Thu, 31/08/2006 - 14:12
Jersey's fund industry has enjoyed very strong growth over the past year, with the net asset value of funds under administration rising by 50 per cent to GBP156bn in the 12 months to the end of March. Part of the increase has been down to performance in the markets, but a significant proportion has been driven by the increase in the number of funds domiciled and/or administered on the island.
The lion's share of the growth in Jersey's fund business stems from the boom in alternative investments, with the surge in private equity, property investment vehicles and hedge funds - especially since the launch of the Expert Funds regime a couple of years ago.
As a core part of the financial services industry, the funds sector plays a central role in the five-year strategy plan recently adopted by the States of Jersey. This envisages the balanced development of the economy, using a controlled level of immigration over the next few years to contribute to the prosperity of the island. Alongside the targeting of high-quality fund promoters to boost growth in fund services, the authorities are also pushing ahead with measures designed to attract hedge fund managers to relocate to the island.
As many as 75 per cent of European hedge fund managers are based in London, but some are reconsidering their situation in the UK following the aggressive approach of HM Revenue and Customs, which is looking at issues such as management control and transfer pricing in relation to hedge funds. At the same time, Jersey is increasingly coming under consideration among managers looking to establish a European base for the first time and examining alternatives to London. There is increasing pressure on managers to ensure that their offshore structures are robust, from both a tax and corporate governance point of view, to protect their brand and reputation. Jersey, which has historically enjoyed a very good reputation among offshore centres for its experience and expertise in the provision of governance services, has seen the emergence of a specialist sector providing third-party services in this area.
Jersey benefits from the experience of its financial services practitioners, the breadth and depth of the industry's expertise, and the quality of its infrastructure, as well as its proximity and good connections to London and other European centres. The island also offers a quality of life hard to match elsewhere, an important consideration for individuals seeking an attractive family location and high standards of health care and education.
One of the most striking signs of Jersey's new status as a major fund services centre is the growth of links with the leading law firms in the Cayman Islands, still the world's leading domicile for offshore hedge funds. Following the arrival of Maples & Calder, which established a fund administration business four years ago and has since launched a legal practice, Jersey law firms such as Ogier and Mourant have established a presence in Cayman, while Maples' Cayman rival Walkers recently teamed up with Crills of Jersey to establish its own presence on the island.
These moves demonstrate the importance of having a presence in a quality offshore location ideally positioned to serve the growing European market. While the number of non-Jersey funds being administered on the island continues to grow, the trend is also for promoters to use Jersey in order to ensure that their structures can stand up to the increased scrutiny of the tax authorities.
By David Pirouet, is a partner with PricewaterhouseCoopers in Jersey
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