As family offices seek exposure to alternative assets, international finance centres have an important role to play. Jersey, with its strong track record in managing family wealth and innovative, user-friendly funds regime, remains a leading choice, writes Simon Morris, Director, Funds & Institutional, IQ-EQ.
The role of the traditional family office has evolved significantly in recent years. As a result, family offices and ultra-high-net-worth (UHNW) individuals are having an increasingly disruptive effect on markets that were traditionally the mainstay of banks, private equity houses and funds.
This comes at a time of an unprecedented transfer of family wealth from Baby Boomers and Generation X to their heirs. In fact, a recent white paper published by IQ-EQ (entitled ‘The Great Global Wealth Transfer’) highlighted that over $15 trillion in assets will be transferred between generations over the next couple of decades.
Our white paper also observed that, once funds are in the hands of the next generation, there is likely to be an increased focus on alternatives, with Millennials favouring more ‘exciting’ investment opportunities in private equity and venture capital and taking particular interest in technology start-ups as well as responsible investing and impact.
Alternative assets have also grown in appeal amid the ongoing Covid-19 crisis, with market disruption opening new doors for family offices to become direct investors in assets that would previously have been out of reach.
Although the ambitions of family offices have increased significantly, these investors, understandably, often take a cautious approach and look to partner with more experienced institutional LPs, joint-venture parties or with other like-minded family offices to reduce their risk exposure.
Depending on the nature and number of such co-investment partners and the underlying asset class (or classes), such co-investment can often move the structuring away from a simple holding structure into the funds arena where monies are pooled together and there is an element of risk-spreading.
In such instances, Jersey’s Private Fund regime (launched in April 2017) has become an increasingly popular vehicle for investors. With its flexible governance, light-touch regulatory characteristics and extremely short application timeframe, Jersey Private Funds (JPFs) can offer an ideal – and cost-effective – solution. JPFs are also well suited to impact and ESG-focused funds.
A JPF can be established using virtually any corporate structure; it can be open- or closed-ended and is available for up to 50 investors who qualify as ‘professional’ or ‘eligible’ (e.g. an investor subscribing for interests with a value of at least £250,000).
JPFs are not required to appoint any Jersey-resident directors or an auditor but must appoint a Jersey-regulated administrator (the ‘Designated Service Provider’) to ensure that the applicable criteria and AML legislation are adhered to and in order to carry out due diligence on the fund’s promoter.
If Jersey’s flexible funds regime is well established, so too is its reputation for servicing family offices and UHNW clients. Jersey has over £600 billion in trusts managed by regulated trust company businesses and its qualified workforce has been servicing UHNW individuals and families for over 60 years. Jersey provides the perfect environment to uphold the traditional values of these families, such as privacy, asset protection, wealth preservation and philanthropy, and to meet the evolving requirements of the next generation.
This experience is an important differentiator when it comes to jurisdiction selection. Like their predecessors, Millennials and Generation Z demand the high touch and personalised service with which Jersey has become synonymous. Combined with innovative solutions such as the JPF and access to highly experienced practitioners, whatever the specifics or complexity of the next generation’s requirements, Jersey is certain to deliver.
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