Equally significant is the advance of the private equity (PE) and venture capital (VC) sector within this. Four years ago, PE/VC funds accounted for just 29% of this value. They now represent 45%. In the five years to December 2021, the NAV of regulated PE/VC funds increased by a staggering 249%.
This growth lies against the backdrop of increasing allocation to PE/VC funds worldwide and an increased use of fund structures as a vehicle for deploying capital, not only by established institutional investors but, increasingly, high net worth individuals and family offices.
However, it is not hard to see why Jersey in particular has been able to attract and sustain this business. As a funds practitioner, I see the benefits of the insight and deep-seated expertise of colleagues across all parts of the Jersey funds industry, on a daily basis. I see the fruits of the innovation which our industry has become known for and I know that managers and investors value the stability which the jurisdiction of Jersey has demonstrated, even faced with the turbulence of recent years.
EXPERIENCED TALENT POOL
As the Jersey funds industry has matured over past decades, the pool of talent in the sector has grown exponentially. This is true across all areas: legal, administration, accounting, audit and more. Those considering Jersey as a funds domicile will not struggle to find the right combination of service providers, ranging from large multinational firms to smaller boutique outfits but all led by individuals with substantial credentials. Likewise, the Jersey regulator – the Jersey Financial Services Commission (JFSC) – has the knowledge to handle even the most complex structures, while funds looking to appoint non-executive directors will find individuals with extensive experience in the sector.
This expertise and insight means prominent managers and investors alike are comfortable entrusting their structures and capital to Jersey. Indeed, over 120 asset managers are now themselves established in the Island.
It has also contributed to the increasing number of newer VC managers using Jersey for their first funds. The Island’s service providers are able to support with the practicalities and legalities of the launch, while the manager’s smaller team keep their focus on sourcing deals and finalising investment.
INNOVATION AND COLLABORATION
The Island’s breadth of talent also gives rise to great innovation. It has been five years since the Jersey Private Fund (JPF) was introduced as a result of cross-industry collaboration. Jersey Private Funds have proven an immense success, with well over 550 established to date and are by far the fastest-growing fund type in Jersey.
The JPF was introduced to address the need for a simple but flexible fund product, which could be marketed to up to 50 professional or high net worth investors and which could be established swiftly under a light touch regulatory regime.
Consent for a JPF can be granted within 48 hours and often on a same-day basis. This speed to market enables managers to move swiftly where opportunities are identified – vital in the VC space in particular – but is only possible given the important role which the Jersey ‘designated service provider’ plays in ensuring the structure meets the requirements of the JPF guide.
For new managers, a particular attraction of the Jersey Private Fund regime is that regulatory approval is not required for the promoter of the fund itself. A start-up manager with an investment thesis may launch a JPF and build up their track record.
Other examples of this cross-industry innovation and collaboration include the recent modernising enhancements to Jersey’s limited partnership law, as well as the introduction of a framework for limited partnerships formed in other jurisdictions to migrate seamlessly to Jersey.
Looking forward, the industry continues to be subject to emerging innovation, with digitalisation in particular set to be a key theme for the foreseeable future.
The first regulated Bitcoin fund was launched in Jersey in 2014 but digital assets now comprise a much more diverse and complex sector and one which is expanding rapidly.
A similar, collaborative approach is emerging in Jersey to digital assets, with a cross-industry working group supporting the Government of Jersey and the regulator in establishing a clear framework for Jersey, as the funds industry worldwide embarks on a new digital chapter.
REPUTATION FOR STABILITY
A key part of Jersey’s attraction to PE/VC funds, however, is that the rush for innovation is not all-encompassing. Stability is also valued highly and Jersey has long positioned itself as a business-friendly jurisdiction based on tax neutrality, transparency and appropriate levels of regulation.
The sense of stability in our funds industry, as with the Island’s finance industry as a whole, comes from taking the right steps swiftly. Jersey made a decision decades ago to adopt high regulatory and governance standards and continues with that commitment to this day.
Whereas global developments in regulation and tax may have resulted in a sea change in some jurisdictions, in Jersey the impact is generally less pronounced. It has required adaptation and evolution, rather than reinvention. A great example is the introduction of formal economic substance requirements, which in Jersey were seen as largely reflecting a codification of the good practice which was already entrenched in the funds industry.
While Jersey has been active in the sustainable investment and ESG space for some time and aims to be the leading sustainable international finance centre by 2030, its pragmatic approach to regulation of sustainable investment funds has recognised that managers are already subject to a myriad of different approaches as international standards develop.
Jersey recognises that a good funds domicile is one which offers security and certainty. PE/VC funds typically operate over a 10+ year timeframe and are therefore at risk from shifts in the political or regulatory landscape.
As a self-governed jurisdiction – independent from the United Kingdom and therefore not directly affected by Brexit or changes in the UK government – Jersey’s political system lends itself to stability. The Government of Jersey has adopted a cohesive approach to enable the further development of the funds industry and demonstrated its longstanding support both on Island and in international forums.
In turn the Jersey funds industry can look with pride at its contribution to the Island and its growth to date, alongside optimism for the future, as its unique combination of expertise, innovation and stability positions it well for further success.