The funds landscape

Written by: Jon Watkins Posted: 27/10/2020

BL71_Karine PacaryAs the Channel Islands funds sector goes from strength to strength, Monterey Insight Managing Director Karine Pacary (pictured) gets behind the numbers in her firm’s recent reports on the UK, Luxembourg, Jersey, Guernsey and Ireland – providing a clear overview of the funds space in each jurisdiction

Karine Pacary has more than 20 years’ experience within the investment fund industry, having served as Senior Data Analyst at Fitzrovia International and Head of Encyclopedia Productions at Thomson Reuters company Lipper.

 She co-founded Monterey Insight with the ambition of creating the definitive reference for funds in the jurisdictions of UK, Luxembourg, Jersey, Guernsey and Ireland – in her words, bringing together “a team that has a blend of capabilities, from traditional data analytics to advanced software engineering”.

“We provide the only comprehensive report of service providers for all investment funds serviced in the UK, Luxembourg, Ireland, Jersey and Guernsey,” she explains. “Based in London, our research covers around 37,000 investment funds within these jurisdictions.

“Each work provides a manually cleansed, wide-ranging and unique source of information on all promoters, administrators, sub-administrators, custodians, auditors, legal advisers, management companies/AIFM, transfer agents and sponsoring brokers, their client lists and their market shares,” she adds. 

“Continuing the Thomson Reuters legacy, each report is produced annually to be the reference point of the entire fund industry in the UK, Luxembourg, Ireland, Jersey and Guernsey.”

Here, Pacary shares the insights for the latest available Monterey Insight reports on each jurisdiction – painting a picture of the funds landscape in each.

Jersey: funds industry tops 17% growth

Our 25th annual Jersey Fund Report highlighted that fund assets serviced in Jersey rose to $481.2bn in 2019 – the latest report available – up 17.1% from 2018. The number of serviced schemes increased to 1,336, up 4.5%, and the total number of sub-funds recorded was also up to 1,807, representing a 5% increase.

The Jersey funds industry has maintained its momentum for three consecutive years now, enjoying an impressive 17% average growth. As expected, private equity products, including infrastructure, are the main drivers of this asset inflow. They remain a crucial element to the attractiveness of the island’s funds business and the consolidation of its funds industry.

In fact, private equity/venture capital and infrastructure funds rose to $320.1bn, with a total of 826 funds and sub-funds. This trend remained the same for Jersey-domiciled funds, where private equity products reached $194.2bn, with a total of 381 funds and sub- funds. 

For Jersey-domiciled funds and for all types of products, 125 new schemes were launched during the year to June last year, totalling $16.0bn.

The specifics

For fund administration services across both domiciled and non-domiciled funds, the Aztec Group maintained the largest market share for fund assets under administration – for the fourth consecutive year – with $167bn in assets. It was followed in second place by Saltgate, with $48.4bn, and Intertrust climbed to third position with $26.8bn. 

Among transfer agents and serviced funds, Aztec Group also maintained its lead, with total net assets of $169.1bn. Intertrust took the second spot, with $26.6bn, ahead of Computershare Investor Services, ranked third with $22.8bn.

The custody ranking of serviced funds remained unchanged for the first two positions: BNP Paribas Securities Services again secured top position as the largest custodian by assets, with $22.2bn, followed by JP Morgan, with $11.9bn. Sanne Trustee Services took third place with $11.7bn. 

Among legal firms, Mourant remained the number one legal adviser, advising on 733 funds, followed by Carey Olsen, with 714 funds. Ogier, with 443 funds, maintained its third position. 

PwC took the leading position among auditors, with 433 funds, ahead of KPMG, with 361 funds. This year, Deloitte climbed to third position, with 190 funds. 

In terms of assets, Deloitte led, with $121.3bn, followed by PwC and KPMG, with $96.6bn and $78.5bn respectively. 

Among fund management companies of both domiciled and non-domiciled schemes, SoftBank took the first position, with assets totalling $70.5bn, followed by Ardian, with $47.7bn, and CVC Capital Partners, with $45.9bn. 

Guernsey: return to strong growth 

Guernsey demonstrated strong returns last year and managed to once again attract major players to launch their private equity funds on the island. We also noticed a strong increase of infrastructure schemes, which has been the trend for a few years now. 

