The introduction of a new exemption in Jersey’s Financial Services Law, designed to simplify and encourage the establishment of hedge fund management businesses in Jersey, was signed into law by Jersey’s Chief Minister in late November.
The change enables Jersey-registered hedge fund managers to be regulated solely under Jersey's 'funds' regulations and not also its ‘investment business’ regulations, provided the managed accounts meet certain criteria to be 'qualifying segregated managed accounts'.
In enabling hedge fund managers to offer managed account services to non-fund clients alongside fund clients without the need for further regulation, the change allows managers to benefit from Jersey's 0% corporate income tax rate without incurring the tax disadvantages of an 'investment business' registration.
In order to benefit from the exemption, a managed account must be able to meet a number of certain criteria, relating to the level of its initial subscription, the strategies it follows, how the assets are held in custody and the name the managed account is held in. The manager will also have to meet a number of reporting responsibilities.
Geoff Cook, CEO, Jersey Finance, said:
“Jersey has a healthy and growing hedge fund sector, and this change in legislation is expected to encourage further growth by simplifying the framework for managed accounts whilst retaining an appropriate level of regulation.
“In particular, it is anticipated that the exemption will boost Jersey’s appeal as a centre for facilitating the incubation and hosting of start-up and smaller hedge fund businesses. In addition, the change is expected to prove popular with those Jersey managers who are seeing a rise in managed account business where there is potential to provide investment services to European clients without the need for AIFMD compliance.”
The latest figures for Jersey’s finance industry, for the period ending September 2014, reflected a particularly strong performance for its funds sector, with the value of funds business in Jersey reaching the highest level in five years, with the net asset value of regulated funds increasing by around 5.5% year-on-year to reach just over £205 billion.