Magazine Issues » December-January 2013

ASSOCIATION COLUMN: Stability and flexibility

Nigel-StrachanWhile global market conditions remain challenging, Jersey's funds sector has continued to demonstrate resilience. The latest figures suggest that Jersey is keeping favour with the needs of the funds industry, with the value of assets being administered around £190 billion (€235.5 billion).

In particular, Jersey continues to assert itself as a major player in the alternative funds space, with alternative fund classes, including hedge, private equity and real estate, accounting for around 70% of the total value of funds under administration on the island.

One key issue that remains in the spotlight for funds jurisdictions globally is the EU’s Alternative Investment Fund Managers Directive (Aifmd). Given Jersey’s strength in alternative funds, it is not surprising that the directive is firmly on its radar.

As EU member states go through the motions of implementing the directive, fund professionals will be encouraged to know that Jersey, as a non-EU third country for the purposes of the directive, has been working hard to ensure it is in a strong long-term position to offer a blend of stability and flexibility.

The overwhelming message is that Jersey intends to give the alternative fund community confidence by maintaining a business-as-usual approach for funds business within the EU. It will be able to do this through private placement arrangements with individual EU countries, until at least 2018. Jersey’s regulator is already engaged with European Securities and Markets Authority (Esma) and member state regulators to ensure the required co-operation agreements can be in place in good time.

At the same time, Jersey is also committed to introducing the option of a fully directive-compliant regime and obtaining an EU-wide passport by 2015 – as soon as is possible for non-EU third countries.

Jersey’s regulator and government are ready to progress additional agreements required by Esma for this. With information exchange agreements in place with 13 member states – and more expected to be ratified in the coming months – combined with the excellent independent reports it has received on its regulation, corporate governance and stance on anti-money laundering, Jersey is confident it will be able to satisfy all criteria needed to comply with the directive ahead of the 2015 deadline.

Meanwhile, as a non-EU jurisdiction, Jersey is able to continue to offer a separate regime that lies outside the scope of the directive, for fund managers who do not want to access EU capital or who do not operate in the EU.

In this way, Jersey will be able to continue operating its existing fund regime while at the same time offering an option that is fully compliant with the directive, providing fund managers with the flexibility to market to investors inside and outside the EU.

The directive could pose some opportunities for Jersey as a specialist, safe, no-change solution. It is anticipated, for example, that maintaining an offshore option for non-European investors will make a great deal of sense for fund managers. In the current climate, fund managers are thinking increasingly about sourcing capital from sophisticated Asian and Middle Eastern investors, for which an offshore solution like Jersey remains attractive.

In addition, it is pleasing to report that Jersey remains a top option for fund managers to relocate to. The feeling is that its regulatory framework, approach to the directive, expert supporting infrastructure, geographical location and high quality of living, is proving attractive to managers – indeed a number have made the move in recent months. Reputation plays no small part here, so it is pleasing that Jersey is now identified as a top 20 global finance centre and remains the highest rated offshore centre in the latest Global Financial Centres Index.

Maintaining flexibility and developing innovative products remains vital in meeting market demand. At the same time, retaining investor confidence through high standards of supervision and responsible regulation is crucial. With this in mind, Jersey’s funds industry continues to fine-tune its full range of fund regime options. It has this year successfully launched a fast-track regime for privately placed closed ended funds targeted at professional and sophisticated investors, implemented codes of practice for certified funds and introduced updated regulations concerning prospectus content requirements.

Jersey recognises that stability and flexibility are key issues for fund professionals in the new alternative funds landscape and has this much in mind as it responds to the directive, continues to enhance its funds regimes and looks to assert its position as a specialist centre for funds business.

Nigel Strachan is chairman at the Jersey Funds Association

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