Those positive results were of benefit to a select group of service providers but, in an overall context, the Guernsey Fund Industry has strengthened.

Although, overall, the number of group and funds slightly decreased, 94 funds and sub-funds domiciled in Guernsey were launched during the year – accounting for $26.3bn in assets.

Of these products, 49 sub-funds were private equity/venture capital, with a total net asset of $17.3bn, representing 65.8% in assets of the newly launched product. 

Overall (for domiciled and non-domiciled funds), the most popular product remained private equities funds, accounting for $242.3bn, followed by infrastructure funds with $43.5bn.

This brought the total for private equity schemes (including infrastructure) to $285.8bn, which represented a 10.3% increase compared with the previous year. 

The specifics

Fund assets serviced in Guernsey increased to $412bn last year, when our most recent report was published – up 3.2% compared with the previous year. 

The number of serviced schemes stood at 1,065, while the total number of sub-funds reached 1,289. This was slightly down on the previous year, when there were 1,077 and 1,363 respectively.

For fund administration services across both domiciled and non-domiciled funds, as has been the case for a number of years, Northern Trust remained the largest by total net assets ($65bn) and by number of sub-funds (185). Aztec Group rose from fourth position in 2018 to second, with $50.7bn of assets. They were followed by Apex Fund Services, which ranked third with $44.2bn. 

Northern Trust also maintained its lead for custody and transfer agency services, with $25.7bn and $56.6bn respectively. BNP Paribas Securities Services preserved its second position in the custody table of serviced funds, with $10.7bn, ahead of Kleinwort Hambros, with $6.4bn. 

Among the transfer agents, Apex Fund Services maintained second position, with $44.2bn, and Aztec Group Partners climbed to third, with a total of $43.9bn. 

The ranking for auditors was unchanged last year, as has been the case for several years. PwC maintained its lead position, auditing 355 funds and sub-funds, ahead of KPMG, with 261 funds and sub-funds, and EY in third position. 

The positions in the ranking table are reversed for the auditors ranking by assets: KPMG leads with $132.9bn, followed by PwC with $111bn and Deloitte in third. 

Among legal advisers, Carey Olsen held onto its lead, offering legal advice to 798 funds, followed in second place by Mourant, with 157 funds, and Ogier in third.

On the market-share ranking of assets, Carey Olsen also took the top spot, with $307bn, ahead of Mourant. 

Among fund managers, the largest promoter/initiator of funds serviced in Guernsey was Apax Partners, with $37.2bn, while Cinven climbed to the second position, with $26.3bn, followed by Permira, with $19.9bn. 

BL70_landscape_LondonUK: funds industry faces continued uncertainty

Our analysis revealed continued concerns around uncertainty in the UK market, with a decrease in assets of 6.14% from last year. Despite this, and challenging market conditions in the UK, a number of service providers managed to perform well.

Fund assets of UK-regulated funds reached $1,909.1bn at the end of December 2018, down from $2,034bn in 2017, a decrease of 6.14%. The total number of funds and sub-funds reached 3,398, an increase of 3.9% from last year. 

The amount of new UK regulated stand-alone and sub-funds launched during the year amounted to total assets of $62.3bn from more than 200 sub-funds. From this, total assets of $42.7bn from circa 100 sub-funds were generated from the creation of entirely new schemes. 

Among UK-regulated fund structures, open-ended investment companies (OEICs) led, with the highest number of new funds launched and more than 120 sub-funds, followed by authorised contractual schemes (ACSs) with more than 30 sub-funds.

ACS schemes led, with total assets of $38.4bn, followed by OEIC schemes with total assets of $15.2bn. Equity funds represented the largest asset class by assets ($874.7bn) followed by mixed equity/bond funds ($417.7bn) and bond products ($245.5bn). 

The specifics

The top three positions for management company/AIFM among UK-regulated schemes, including UK UCITS and UK non-UCITS, placed BlackRock Investment Managers in top position ($146.4bn) last year, with St James’s Place second ($116.6bn) and Aviva third ($92.9bn). 

For fund administration services (fund accounting) across UK-regulated funds, State Street continued to rank in first place by assets ($461.1bn), followed by BNY Mellon ($328.2bn), while HSBC ($234.5bn) was ranked third ahead of Northern Trust.

