The first half of 2020 for the US was a fragmented, disrupted and at times tumultuous period.
From an economic perspective, after a period of a few years of achieving annual growth above 2%, figures just released for the second quarter of this year show that, driven by widespread pandemic-induced disruption, the US economy shrank by 32.9% year-on-year – the biggest contraction ever.
This was despite the massive economic support provided by the US government over the past few months – around $5tn aimed at trying to stimulate the economy and employment through low-interest and partially forgivable loans, direct cash payments and unemployment support.
Today, tens of millions of Americans are out of work, and with politicians in a state of deadlock on a new coronavirus relief bill, 20 million Americans are likely to shortly stop receiving emergency unemployment benefits.
The White House has previously announced a phased plan for opening the US that requires states to meet certain health criteria, enact state action plans and adhere to phased guidelines for individuals and businesses.
As far as New York City is concerned, where Jersey Finance has its office, it was the last of New York state’s regions to enter the final Phase Four of the re-opening process on July 20. For businesses, that phase means offices can open but in accordance with hygiene and distancing measures in place.
The fact that the US has recorded the highest number of confirmed cases of Covid-19 globally (approaching 4.5m, almost twice as many as nearest country Brazil) only tells part of the story of a country that has grappled politically, socially and culturally with what lockdown has meant.
Of course, the US is a massive and diverse country, and the response across the nation in terms of travel restrictions and social distancing measures could largely be described as patchwork. Whilst the infection curve has overall been flattened, even four months after a national emergency was declared, certain states are still struggling to control the outbreak.
For a nation that values its freedoms so highly, these are testing times – and the coming weeks will be absolutely pivotal as the US looks to control the pandemic, instil confidence in its economy and rebuild for the future.
For Jersey, recognising the specific challenges the coronavirus has thrown up for US investors, families and fund managers has been really important.
Our ability as a jurisdiction to be agile, pivot to a more digital way of engaging with contacts, and being proactive to put in place practical measures and provide essential support to enable business to carry on, has been very well received.
The Jersey authorities moved quickly, for instance, to give firms some added flexibility in ensuring ongoing compliance with international economic substance requirements by enabling them to use technology to hold virtual board meetings.
The ease with which Jersey firms have been able to move to an online remote working environment, thanks to our high-speed fibre broadband – the 3rd fastest in the world – has also proven to be a huge differentiator.
Firms have had the ability to continue to transact and support clients in the US remotely without impacting on service quality – in fact, we’ve seen a number of US funds and transactions come to fruition through Jersey over recent months – whilst we’ve also seen an uptick in enquiries from the US, particularly from new fund managers.
Our resilience as an international finance centre (IFC) has proven to be a vital and positive differentiator, and our record-breaking funds figures from the first quarter of this year – albeit from the period immediately prior to widespread lockdown – reinforce this.
When we launched the Jersey Finance office in New York last year, our core message was that Jersey offered a stable, efficient, no nonsense platform for enabling US fund managers to access the European market.
It was a proposition built on Jersey’s expertise in the alternatives space, and its tried and tested ability to market funds both into the UK and EU through private placement routes under AIFMD.
Of course, at the time, Brexit was still a big issue and the clear feeling was that, whilst establishing an onshore EU operation could on rare occasion be the best option, for instance if blanket marketing was necessary, Jersey could often provide managers with an alternative that would suit their needs better – if the target market was a small pool of specific investors or markets.
What we didn’t account for at the time, of course, was the massive disruption we have seen in the first half of 2020. The prospect of a US election campaign trail also has the potential to fuel disruption and uncertainty further, as the candidates and parties mark their territory – specifically tax agendas and policy proposals.
That sort of disruption will exacerbate the need for stable, resilient centres as we go through the remainder of 2020, and, as managers look for all the reassurance they can get, our core message of certainty remains absolutely critical.
In tandem with that, we’re seeing certain jurisdictions that have traditionally been home to US funds play catch up in terms of complying with EU substance requirements. That is raising some red flags for managers who are now having to engage in contingency planning with respect to their global structures.
In contrast, Jersey is ahead of the game. Our route to market is well established, our substance rules are in place, and we have been found time and again to be compliant with international standards of transparency and cooperation. All that is balanced against a positive, innovative and flexible framework, and that is resonating well with US managers.
With that in mind, Jersey is continuing to enhance its proposition – last month amendments were approved to enable limited partnership structures to more easily migrate from other jurisdictions. We expect this enhancement to be transformational in enabling US managers to move structures to Jersey from elsewhere. And, later this year, we expect new Limited Liability Company legislation to come on track – a further move that should help bolster our proposition in the US market.
In summary, the current environment provides Jersey with a significant opportunity to distinguish itself in the US market. The US continues to value certainty, established models are being challenged, and Jersey is in a really good position to demonstrate its expertise.
The challenge will be in making sure our message is heard in what is a very noisy, complex market. To that end, we are looking forward to our Global Jersey virtual event in September and we will be hosting a number of other webinars over the coming months too. I’m also working collaboratively with colleagues in Jersey, the UK, the GCC and Asia to support the message that Jersey is an IFC with truly global capabilities, able to support the international ambitions of managers and investors.