By Alexandra O’Grady, a managing associate in Ogier’s investment funds team in Jersey and part of the firm’s multi-disciplinary private equity team
PRIVATE equity has always been a significant asset class for Jersey funds and, right now, we are seeing a number of key trends – personalisation, retailisation and secondary funds – driving private equity fund and deal structuring.
Personalisation is an overarching key topic. It encompasses a huge array of outcomes, from the bespoke carry or co-investment opportunity to the joint venture, from family office private investment funds, to dedicated investor feeder funds. We are seeing both established asset managers and first-time managers creating increasingly bespoke structures with key clients, personnel and partners to accommodate and align interests with a view to building successful, long-term relationships.
The varied types of Jersey vehicle (including the recently introduced Limited Liability Company) and Jersey’s regulatory landscape offer a flexible and diverse range of structuring options to help enable asset managers and their key clients to achieve initial deal objectives while also offering appropriate regulatory registration options to accommodate any plans for the future. This better serves clients who have built a particularly successful deal structure to replicate it or even diversify the investing group or strategy.
The retailisation trend sees alternative asset managers expand the investor base to include ‘ordinary’ or ‘retail’ investors in their list of offerees, either ‘directly’ or through employer-sponsored retirement accounts. The definition of ‘retail’ will be informed by the marketing rules of the relevant target jurisdiction and, perhaps to their detriment, retail investors will often be defined as those not meeting the definition of ‘professional’ in their home jurisdiction.
Retailisation has been a hot topic for at least a couple of years and, dare we say it, this trend might not be as new and innovative as it sounds. The fact is, large institutions have, for years, catered for their private wealth clients by establishing bespoke investment structures, enabling such ‘retail’ clients to gain exposure to investment opportunities which might not otherwise be available to them.
Jersey has long offered appropriately regulated solutions to facilitate these structures but what has changed is the ever-growing demand for these structures from an increasingly diverse range of investors who are ever more alive to the opportunities available in the alternative asset space and willing to take on an appropriate degree of risk.
Of course, there are complexities in ensuring that sufficient protection is afforded to investors of this type to ensure that the desired exposure to the investments is carefully balanced, given that such structuring is typically longer term/illiquid in nature. Prevailing market conditions continue to drive discussions and activity, with secondary transactions being used by managers as a tool to actively manage and strategically realign their private equity portfolios.
In keeping with the aforementioned personalisation trend, the secondary private equity market is seeing an ever-increasingly diverse and sophisticated number of secondaries transactions and secondary funds seeking to purchase limited partners’ existing commitments.
Secondaries are not only viewed as a means for generating liquidity (although this is certainly one attribute driving the upward trend) but the huge growth of secondaries over the last decade has been supported by the development and expansion of the market’s intermediary network, including the availability of specialist secondaries advisory firms to support and co-ordinate transactions.
Jersey’s strong legal framework, including its variety of tested legal vehicles and regulatory certainty, coupled with experienced legal and administration service providers, offers asset managers looking to explore or build on these trends the flexibility to structure a full domicile end-to-end solution. This in turn demonstrates Jersey’s strength as a forward-thinking and leading funds domicile.