It was a pleasure to be able to sponsor the evening dinner before the AIMA Global Regulatory Conference yesterday in New York. As such, I had the opportunity to convey some key messages to the audience regarding the current funds environment and the opportunties ahead.
It was an opportune time to remind the audience that it is eight years after the Financial Crisis and we are still focused on a huge regulatory agenda. In Europe the current regulatory programme is very substantial, including emerging initiatives such as; Capital Markets Union, the continuing evolution of AIFMD, with the prospect of third country passporting, and the interaction of funds regulation with other directives such as CRD IV, to name just a few items.
On the tax front, Base Erosion and Profit shifting and the various transparency initiatives such as the OECD common reporting standard and FATCA, are also major considerations. Thomson Reuters now estimate that daily regulatory alerts have risen from 4,000 per day in 2012, to over 9,000 per day in 2014.
It was in 2012 that Andy Haldane in his Jackson Hole paper the “Dog and the Frisbee” posed an important question which I paraphrase:-
“Are there risks inherent in the sheer complexity of crisis induced regulation, that might actually make things worse?”
Add to this the quantity of complex regulation now facing banking, insurance and asset management – And it would not be unreasonable in my view to re visit whether regulatory complexity may in fact be a significant risk in and of itself.
I posed the question; is regulation achieving its prime objective of financial stability and investor protection in a manner that is sound, but still progressive enough to support a jobs and growth agenda? This question was strongly debated by the speakers and panellists at the actual event where it was agreed that regulation is a necessary and critical part of responsible and sustainable capitalism. In Jersey, sound regulation is something we believe in, aspire to and work very hard to maintain, reflected in our high compliance ratings from bodies such as the IMF, the OECD and the World Bank.
So why would US fund managers find Jersey an attractive choice for Alternates?
There are many reasons – the fact that Jersey is an accessible location with significant funds expertise and a sound regulatory framework, providing breadth and depth of service provider choice, through a workforce of over 12,500 finance professionals.
Presenting the latest performance figures, I confirmed that they are a true reflection of the opportunity Jersey offers as a platform for fund management business and the island’s continuing success in this area of the finance sector.
A further key advantage is that Jersey’s Limited Partnership rules permit the limited partner a greater degree of participation than in many other jurisdictions, whilst preserving an appropriate level of privacy
It probably came as a surprise to some to learn that Jersey was the first ‘third country’ in the world to offer a fully functional opt-in regime.
Another key point I raised was that managers with a Jersey based entity can currently choose the best of both worlds, opt in to AIFMD or access the EU through National Private Placement regimes. Not only that, but we can help Managers in the US and elsewhere access European Capital utilising Managed Accounts and Funds of One. As we are aware, this is proving to be very popular as it provides managers with stability and the flexibility to market to investors both inside and outside the EU.
Remember that eight months after AIFMD going live, 186 Jersey funds and 55 Jersey managers are already actively marketing into the EU through private placement.
In concluding, reference was made to the delegation of New Jersey assembly members visiting our island next Monday and that we were very much looking forward to extending a warm welcome from the original Jersey to our new world colleagues.
With our strong regulator framework, our AIFMD compliant regime, robust and flexible national private placement options, Jersey is without doubt an attractive proposition for fund managers and fund domiciliation in the US. With these factors in mind and following this trip overseas, let's hope that this fledgling relationship can flourish in the times ahead.