The leading administrators by product types were State Street, with $286.1bn for OEIC, and $157.6bn for Unit Trust.

Among custodians, State Street moved up to first position, having the largest assets under custody with $443.3bn, ahead of BNY Mellon ($412.8bn) and Northern Trust ($263.8bn). 

BL70_landscape_LuxLuxembourg: healthy growth

The total net assets for regulated collective investment funds domiciled in Luxembourg increased to $5,351.9bn from $4,680.0bn last year. This represented an increase of 14.4% in US dollars and a euro increase of 16.7%, from €4,094bn in 2018 to €4,777.3bn in 2019.

Taking a closer look, nearly all products increased in assets during the year. The overall number of regulated sub-funds reached 14,991, a negligible increase of 0.6% on the 14,903 of the previous year.

In addition to the regulated structures, reserved alternative investment funds (RAIFs) and Luxembourg limited partnerships (LuxLPs) continued to enjoy a great increase and proved to be popular products for investment.

RAIFs doubled their total net assets to reach $122.2bn with 1,048 sub-funds, while LuxLPs reached $167.8bn with 1,303 sub-funds.

With this increase in popularity, RAIFs became of greater importance than SICARs in terms of assets and number of sub-funds.

More than 1,350 funds and sub-funds were launched during the year, reaching $175bn. Some 74% of these new sub-funds were invested in traditional investments, such as bonds, equities and mixed products. 

Alternative funds were in second position, with 18%, including alternative investments, private debt and private equity/venture capital.

Of the newly launched funds, as expected, ESG made considerable progress, covering 13% of assets and 10% in number of sub-funds.

As in the previous year, equity fund products were once again the most popular by assets under management ($1,647.9bn), exceeding bond funds, which had assets of $1,480.6bn. This represented an increase of 23% and 13% respectively. Equity funds were also the most popular product in terms of number of sub-funds, reaching 4,677 compared with bond funds, which had 3,294 sub-funds.

Ireland: 6.2% growth, funds industry continues to flourish 

Fund assets serviced in Ireland rose by a strong 6.2% in our last analysis, reaching $3,903.4bn at the end of June 2019, up from $3,677.1bn the previous year. The total number of sub-funds reached 9,249 (an increase from the 8,982 of the previous year).

Looking at Irish-domiciled funds only, the number of funds and sub-funds grew by 7.2% to 5,607 (from 5,229), reaching a market size of $3,001.1bn, an increase of 5.4% of total fund assets. 

The amount of new Irish schemes launched during the year rose to $27.3bn, with in excess of 200 sub-funds (this does not include new sub-funds launched within existing umbrellas). 

Altogether, 859 Irish groups and sub-funds were launched during the year, representing total assets of $117.8bn. 

State Street continued to be the largest player for administration, custody and transfer agency services, increasing its assets for each role – assets under administration $1,313.4bn, custody $1,186.3bn and transfer agency $1,109bn. 

In more detail, for fund administration services across both domiciled and non-domiciled funds, State Street Fund Services ($1,313.4bn) was followed in second place by BNY Mellon ($510.4bn), then Northern Trust ($509.3bn) in third and JP Morgan in fourth position with $345.1bn. 

Among custodians of serviced funds, the ranking remained unchanged, with State Street Custodial Services having the largest assets under custody ($1,186.3bn), ahead of BNY Mellon.

In the transfer agents’ ranking of serviced funds, State Street Fund Services secured first position, with total net assets of $1,109bn, followed by Northern Trust ($510.9bn) in second position and BNY Mellon ($389.6bn) in third place. 

For the market share ranking of legal advisers by assets, Matheson continued to rank first for Irish-domiciled funds, with $921.5bn, followed by Dillon Eustace, with $578.7bn, and William Fry, with $460.6bn. Among domiciled and non-domiciled funds, Matheson and Dillon Eustace were also first and second respectively, with $926.9bn and $587bn. However, Maples Group took third position with $536.6bn. 

Similar to previous years, money market funds remained the largest asset class, although they decreased by 1.5% to $579.6bn, followed by bond and equity products. Bonds were up by 6.1%, reaching $549.2bn, and equities rose by 9.0% to $539.4bn.

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