Recent indications of growth in the Channel Islands funds sector are rooted in alternative investments, bespoke closed-ended funds and confidence in the islands as reliable jurisdictions, say practitioners – and there are signs that further expansion is in prospect.
According to the Guernsey Financial Services Commission, the aggregate asset value of funds domiciled or serviced on the island increased by GBP2.7bn (1.5 per cent) during the final three months of last year, a second successive quarter of growth that took the total value of funds business in the island to GBP184.2bn at the end of December.
Although there was an overall decline in fund assets of GBP16.2bn (8.1 per cent) from the end of 2008, the signs of recovery have been hailed in the islands as cause for cautious optimism.
“We are seeing increasing interest from sponsors and promoters looking to establish alternative investment funds,” says Ben Morgan (pictured), a partner in the corporate and finance group with law firm Carey Olsen. “Guernsey has positioned itself extremely well for a recovery in this sector, having established a solid reputation over the years.”
“In the last quarter of 2009 Carey Olsen acted on the establishment of Better Capital’s listed fund, and we have a number of private equity funds scheduled for launch in the next three months as well as further capital raisings.”
Ian Clarke, managing director of Intertrust Fund Services (Guernsey), argues that Guernsey seems to be benefiting from interest in assets classes perceived as solid, and from a decline among less regulated financial jurisdictions.
“Investors are looking at better-regulated jurisdictions like the Channel Islands and taking comfort in them,” he says. “We’ve been very busy with enquiries and in fact launched London Centra Residential Recovery Fund, a UK property fund, to great acclaim at the start of the year.
“We are also seeing growth in other alternative asset classes. The general feeling is that there is now more room for businesses to invest, they are finding it a bit easier to raise funds and the returns on, for example, wine and timber, are seen as more solid.”
The Jersey Financial Services Commission says net fund assets under administration in Jersey increased by GBP3.1bn to GBP166.2bn during the last quarter of 2009, although the year-end total was down 31 per cent from GBP241.2bn 12 months earlier.
There are additional signs of recovery in the unregulated funds sector, particularly in exchange-traded unregulated funds, according to Rob Milner, a senior associate with Carey Olsen in Jersey. Unregulated funds, which were introduced in Jersey in 2008, are not required to file accounts with the regulator.
“We are seeing more and more interest in using Jersey funds listed on the Channel Islands Stock Exchange, and as a pan-island firm we’re delighted about the recent growth in both islands,” Milner says.
Guernsey-domiciled closed-ended funds accounted for net assets of GBP85.4bn at the end of December, a rise of GBP4.3bn (5.3 per cent) during the quarter but a decline of GBP6.1bn (6.7 per cent) year-on-year.
Open-ended fund assets amounted to GBP50.7bn, down by GBP800m (1.4 per cent) during the final three months of 2009 and by GBP12.9bn (20.3 per cent) compared to twelve months earlier.
