In fact, as we look forward, these qualities should galvanise Jersey’s appeal as a stable, neutral and robust gateway to Europe for investors around the world.
As a leading international finance centre (IFC), Jersey has for years been focused on building positive relationships with international markets from Europe to Asia, North America and Africa. With globalisation in the financial services industry and the constant rise of emerging economies continuing to open up a range of new opportunities, we remain committed as a jurisdiction to further strengthening these links in the future. Certainly, with Brexit now very much on the horizon, these overseas relationships are more important than ever.
Evidencing its global role, research tells us that Jersey is a conduit of €188 billion of foreign investment into the EU (excluding the UK) – as outlined in ‘Jersey’s Value to Europe’, 2016 – and is a pipeline for almost £1/2 trillion of foreign investment into the UK, equivalent to 5% of the total stock of foreign owned assets in the country (see ‘Jersey’s Value to Britain’, 2016).
These figures are encouraging and the indications are that, as a stable and neutral location, Jersey will continue to play a supportive and positive global role in adding value to these economies and ensuring seamless, ongoing cross-border financial flows between the UK and the EU post-Brexit.
Where alternative funds are concerned, Jersey is well placed to continue to support global investment flows. As a third-country in relation to the EU, the jurisdiction’s national private placement regime (NPPR) route into the EU is a proven and effective option under the Alternative Investment Fund Managers Directive (AIFMD), with more and more non-EU managers from, for example, Asia and the US electing to use Jersey as their centre of choice for fund distribution into EU countries.
Figures show that, as of December 2017, 149 alternative investment fund managers (AIFMs) had been authorised in Jersey to market into Europe through NPPRs, up 17% year-on-year, indicating clearly that the use of private placement continues to work well as a means for non-EU managers to market their funds into the EU.
At the same time, Jersey’s flexible funds regime can market alternative funds all around the world, efficiently and outside the scope of AIFMD. In fact, recent research by KPMG, ‘Analysis of the Jersey Alternative Funds Sector Investor Base’, (Q4 2017), shows that, after Brexit, almost 75% of capital in Jersey alternative funds will come from non-EU sources.
Further research by Europe Economics, ‘Jersey for Institutional Investors: A Clear Choice’ (November 2017), also reflects this global role. It found that of the £39 billion of pension fund assets administered in Jersey, around 40% (£16 billion) originates from outside the European time-zone.
Being able to effectively work with key overseas markets is based on a deep understanding of current and future trends, as well as an appreciation of what matters to investors in those markets. Jersey has invested heavily in building strategic, meaningful relationships with investors’ demands in mind.
Growth in Asian markets has been particularly vibrant; the ‘Global Wealth Report 2017’, compiled by the Boston Consulting Group, shows that Asia Pacific was the fastest growing region globally last year in terms of private financial wealth at 9.5%, with wealth in the Middle East also growing an impressive 8.5%.
Burgeoning middle classes in these markets are increasingly looking for diverse outbound investment strategies and new markets and sectors. This means that there are real opportunities right across Jersey’s private wealth, funds, banking and capital markets sectors to provide high-quality specialist support.
These opportunities are highlighted in our refreshed strategic review, which underpins Jersey Finance’s structured programme of activity in overseas locations. Over the past year, this programme has included continuing to embed our highly successful roadshow series in key markets.
Throughout 2017, supported by our overseas business development teams, we staged events in Lagos, Nairobi, Cape Town, Johannesburg, Dubai, Kuwait, Shanghai and Hong Kong, with the highest ever attendance recorded at those events. We also hosted receptions in Saudi Arabia for the first time in conjunction with the British Embassy in Riyadh and the British Consulate General in Jeddah.
As a result of these activities, in 2017 we also witnessed record numbers of Jersey firms investing in flyout activity to these markets. There are now around 40 firms active in the Gulf Cooperation Council (GCC) region with many of those also expanding their reach into Greater China and a growing number also exploring opportunities in Africa.
We will be continuing to work with our established markets and we will look further afield at other potential growth markets. This includes the USA, where we are seeing specific opportunities to support fund managers and growing volumes of outbound real estate investment.
Supplementing this outreach activity, in order to both better understand our core overseas markets and set Jersey apart from other IFCs as a thought-leading jurisdiction, Jersey Finance is continuing to bolster its library of evidence-based research.
Last year we published a series of white papers – including ‘How to Service Chinese Wealth as it Goes Global’ and ‘Driving Forces Behind GCC HNW Investors’ – which looked at some of the challenges faced by advisors when it comes to business succession and family wealth planning in overseas markets.
These reports are proving instrumental in informing our activity in Asia. They confirmed, for example, that participants in those markets are heavily focused on succession planning and asset protection for future generations. Amongst Chinese high net worth individuals (HNWIs), legacy planning is the main priority (47%) when it comes to wealth planning, whilst more than half of professionals working with family businesses in the GCC (55%) see business succession planning as the most critical issue for GCC families today.
However, whilst there is a clear acknowledgement that wealth and succession planning is vital, other themes that clearly emerged from those reports were concerns that wealth planning might involve a loss of control over assets and that there is still much misunderstanding in terms of reporting obligations under international transparency regimes, such as the Common Reporting Standard (CRS).
Given Jersey’s expertise in managing complex cross-border investments, its sound regulatory framework and its experience of working in a compliance-driven transparent environment, these are challenges that Jersey is extremely well-placed to respond to, working with investors to improve confidence and help deliver objectives securely and robustly.
We will be continuing to expand our portfolio of research throughout 2018 with a number of reports looking at specific markets and sectors.
Looking ahead, in the face of strong competition from other centres, maintaining strong relationships with stakeholders in overseas growth markets and connecting with our various audiences will be absolutely vital.
Despite protectionist fears, globalisation is continuing to shape the environment Jersey operates in and whilst greater competition and complexity in global financial markets is presenting challenges in some respects, it is also providing a number of significant opportunities.
For example, whilst Jersey has traditionally provided private and family wealth structuring solutions in the GCC, we are now seeing growing interest in alternative funds and in particular in real estate funds too.
Likewise, in China, our strong reputation for providing corporate and capital markets services has broadened to now include family business and wealth structuring and providing administrative support to major Belt and Road infrastructure initiatives.
In Africa, we are seeing considerable growth in supporting inbound infrastructure fund structuring, as well as outbound social impact and philanthropic activity. This complements our well-established reputation in the continent for private family wealth services.
Investors want top-quality products and services, high standards of regulatory oversight and clear commitments to innovation. Regarding the latter, digitisation of financial services will play a massively expanding role in coming years. We believe Jersey can deliver across these areas. Its political and economic stability, sophisticated legal and fiscal infrastructure, long-standing partnership with London and commitment to innovation and expanding its presence in new markets is balanced with an effective response to the challenge of greater transparency and an increasing focus on global compliance.
With security around flows of global capital likely to become increasingly important for institutions and individuals throughout the coming months and years, clients and their advisors will find that Jersey’s forward-thinking approach, its highly-skilled workforce and expertise can provide them with the attractive cross-border solutions they need to support their international investment objectives and plans.
In an increasingly complex and diverse global market, shaped by globalisation on the one hand and fragmentation such as Brexit on the other, families, investors and governments are looking for quality IFCs to help intermediate between cross-border saving and investment. Jersey has a proven track record that it can service this demand flexibly and efficiently and will also strive to deliver first class financial services solutions for clients around the globe in the future.