Asian investors have been looking for jurisdictions that can offer expertise, stability with no regulatory, legal or economic surprises.
If ever there was an opportunity for fund jurisdictions to distinguish themselves, the start of 2020 is a defining moment with the outbreak of the COVID 19 crisis and the EU Council decision to add the Cayman Islands to its tax haven blacklist.
In Jersey, our funds services businesses have shown strong resilience so far. In terms of steps taken, all financial services firms in Jersey have been working closely with the regulator to communicate their business continuity measures.
Businesses were asked to move to remote working, remain operational and to continue to meet their regulatory obligations. For most funds services firms this transition happened smoothly.
Our regulator, the Jersey Financial services Commission (JFSC), has adopted a caring and pragmatic approach and remains on standby to help businesses navigate through these difficult times where needed. Several reporting deadlines have been extended to help relieve some of the pressures for businesses.
In times of crisis, the ability to be pragmatic and respond quickly is key.
Jersey’s regulatory, legal and legislative structure means that it can react promptly and introduce measures such as acceptance of e-signatures for regulatory purposes, deadline extensions, guidance on governance and compliance requirements and adaption of substance requirements.
One of Jersey’s key strengths is the ability of the Government of Jersey, the JFSC and the financial services industry to collaborate, innovate and address matters in a timely manner – retaining the Island’s reputation for being a pragmatic and forward-thinking jurisdiction.
The ability to react quickly is extremely important in volatile markets to ensure that transactions can still complete, timely advice can continue to be given and people, businesses and their interests can continue to be protected.
The links between Asia and Jersey have traditionally been strong through private wealth structuring for UHNW and HNW families, and increasingly these families have been looking at setting up their own alternative investment funds.
Jersey offers stability and expertise and therefore there has been a natural gravitation for Asia fund managers to Jersey as a domicile for alternative investment funds.
Some of the challenges that asset managers worldwide will have experienced during the crisis relate to asset valuation in these very volatile markets.
Some open-ended real estate funds may have suspended for obvious reasons, but it is difficult now to predict what the long-term effects of the crisis on asset valuations will be.
In such uncertain times it is even more important for investors to be able to rely on strong corporate governance standards such as those applicable in Jersey.
The findings of recent research into fund domiciliation by IFI and supported by Jersey Finance show that the most important determinant in domicile selection is whether a jurisdiction is well known and respected by investors that are being targeted by a fund manager.
Investors want to allocate to funds that are domiciled in jurisdictions with good infrastructure, considerable local expertise and knowledge of the asset class in question along with well-established regulations.
There is some investor dissatisfaction at recent increases in costs in international fund jurisdictions, but especially in those in the EU. And when we say EU, we must consider AIFMD.
A key differentiator for Jersey is that it offers easy and cost-effective marketing to EU investors through the National Private Placement Regimes (NPPRs) under AIFMD, an alternative route to the AIFMD passport.
This route is working extremely well and has been tried and tested in key alternative funds markets such as the UK, the Netherlands, Ireland and the Nordic countries.
NPPRs offer simplified regulatory obligations familiarity outside the AIFMD for non-EU investors.
Jersey is a leading funds jurisdiction with more than 50 years’ experience in structuring, managing and administering funds, and has seen an increase in the number of fund related enquiries from Asia.
Jersey offers exceptionally high standards of service and governance. It also has a large pool of expertise, including a wealth of professional non-executive directors with extensive knowledge of funds across a variety of asset classes.
Data from the JFSC shows that, as at 31 December 2019, there were 183 Jersey-registered managers opting to market into the EU through NPPR, a figure that has risen 6% since June 2019 and by 9% year-on-year.
Meanwhile, the total number of Jersey alternative funds being marketed into the EU through NPPR also increased to stand at 320, representing a 3% increase since June 2019 and an annual rise of 2%.
These are positive figures reinforcing just how attractive the private placement route to market is for Asia managers wanting to access EU investor capital.
The sustained and consistent rise in the number of alternative managers and funds making use of private placement through Jersey over the past few years prove that it is a tried and tested route that provides certainty and flexibility and that is cost-effective, and those qualities are hugely attractive – particularly in the current challenging market.
If you would like to hear more about Jersey for funds, please do not hesitate to contact me.
Jersey Finance, established in 2001, is a government-connected not for profit organisation. Our mandate is purely informational and geared toward relationship building between our 200+ Jersey member firms and industry professionals around the world.
Jersey Finance’s main aim is to promote and represent Jersey, the international financial centre, with offices in Hong Kong (since 2009), Dubai, London and New York, and with representation in Mumbai and Shanghai.
Jersey Finance is proud to work with key partners to represent and promote Jersey as the clear leader in international finance. We champion the competitive position of Jersey’s finance industry, both locally and internationally, supporting the highest regulatory standards and the most attractive products and services to suit the needs of global investors, in addition and complementing their local investments and structures.
Jersey is a leading private wealth and funds jurisdiction with more than 50 years’ experience in structuring, managing and administering private wealth structures and funds. The island’s stability and expertise, paired with exceptionally high standards of service and governance makes for a natural gravitation for fund managers to consider Jersey as a domicile for alternative investment funds.
Jersey’s regulatory, legal and legislative structure has reacted promptly to the COVID-19 pandemic and introduced measures such as acceptance of e-signatures for regulatory purposes, deadline extensions, guidance on governance and compliance requirements and adaption of substance requirements, allowing business to continue.
This article was originally published in PBCE.