Today’s investors in the Middle East have a challenging market to navigate. Many are looking for both asset protection and greater diversification, while negotiating a range of regulatory initiatives which make cross border investing more complex. Added to this is the ongoing impact of the pandemic which continues to hit global economies hard.
Against this backdrop, investment funds with exposure to global assets and new and niche markets, particularly in the alternative fund space, are seen as increasingly attractive. In pursuit of that objective, high net worth investors and ultra-high net worth families are finding that the jurisdiction which they have become familiar with over many years in supporting their private wealth structuring is also the natural jurisdiction for meeting their alternative investment objectives.
Over a period of more than 50 years, Jersey has developed a well-respected and forward-thinking funds sector. Midway through 2020, despite ongoing challenging fundraising conditions, the total value of fund assets serviced in Jersey rose to reach an all-time record high of around $490bn, with alternative funds, including private equity, real estate and infrastructure, showing stellar growth to represent approaching 90% of Jersey’s funds business.
Built on strong foundations, Jersey has enhanced its provision during the last decade and now delivers a seamless, flexible and truly global platform, tailored to the needs of managers and investors world-wide including those in the Middle East.
Investors looking for a European time-zone hub with easy, cost-effective UK and EU investor access, outside of the EUs’ Alternative Investment Fund Manager Directive (AIFMD) rules, that offers a stable, straightforward, transparent environment, with superior standards of governance endorsed by international regulatory bodies, can find their needs met through Jersey.
In many ways, the current challenging environment has served to highlight the inherent strengths of Jersey’s funds proposition – the stability and certainty of its regulatory and legislative regime, the focus on service quality, and the impressive level of expertise offered by a 14,000 strong financial services workforce.
In this uncertain economic environment, investors in the Middle East keen to tap into the opportunities offered up by alternative funds will be relying on centres that offer sensible regimes, a no-nonsense approach to getting funds to market, and some much-needed certainty to manage, structure, and service their funds in a hugely challenging environment. Jersey is ready to meet those demands.
It is not possible for International Finance Centres (IFCs) to remain at the centre of the international investment marketplace without a consistent commitment to innovation in both the products provided and the legislative armoury that supports them.
Alongside the core qualities that make up a stable, secure, and robust jurisdiction, leading IFCs such as Jersey have needed to embrace innovation to maintain their appeal in regions such as the Middle East.
Yet while Middle East professionals will be most familiar with innovations relevant to the private client market, Jersey has developed an investment funds environment designed to cater for all investor types, with a full suite of tailored products to meet the specific needs of institutional as well as private and family investors.
The launch of the Jersey Private Fund (JPF) in 2017 is a case in point. It aimed to give small numbers of sophisticated investors a vehicle offering quick regulatory approval, and its introduction has proven to be a big success. It has become the go-to vehicle for alternative fund structuring, with more than 350 JPFs having now been established, driven by demand for structures that are suitable for impact investing, as well as for family offices looking to co-invest – making it an ideal option for the Middle East market.
Meanwhile, Jersey’s capabilities and expertise in Islamic finance adds to its appeal among Gulf investors and provides the necessary framework to support Shariah-compliant structures. Against a backdrop of growing interest in private equity and real estate opportunities across the GCC, Jersey’s ability to support the regulation of Islamic finance products and for Jersey SPVs to work with a range of Shariah-compliant Islamic capital market transactions, positions it perfectly.
Jersey has also been on the front foot by honing its proposition to support the global ESG drive and most recently it introduced new legislation for the migration of limited partnerships, a legislative change that introduces an express mechanism whereby limited partnerships can migrate to Jersey quickly and seamlessly, providing further options for the manager when choosing jurisdictions.
Jersey’s forward thinking approach to innovation, combined with its commitment to digital technology – the jurisdiction has the world’s second fastest broadband connectivity speed according to independent rankings – should give further confidence to the investor market in the Gulf that Jersey can be relied upon in these uncertain times.
An IFC at the heart of Europe, with strong ties to the UK and continental Europe, Jersey has evolved into a truly globally focused location dedicated to finding solutions to meet the far-reaching, bespoke needs of international investors across worldwide markets.
Today Jersey has a formidable global reach, with more than 50% of new business in Jersey emanating from outside Europe and the top five sources of capital committed to Jersey funds being the UK, the US, Ireland, Luxembourg and Canada. Jersey also helps specifically to manage around £100bn of assets originating from the GCC.
Jersey’s ability to offer an international solution for servicing alternative funds, with global distribution capabilities, has put it in a strong position to meet investors’ strategic needs.
Given its position in Europe but outside of the EU and with its ties with the UK, for instance, Jersey can act as a gateway both to the UK and EU by offering seamless access through flexible, cost-effective, private placement regimes – a route that is tried and tested and proving increasingly popular, particularly in light of Brexit.
Beyond Europe, Jersey is well placed to connect global managers and investors too, with a growing number of managers in the US and Asia in particular looking for a European time-zone hub, outside of AIFMD rules, that can offer a stable, straightforward, transparent environment, offer easy UK and EU investor access and superior standards of governance.
Indeed, one of Jersey’s great strengths has been its robust regulatory framework which has been confirmed time and again by international bodies as being compliant with international standards of transparency and cooperation.
In particular, substance rules, which have been in place since last year, are giving globally-dynamic managers and investors additional comfort in Jersey’s environment for alternative funds.
When it comes to fund structuring, the clear indications are that investors in the GCC are looking for jurisdictions that can offer expertise, certainty and stability, with no regulatory, legal or economic surprises.
Jersey’s carefully structured ecosystem meets all those expectations and, combined with the expertise of its 14,000 strong workforce and its global distribution capabilities, is set to make it increasingly attractive to investors in the Middle East with global ambitions.