Recent years have seen an increasing number of specialist funds launched in Jersey, including property, private equity and hedge funds as well as so-called ‘alternative alternatives’.
Recent years have seen an increasing number of specialist funds launched in Jersey, including property, private equity and hedge funds as well as so-called ‘alternative alternatives’. They have used traditional fund authorisation processes but also in recent times the fast-track routes offered by the Expert Fund Guide, the Listed Fund Guide and now the Unregulated Fund regime.
Over the past few years Jersey has focused on modernising the regulatory system, in a progressive way to ensure a minimum of disruption, to provide a safe harbour for institutional and listed vehicles. Any fund with a high net worth or highly sophisticated investor base can enjoy a fast-track approval process or mere notification procedure that can enable it to be established in as little as a couple of hours.
The shift in focus to regulation of service providers rather than of funds has been welcomed by the industry because it reduces the burden on the Jersey Financial Services Commission, speeds up the authorisation process, ensures that regulation is at an appropriate level, and makes it possible to take on new business much more easily. This has enhanced the ability of Jersey administrators to compete for work internationally.
The capability of Jersey financial services providers is honed by the fact that the market is open to competition from companies elsewhere. All Jersey structures allow the use of non-Jersey service providers, with unregulated funds and very private funds (with fewer than 16 investors) needing no Jersey providers at all. There is a recognition that competition for service provision is now global and there is nothing that ties a fund promoter to obtaining their administration services from a particular jurisdiction.
This vigorous competitive environment is leading to a polarisation in the fund servicing industry between specialist local firms, which offer a bespoke service and tend to be ready to accommodate even small start-up managers, and the largest global groups, which have made huge investment in IT and have developed sophisticated international outsourcing networks that offer clients high-quality, seamless services at an advantageous cost as well as a single point of contact in Jersey.
But there remains plenty of room in the market for smaller providers that pride themselves on being more nimble and with the flexibility to adapt more easily to clients’ individual needs. Over the past few years a number of local fund service providers have been launched in Jersey, including spin-offs from existing administrators or new ventures by established firms such as trust companies.
This combination of a broad range of structuring and regulatory options and the development of a varied and sophisticated custody and administration industry is attracting increasing hedge fund business from Europe, assisted by frequent daily flights to London and connections to other capitals and business centres. For promoters who prefer to establish their funds in a more convenient time zone than the Caribbean jurisdictions, Jersey is aiming – with some success – to position itself as the jurisdiction of choice.
The extension of the full benefits of the Unregulated Fund regime from companies to unit trusts and limited partnerships will enhance Jersey’s ability to compete at least on an equal footing with rival hedge fund centres such as the Cayman Islands. The regime is the latest and, we think, the best attempt so far to provide a really viable alternative to Cayman – arguably the first such alternative in the past 20 years.
Daniel O’Connor is a senior associate in the corporate group with Carey Olsen in Jersey, specialising in investment funds
