Flexibility and expertise promote Guernsey fund boom
For Guernsey's fund industry, 2005 was the most successful year yet, underlining the island's pre-eminent position as the jurisdiction of choice for a growing number of fund promoters.
And there's every reason for this unparalleled success to continue, as industry professionals work to develop and reform the island's legislative and regulatory framework in order to encourage further innovation.
Guernsey now has more than £100bn worth of fund assets under administration - with growth of 36% in 2005. Traditional funds are doing well, but growth in funds of hedge funds, hedge funds, private equity and property funds has been particularly impressive. The figures reflect both the prevailing favourable market conditions and the fact that Guernsey has now become a recognised global fund services provider.
From its administrative heritage stretching back four decades, Guernsey has in recent years begun to attract fund managers, enhancing its reputation for fund work and significantly adding to the pool of expertise on the island. There is also a highly developed infrastructure, including comprehensive specialist legal and accounting services, to support the industry.
Guernsey developed its own professional funds, Qualifying Investor Funds, early last year and has now introduced further flexibility by changing the definition of a qualifying investor, to further enhance its competitive position in the international marketplace.
The optimism about future growth and success is well reflected by the participants in this special report. One of the drivers for this enthusiasm is the root-and-branch review of the industry's legal and regulatory structure that has been conducted this year.
Guernsey's Department of Commerce and Employment and the Guernsey Financial Services Commission jointly commissioned a working party to reappraise the investment sector legislation and regulation, under the leadership of a respected Guernsey advocate, Peter Harwood.
Its terms of reference called on the working party 'to consider the investment industry in the Bailiwick of Guernsey and the conditions required for its continued prosperity'. The review evaluated the legal and regulatory framework, assessing how aspects of public policy relate to the industry, and the working party is expected to make recommendations for change in its report, which is due to be made public very soon.
It is also anticipated that the report will propose fundamental changes to the system of regulation, particularly within the investment funds sector, considerably reducing the number and scope of investment funds that are required to be regulated. Furthermore, it is expected that the working party will recommend that the focus of regulation should be on the licensed Guernsey administrator.
The working party is also likely to recommend other changes to facilitate the administration of non-Guernsey domiciled investment funds by Guernsey licensed administrators as a means of ensuring that Guernsey maintains a vibrant fund administration sector. All of this is very good news for Guernsey's thriving fund industry. The outcome of the review is sure to increase flexibility, boost confidence, and promote further growth in this highly dynamic area of the island's financial services business.
By Peter Niven, Chief Executive, GuernseyFinance
Please click here to read/download the full hedgeweek special report on Guernsey Hedge Fund Services 2006
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