Although first time alternative fund managers may well possess significant amounts of experience and know-how, particularly if they are spin-outs from larger GP houses, they are nevertheless presented with a number of specific challenges when it comes to getting their operation and first funds off the ground.
Access to investor capital, finite resources, time and costs are all potential issues. All this makes choosing partners – including a domicile – who understand the first-time manager market absolutely critical.
Whereas established managers will already have networks and processes in place, first time managers are essentially starting from scratch. Getting off to a good start is fundamental to the ongoing success of the fund.
Choosing a domicile is vital for all alternative managers, but the issue comes into particularly sharp focus for first time managers who are highly time- and cost-sensitive. Having a reliable, robust platform on which to build a fund operation can support success for the longer term.
Jersey has a long-track record in supporting the needs of alternative investment managers such as private equity, hedge and crypto and has become a centre of excellence.
Recent figures for the industry back this up – the total value of fund assets serviced in Jersey at the end of 2021 stood at more than £450bn (December 2021), a new record high and an increase of around a fifth year on year.
The statistics show particularly strong performances in the private equity asset class, which grew 27% over 2021 and now represents just shy of half of all funds business done in Jersey (46%).
But recent trends have shown that, whilst Jersey continues to support the strategies of mature, big-ticket managers, a growing number of first-time managers are looking to Jersey to support them on their journeys too – at both a fund and a fund manager level.
There is good reason for this. As the world emerges from the pandemic and as political fragmentation persists, secure, safe and certain conduits for supporting targeted and efficient capital flows have become highly prized, and Jersey ticks those boxes.
There is the issue of regulatory certainty too, with a plethora of regulatory activity currently under way globally – EU pre-marketing rules, AIFMD II proposals, ESG regulation, and antimony laundering rules, for example. For first time managers, this can be a minefield to navigate.
As a jurisdiction, Jersey’s default is stability, both political and fiscal. Further as a domicile it offers a minimal change outlook from a regulatory, legal or economic perspective.This base of stability is underpinned by tax neutrality and supported by world class infrastructure highlighted, for example, by the fastest broadband in the world.
For a first-time manager, being able to rely on a domicile that can offer this level of reassurance is invaluable.
Cost and Flexibility
Cost is also likely to be a far more sensitive issue than for more established managers, and domiciles need to acknowledge that by offering innovative, flexible solutions.
From Jersey’s point of view, that means supporting managers with a full range of options that can be tailored to their needs.
Some managers might be looking for structuring options only for their funds – and Jersey offers a range of vehicles, including the popular Jersey Private Fund (JPF) is well suited to the first-time manager market, being quick and straightforward to set up.
Equally, a first-time manager might be looking for more holistic support. Again, Jersey can offer a range of solutions, including a ‘manager of a managed entity’ (MOME) platform through to a full manager relocation, which can be dialled up or down, all backed up by Jersey’s commitment to meeting international guidance on substance.
In terms of distribution and market access, meanwhile, Jersey continues to be well placed to support non-EU (including UK) managers looking to access EU investor capital, thanks to its flexible, quick, cost-effective and tried-and-tested private placement regime under AIFMD. There are now more than 200 Jersey registered fund managers marketing into the EU in this way, a figure that continues to rise.
Beyond Europe, Jersey is also increasingly playing a role in connecting managers and investors globally, including across the US, the Middle East, Africa and Asia.
It’s an efficient, accessible and flexible ecosystem that is finding growing appeal amongst first-time managers.
One of the key issues we hear from first time managers is around the accessibility of expert support.
Particularly when launching an operation or a fund, being able to tap easily into specific knowledge around, for example, governance, substance or taxation, can save time and money.
Social capital and the ability to meet on-the-ground experts in diverse, specialist areas easily, is a real selling point for Jersey. There are few domiciles that can offer the depth of experience Jersey has gained over the past six decades.
Domicile selection is clearly a vital decision and getting it right at the start of a first-time manager journey can make a huge difference, before it becomes too onerous to change.
Jersey continues to see growth in managers on the ground and, in parallel, is now firmly established as a destination for fund allocators too. As a domicile, it wants to see first time managers flourish and is enabling that by taking away the operational headache, leaving managers to focus on what they do best. For that reason, we fully expect to see an ongoing rise in first time managers in the private equity space over the coming months.