Funds Europe – How is Brexit impacting Jersey as a fund domicile since the UK left the EU? Do you think that Jersey is in an advantageous position to benefit from Brexit?
Refson – Jersey sits outside the EU and outside the UK, so Brexit itself has not impacted Jersey in any way. Jersey, when we responded to AIFMD [Alternative Investment Funds Managers Directive], we had an opt-in/opt-out approach, which means that if you’re not marketing in Europe, you’re completely outside the scope; if you’re marketing within Europe, then you are able to market via the national private placement regime [NPPR]. On the back of that, since 2012 we’ve seen strong growth in managers using Jersey structures to market both into the EU and into the UK. That itself has not been impacted by Brexit.
Honeywood – Jersey is still attracting institutional-grade managers and institutional-grade investors. The point around Brexit does play off nicely to the earlier comments around stability. There has been political stability here and that hasn’t necessarily been the case elsewhere in Europe, and as a result, Jersey has been considered a safe harbour in that regard. Also, we see NPPR still holding up as a compelling route into accessing European capital, and I don’t see that changing. There is an interesting development in the UK right now regarding the new UK funds regime and whether London will become Singapore-on-Thames, as has been quoted. One view is that it’s an opportunity, and the opportunity for London can only be good for the Channel Islands and Jersey.
Baird – To a degree it’s one of these things you almost have to let roll out for a year or two and then look back and go: ‘Actually, yes, there was no impact.’ Sometimes we just have to sail on those choppy waters for a little while. For me, it’s about stamping out the uncertainty, because uncertainty can lead to the wrong decisions being made around fund structuring.
Taylor – It comes back to the fact that there was uncertainty when Brexit was happening. We tried as a jurisdiction to identify what this might be, but we are still watching this play out. It will be some time before we can look back on it and really see what the impact has been. I haven’t heard of Singapore-on-Thames before, but I quite like that! It’s currently too premature to see the true impact Brexit’s had for Jersey from the funds industry’s perspective.
Macleod – On the UK side, time will tell. A more user-friendly fund regime has been long debated but not quite delivered. With Brexit, Jersey’s come out pretty well. You’ve got to remember that Jersey continues to attract lots of funds who market to non-European investors and the impact of Brexit on these funds is quite limited.
Cruickshank – Being outside of the EU, Jersey has always been able to readily adapt to market conditions and work effectively with both the UK and EU member states and their network of intermediaries.
Interestingly, nearly four-fifths (78%) of our survey respondents thought Brexit would continue to impact their investment decisions over the coming 12 months. At Ocorian, we have certainly seen an uptick in enquiries from smaller UK-based fund managers who are less tied to European markets. They are attracted to Jersey because of the Jersey Private Fund regime and the benefits that can offer in keeping running costs down.
Jersey also represents a much more cost-effective and less bureaucratic solution for fund promoters looking to raise funds in Europe when utilising national private placement regimes over a hosted Alternative Investment Fund Manager (AIFM) arrangement.
Funds Europe – Competition is growing as other fund domiciles attempt to attract more flows from alternative fund managers, for example. Jersey has already made changes to make its domicile more attractive, but how has the domicile fared in recent months? Looking forward, what else does it need to do to maintain its allure?
Refson – According to the 2020 Monterey Report, AuM [assets under management] in Jersey broke through US$500 billion for the first time in 2020, and that represents growth of 95% over five years. At the end of the second quarter of 2021, that figure stood at $574 billion, and that’s a year-on-year growth of 20%. We touched on the fact earlier that the number of limited partnerships created this year was 70% above the five-year average. It’s really important to remember that with structures like the JPF, for example, they can be held in corporates as well as fund vehicles, and in addition to the fund statistics, there’s around $1.8 trillion that’s held in corporate vehicles in Jersey.
In terms of what we need to do to maintain the allure of Jersey, it’s again back to the joined-up approach that everyone on this call takes, that manifests every organisation within Jersey – the regulator, government, Jersey Finance, each of our members – in working together in establishing what the forthcoming trends in the markets are and in addressing those things. That’s one thing we do well, and that’s going to continue to be the way we operate.
Honeywood – From our perspective, why do our clients still like using Jersey? We’ve talked about strong and proportionate regulation, stable government and operating environment, high-quality workforce, but also there are other, softer sides around the English language and English culture, central time zone, ease of access to London, etc. All those factors have a significant driver to make Jersey attractive both now and into the future