February 2008

ASSOCIATION COLUMN: Jersey's attraction for alternatives

"Jersey is recognised for its credible and experienced fund administrators and the quality of its regulation" Richard Thomas (Jersey Funds Association) The latest statistics for Jersey’s funds industry provide an indication of continued growth in the demand for Jersey’s products and point to a positive year ahead. The net asset value of funds under administration in Jersey rose by over 30% over the twelve months up to the end of September 2007, to reach a record level of £221 billion (e296.9bn). The Expert Fund regime continues to prove highly popular, with 349 Expert Funds having been approved since the regime’s launch in 2004. The fact that the net asset value of Expert Funds increased by 71% to £43.6bn over the twelve-month period up to the end of September 2007 is also indicative of the sustained attractive nature of the regime.

Reputation for expertise
The statistics also reflect the extent to which Jersey is building a reputation for expertise in the specialist funds arena.  More than half of the total value of fund assets – £114bn – is accounted for by alternative funds. The island is continuing to drive forward its funds offering, however, and the beginning of 2008 promises further exciting developments as Jersey asserts itself as a leading European funds centre. The announcement last year that the island was proposing to introduce new exemptions from regulation for two ‘Unregulated Fund’ categories has been received with numerous expressions of interest from international funds professionals. After in-depth industry consultation and with support from the financial regulator, the introduction of these categories is now imminent.  These will complement the existing range of regulated fund types and maintain the island’s competitiveness in the alternative funds sector. It is anticipated that additional hedge fund and private equity fund business will be attracted to the new unregulated fund categories. Since the launch of the Expert Fund Guide in 2004, with its streamlined regulatory approval process, there has been a significant increase in the number of fund promoters domiciling alternative investment fund vehicles in Jersey.  A number of private equity houses and fund managers have also established operations in the island. Feedback continues to indicate that Jersey is recognised for its credible and experienced fund administrators, the quality of its regulation and the strength of its legislation. The introduction of Unregulated Fund categories – the ‘Unregulated Eligible Investor Category’ and the ‘Unregulated Exchange Traded Category’ – will undoubtedly add to the flexibility of fund solutions offered by the jurisdiction. In fact, Jersey will be the first European jurisdiction to offer such a level of flexibility to the alternative fund sector. Promoters using the new regime will not need to seek regulatory approval when applying to set up a fund in either category. Moreover, there will be no requirement for an unregulated fund to appoint a Jersey-domiciled administrator, directors or custodian and, significantly, there will be no audit requirement. Jersey-based functionaries will continue to be required to be regulated for the conduct of fund services business and the same anti-money-laundering regime as is currently to be applied to regulated funds is expected to be applied to unregulated funds.

Service provider regulation
Other legislative changes are on course to increase the flexibility of Jersey companies for fund structures.  Notably, the rules which govern the making of distributions are to be updated later this year following the passing of an amendment law on 16 January. This will mean that any cash or assets will be available for distribution provided only that the company will continue to meet the standard prescribed solvency test. In addition, funds using the already popular cell company structures will be able to benefit from different boards of directors for the cell company and any of its cells. As a result of changes made in November, the emphasis within Jersey’s regulatory environment has shifted more towards the regulation of the service providers rather than the authorisation of individual funds. It is believed that this is a significant improvement to Jersey’s fund sector infrastructure which, as well as facilitating the introduction of unregulated funds, is able to smooth the set-up process, while at the same time maintaining a high degree of flexibility, efficiency and transparency. The combination of these developments is continuing to position Jersey as the jurisdiction of choice for many alternative asset managers.

• Richard Thomas is chairman of the Jersey Funds Association ©  fe February 2008

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.