With the United States on the brink of a new era, now seems an opportune time to take stock of Jersey’s standing on the other side of the Atlantic, on the progress we’ve made to raise our industry’s profile, and on the outlook for the months ahead.
For many investors, 2020 was a volatile year filled with uncertainty. As the global pandemic affected capital markets in unprecedented ways, managers engaged business continuity plans and had to hit the pause button on many functions of their business. However, fundraising across the globe remained resilient.
According to Private Equity International’s Q3 Fundraising Report, managers amassed nearly $350 billion for private equity funds in the first nine months of 2020. Most notably, about 12% of the capital raised was for funds located in Europe, a figure nearly unchanged from the previous year. Looking ahead, AUM growth in alternative assets is expected to average 9.8% per year to 2025, with 81% of investors saying they expect to increase allocations to alternatives in the next five years (Preqin, December 2020).
With US President Elect Biden’s inauguration only days away, many expect the new administration, along with a now Democrat controlled Senate and House, to enact several changes in economic policy. The shape of this is yet to be seen, but in the American investment community, for fund managers looking to access the attractive European markets, there is no better place to domicile than Jersey.
Throughout the pandemic, a number of US funds and transactions have come to fruition in our jurisdiction, whilst we’ve also seen an uptick in enquiries from the US specifically around accessing European capital, reflective of the certainty we offer as a jurisdiction. Assets under administration in Jersey with US origin have increased by 198% over the past five years, according to Monterey Insight. This has, in no small part, been thanks to an increased presence and engagement by Jersey Finance and Jersey financial services providers in the region and a growing awareness there of Jersey’s offering and reputation. This has been bolstered by positive coverage in targeted US media, a series of US events and webinars where Jersey has been well represented, and through ongoing digital engagement.
Jersey Finance has continued to promote Jersey as ‘a gateway to Europe’ in the US, together with the message that, thanks to our ‘third country’ status, the full scope of the Alternative Investment Fund Managers Directive (AIFMD) need not apply. The National Private Placement Regimes (NPPR) route, which allows non-EU managers and funds to continue to market in Europe without using the AIFMD passport, creates compelling reasons for US managers to choose Jersey as domicile for their funds.
In parallel, other jurisdictions, that have traditionally been home to US funds, have had to play catch up in terms of complying with EU substance requirements. This has been raising some red flags for managers, who are now having to engage in contingency planning with respect to their global structures.
Meanwhile, Jersey also has a great story to tell against the backdrop of Brexit. Being outside of the UK and the EU, Jersey is perfectly positioned in this regard. As the UK and EU work through the semantics of their new Trade and Cooperation Agreement and become accustomed to their new working arrangements, we can offer US fund managers stability and certainty – commodities in short supply in these unprecedented times.
Globally, the appetite among investors to allocate to alternatives, including private equity, infrastructure, real estate, and hedge, continues to grow as those asset classes move increasingly centre-stage. Balancing appetites for risk and return, while also diversifying portfolios, have become priorities. Jersey has the skills and experience in domiciling and servicing alternative funds and we expect to facilitate that growth. Ours is a stable, efficient, and resilient international finance centre, and we provide US-based alternative asset managers with an ideal avenue for marketing to European investors. The future is bright.
