Commissioned by industry promoters Jersey Finance, the report focuses on institutional investors such as pension funds, endowment funds and sovereign wealth funds which are not subject to tax in their home countries.
London-based researchers Europe Economics gathered data from existing sources and a representative sample of Island administrators, fund managers and lawyers.
They found that £160 billion of pension funds assets are invested through Jersey, including £39bn in fund structures and £120bn in corporate ‘vehicles’.
Of the fund structures – which make up 16% of the total administered in the Island – nearly half (46%) originate from the European Union, 13% from the UK, 9% from the United States and Canada and 32% from the rest of the world.
The greater part of institutional investment (60%) is in the ‘alternative’ asset class of private equity and venture capital – an area in which Jersey practitioners specialise – with 19% in property/real estate and around 7% in more traditional classes such as bonds and equities.
The report, presented to Jersey Finance members yesterday, concludes that tax-exempt investors choose to use Island firms not only because of tax ‘neutrality’ – meaning that they do not incur cross-border charges – but also because of Jersey’s ‘proportionate’ regulation and high standards of service and professionalism, with estimated overall cost savings per annum of up to £26 million.
In addition, alternative asset classes such as private equity, real estate and hedge funds are providing institutions with a ‘diversified portfolio’ in the current low-interest-rate environment.
Outlining their approach at yesterday’s presentation, Europe Economics researchers Deborah Drury and Ross Dawkins explained that they had used data provided by the Jersey Financial Services Commission as well as independent researchers Monterey Insight, together with field work interviews and surveys carried out locally.
Mr Dawkins said that contrary to previous expectations, the ‘big story’ to come from the research was the large percentage of investment from Europe, with a relatively small contribution from the UK.
Regulation in Jersey was seen as particularly responsive, he said, in comparison to Europe. ‘We have seen in in other jurisdictions the danger of rigid timeframes, without clarity from the regulator,’ Mr Dawkins observed.
Commenting on the findings, he added: ‘For institutional investors who make cross-border investments into non-tax-neutral countries, creating tax transparent vehicles can be complex and costly. Investing through a tax-neutral international finance centre like Jersey avoids these complications.
‘Ultimately, this benefits everyone, especially the people on the street who rely on their pension.’
Ben Robins, partner at Mourant Ozannes, said that both public-sector and private-sector pension funds had invested in private equity and real estate. He also referred to the way in which projects such as the Battersea Power Station development translated into jobs and wealth creation in the City of London and other UK cities.
Mr Robins said he believed the latest report would be ‘incredibly useful’ to put into the hands of clients who might be unsettled by the recent ‘inflammatory and one-sided’ media reports on the Paradise Papers. ‘There is nothing controversial going on in this space,’ he said.
The full report is available on the website jerseyfinance.je.
