Funds commentary

Jersey funds sector adapts to market demand

Richard Thomas, chairman of the Jersey Funds Association, writing exclusively for BusinessIFC.com, looks at the priorities for the Jersey funds sector 

Jersey’s funds sector continues today to be one of the most prominent and successful specialist sectors among the island’s range of financial services. The sector has continued to perform strongly through 2009, showing resilience in difficult market conditions – something that has been aided by a focus on attracting increasing levels of alternative investment funds business while always maintaining appropriate regulatory standards. 

In order to compete for private equity, venture capital, property, hedge and other alternative investment fund business, the island has over the years needed to update its regulations and the industry - led by the Jersey Funds Association and the regulator, the Jersey Financial Services Commission – has consulted extensively with that objective in mind. 

The Expert Fund Regime of 2004, which featured a streamlined approval process, was a first step in enabling Jersey to make significant inroads into the alternative investment fund market. Regulations have since continued to evolve, with the Non Domiciled Fund Guide introduced later in 2004, enabling Jersey functionaries to act for non-Jersey funds and allowing the island to compete directly for the servicing of structures domiciled outside the island. 

The launch of unregulated fund classifications in 2008 was another move that had been keenly anticipated by many professionals, particularly private equity and hedge fund managers who invariably want a fund set up and ready to trade in short timescales with no local regulatory input.  Two unregulated funds products were introduced - the Eligible Investor Category and the Exchange Traded Category. 

The overall result is a funds landscape that offers a full spectrum of solutions, from highly regulated retail funds right through to lighter touch options for more sophisticated investors.  The island is also encouraging specialist fund managers and family office professionals to consider relocating their business to the island. This has led to the arrival of some specialist hedge fund managers from London and elsewhere. 

The ongoing evolution of Jersey’s regulatory model sends a clear message to the international financial services community that the island is looking to the future and intends to remain a serious competitor for funds business. 

Over the years, Jersey has earned a reputation for its ability to adapt and tailor its services according to the prevailing markets and for demonstrating its characteristic strengths of stability, flexibility and reliability. Maintaining stability, through high standards of supervision and responsible and proportionate regulation is crucial for the continuing success of Jersey’s funds sector and in retaining high levels of investor confidence. 

The island has consistently received third party endorsement from a number of global bodies. In 2009, both the OECD white list recognition of Jersey’s compliance with international tax transparency standards and the IMF’s ranking of Jersey in the top division of international centres after its review of Jersey’s “comprehensive and robust” framework for countering money laundering and terrorist financing and its improved regulation of funds business following the transition from product authorisation to service providers supervision, demonstrate a stable platform for sustainable business growth in the island. 

Jersey has also been careful to monitor evolving international regulation and has worked hard to analyse issues emanating from international bodies. The issue of the EU Alternative Investment Fund Managers Draft Directive was a case in point, with industry, government and regulator bodies all pulling together to ensure that Jersey is able to play a role in the development of appropriate global regulation of the alternative investments sector. 

Flexibility is also vital in meeting market demand and the industry and the regulator are continuing to look at ways to enhance the funds regime. While Jersey’s funds industry can take heart from its performance during a tough trading period, there is certainly a need to consider carefully the challenges ahead and Jersey will need to call on its ability to remain flexible, innovative and to adapt quickly. 

Reliability is also vital and Jersey is fortunate to be backed up by a first class infrastructure that features a highly skilled specialist workforce and a network of more than 100 fund service providers, including administrators, managers, law and accountancy firms. The depth of expertise has become increasingly important which is why nurturing local talent is central to the industry’s long-term prospects. There is a variety of funds-related career opportunities available in Jersey. Moreover, the desire to support local talent has led to the launch in 2009 of an official funds sector qualification.  The Certificate in Fund Administration has been designed for new entrants into the fund administration industry, for those wishing to make a transition from a related industry into funds and for professionals wishing to gain a holistic view of the industry. 

Jersey has always been adept at tailoring its services to market conditions. The funds sector has led the way with its approach and will continue to do so to ensure that its offering reflects the needs of the ever-evolving global marketplace, establishing Jersey as the preferred domicile for alternative funds and as a leading international fund administration centre.