Martin Paul (pictured right), Partner, Bedell Cristin, Jersey, and Richard Sharp (pictured below), Partner, Bedell Cristin, Guernsey, give their views on what might happen this year in funds
As we enter 2018, what’s the general health of funds in the islands?
The funds industry in the Channel Islands remains in good health. In Jersey, the private placement fund has been a success, and figures show that they continued to rise in popularity in 2017. Some ‘mega funds’, such as the SoftBank Vision Fund, have also been established, which highlights the Channel Islands’ expertise and capabilities.
A large segment of Jersey’s funds industry focuses on quasi-funds such as club deals and other investment syndicates – we’ve remained busy in this area, which is a positive indication for 2018.
As for Guernsey, total net assets under management and administration increased by 9.6 per cent in the year to the end of June 2017. In the past 18 months, Guernsey has also launched two structures – the Manager-Led Product (MLP) and the Private Investment Fund (PIF).
Aimed at circumstances where a special relationship exists between managers and investors, PIFs dispense with any formal requirements for information particulars, and involve very quick regulatory approval. PIFs have been widely welcomed and represented 14 per cent of Guernsey fund launches in the three quarters to the end of June 2017.
The MLP was introduced in expectation of Guernsey receiving a third-country passport under the AIFMD. It follows the approach of AIFMD in regulating a manager rather than the underlying fund structure, providing yet another structuring option for managers.
In the next 12 months, what do you think will be the biggest challenge(s)?
The biggest challenge is perhaps a general environment of uncertainty. There is economic and capital market uncertainty, with a long-in-the-tooth bull market, inflation on the horizon and central banks raising interest rates.
We also have uncertainty in the run-up to Brexit. The Channel Islands may need to slightly reposition how they fit into the wider financial world, but the extent of the impact is still unknown.
The Paradise Papers present a further challenge that we can’t ignore. We should keep reiterating the positive role that Jersey and Guernsey play in international finance and stress that they provide highly regulated and transparent centres for tax-neutral, cross-border investment.
And where will the greatest opportunity lie?
Opportunities lie in all of the challenges noted above. The scrutiny of offshore finance, and any re-evaluation of the Channel Islands’ relationships with Europe and the wider world, may eventually bring an increased awareness and understanding of Jersey and Guernsey’s positive role in the efficient international movement of investment capital, and in finding much-needed inward investment.
The transparency and substance being demanded play to the islands’ strengths, as they have always been early adopters of international regulatory initiatives and have, for many years, operated as well-respected and highly regulated jurisdictions.
They also have well-established reputations for corporate governance, and breadth and depth of industry capabilities.
Geographically, we will see opportunities arising in new markets, or in markets where there is still growth potential, such as the Middle East, Asia and other emerging markets.
Is there one thing that will dominate in funds this year?
Brexit – merging somewhat with questions arising from the Paradise Papers. A key question is what our market access will be. The need to secure market access and an acknowledgement of the legitimacy of offshore finance centres will be key issues in the context of Brexit, potential black listings and the tide of opinion.
We’ll all need to work together as an industry to achieve clarity on what our proposition and markets will be beyond 2018.