Zedra Funds Director Mark Cleary and Guernsey Head of Funds Damien Fitzgerald on why the Channel Islands have always faced robust competition from other jurisdictions for their share of the international funds market – and this will remain the status quo in the future
The bailiwicks of Guernsey and Jersey share some unique historical characteristics that have helped us to be competitive in the past – political stability, an independent government and strong links to the City and the British Crown among others.
But what got us here probably won’t be sufficient to propel the Islands to continued success in the future. To remain competitive, we will need to lean into new markets and products and embrace emerging technologies.
New market segments
Many of the conversations we have been party to over the past six months have shone a light on the growing importance of the first-time manager to the islands’ funds ecosystem.
Indeed, many of the enquiries we have dealt with at Zedra have originated from emerging fund managers and there seems to be a clear trend developing. This represents an opportunity and should be welcomed, but there will be some novel challenges to address to ensure a win-win scenario develops.
Some of the challenges include dealing with the economics of smaller fundraises, and the associated need for cost efficiencies and automation and to provide excellent customer experience.
There is also the need to provide solutions to enable robust fund governance and oversight, especially as compliance obligations continue to expand seemingly exponentially.
Getting to grips with the latter can be daunting for seasoned professionals, let alone first-time managers who are primarily focused on fundraising and investment strategy activities. Being able to lean on trusted partners becomes even more important.
New jurisdictions and investment themes and strategies will also play a role in sustaining the investment funds industry in the islands into the future.
Much has been written and said about so-called ESG strategies, but in our view, this acronym will eventually disappear as managers incorporate ESG factors into their decision-making process as part of their business as usual.
Impact funds and strategies are likely to accelerate and take their mantle in the years ahead and we should look to attract these types of funds to our islands.
They typically have a dual goal of seeking financial returns (which can be +/– market return) and making a specific social or environmental impact at the same time.
They can be particularly attractive to investors who associate strongly with purpose, specific causes and sustainable societal values.
Funds with specific or niche investment strategies or market segments also seem to be gaining momentum and are attractive to investors who want specific risks or allocations in their portfolio.
New products
Both the islands have been agile and responsive to demand for new products and solutions and we expect this to continue as a source of competitive advantage.
This is not new; both of the Channel Islands have a history of innovation in the investment funds space and they will need to remain on their toes to outmanoeuvre competitor jurisdictions.
This has recently been evidenced in Guernsey through the introduction of the Natural Capital Fund and in Jersey via the introduction of the Limited Liability Corporation (LLC).
Both islands also introduced the private fund product around the same time, and this has been a great success story.
The product landscape will continue to evolve as technology advances and client demand dictates, and both islands need to be ready to adapt and innovate.
Fund vehicles are merely shells and are human-made constructs. It is entirely conceivable that as technology evolves, new vehicles and constructs may be required – and we will need to be adaptable and responsive to such demand to remain competitive.
Emerging technologies
Many businesses still rely on packages such as Microsoft Excel to undertake important client work. Very rarely, if ever, will this lead to productivity gains for businesses and/or efficiencies for clients.
In particular, the use of spreadsheets to produce key documents for board consideration, such as business risk assessments, will rarely enable the dynamic management of risks or the exploitation of opportunities in real time.
In the future, boards of directors will demand tech-enabled solutions to help them manage whatever changes in circumstances they face, in real time.
Hence there is an opportunity for businesses in the funds ecosystem to develop holistic systems that can capture data, synthesize it and present it to boards in meaningful and condensed ways for their action via a user-friendly interface.
Such a solution would also resonate strongly with first-time managers, who may not fully appreciate the enormity of regulation and compliance in the islands, while simultaneously raising and deploying investment capital.
These are some of the key areas of the funds ecosystem that both islands remain fully focused on. Being innovative, adaptable and embracing change will be key to Jersey’s and Guernsey’s ongoing success in the international funds market.
FIND OUT MORE
• Mark Cleary: mark.cleary@zedra.com and +44 1534 844 321
• Damien Fitzgerald: damien.fitzgerald@zedra.com and +44 1481 881 433
This advertising feature was first published in the Funds Edition of Businesslife magazine in November 2023