By Elliot Refson, head of funds at Jersey Finance
DESPITE an increasingly complex environment, from instability in Europe and the rapidly shifting landscape of international regulation to the increasing focus on the growing trends of ESG and digitisation, the Island’s funds sector has continued to thrive.
Of course, against this backdrop, it is not surprising that certainty, stability and expertise – descriptors Jersey has become synonymous with – take on greater resonance for fund managers who are currently navigating a tumultuous sea.
Nowhere is this more apparent than when we look at the alternative investment fund sector, which today accounts for around 80% of Jersey’s book of funds business. Once only the preserve of institutional investors, alternatives – such as private equity, real estate, infrastructure, venture capital and hedge – are now entering a new era driven by investor demands for greater diversification, an influx of private capital originating from wealthy families and greater emphasis on environmental, social and governmental investment.
With this explosion of alternatives into the mainstream comes a flight to quality and, for Jersey, the numbers speak for themselves. At the last count, the net asset value of regulated funds in the Island stood at £488.9 billion, a figure that has consistently risen each year.
This figure reflects the ongoing appeal of Jersey’s stability – a cornerstone of our offering as an international finance centre for more than 60 years – and consolidates our position as a leading specialist funds hub in Europe.
For more than 20 years, we have prioritised creating the ideal ecosystem for the alternative funds sector, blending targeted innovation with a stable, reliable platform. Our ability to do this successfully is the reason that cross-border funds business in Jersey has more than doubled in size over the past six years.
Of course, we are conscious of the need to keep pushing and driving forward if we are to maintain that momentum and retain our leading position, and that is reflected in our approach to innovation and, crucially, our global outlook.
These two points have been particularly evidenced over the past 12 months.
For instance, last year marked the fifth anniversary of the Jersey Private Fund structure. Launched in 2017, 637 JPFs – an increase of 20% over the last year alone – have been registered with the Island’s regulator with the structure, which offers a cost-effective, flexible and swift-to-market option, becoming a go-to choice for private capital coinvestment and cross-border institutional fund structuring. Notably, the value of assets held in JPFs is now £61.7bn and is in addition to the headline funds figure quoted above.
In addition, earlier this year, new Limited Liability Company legislation was approved, enabling us to offer a structure familiar to US-based managers, with its own legal personality and the option of attaching body corporate status – with the added benefit of providing certainty around accessing EU capital via third-country private placement rules.
Notably the Jersey LLC was the fruit of a collaborative approach between government, regulators and industry, a symbiosis that truly sets the Island apart from other jurisdictions.
Not only does this underline our commitment to targeted innovation but it also points to our global outlook. Close to half of all new finance business in Jersey is now generated from regions beyond Europe. In recognition of that fact, 2022 saw us hold our first-ever US roadshow, talking to managers and investors in New York, Miami, San Francisco and Chicago. Later this summer we will be taking our message to managers based across South-East Asia too. We are a European funds domicile with truly global capabilities.
We continue to look to the future, though, ready to anticipate the direction of our industry. We are cementing our reputation as a leader in sustainability, for instance, and are undertaking important research in digital assets and tokenisation, areas which could fundamentally disrupt the cross-border funds sector and where we feel Jersey could take a leading role.
The regulatory environment continues to evolve, from substance rules and disclosure obligations to reporting requirements and distribution mechanisms. Jersey, though, has a long history of adapting to such conditions. Our ability to pivot and innovate in the face of an ever-shifting landscape is why more alternative investment funds are being marketed to EU investors through Jersey than ever, why the Jersey Private Fund continues to be a sought-after vehicle, why interest in Jersey from global managers continues to rise, and why the value of our funds sector repeatedly sets new records.
This should all send a clear message about the enduring confidence in Jersey’s ecosystem for crossborder funds activity.
