940. The Securities and Exchange Commission (SEC) expects compliance frameworks for both the manager and fund, combined with the subsequent governance requirements, and these are well serviced from jurisdictions that offer substance and high-quality resources, like Jersey.
Meanwhile, in the EU, the AIFMD requires managers wishing to benefit from private placement regimes to demonstrate substance in the jurisdiction they operate from; they must have sufficient resource to supervise delegated functions. Jersey, with its strong infrastructure, expertise in risk management and, as already mentioned, extensive network of non-executive directors offers an ideal solution. And, because Jersey is not part of the EU, hedge funds domiciled here can market to both EU investors and rest-of-world investors without being subject to the full scope of the AIFMD – a benefit onshore EU jurisdictions don’t enjoy.
Jersey is a place that has and will continue to invest in its future; its homegrown workforce is expanding with more and more school leavers and graduates looking at the diverse opportunities the funds sector offers, and its innovative regulatory approach has led to new products, such as the Jersey Private Fund, which has seen significant success since it was launched a little over six months ago. So those more familiar with our namesake across the pond might find that the old Jersey offers exactly the forward-thinking approach they’re looking for.