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Guernsey’s key role in global investment

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Guernsey Finance’s Head of Technical, Sinéad Leddy, discusses a recent KPMG report that showcases Guernsey’s role as a facilitator of global capital flows and the benefits that this brings to Europe.


A new report published by KPMG has revealed the extent to which Guernsey’s funds industry facilitates the flow of capital globally, including GBP105bn of investment in Europe.

The report says that: “Guernsey is used as a conduit to facilitate the raising of capital from investors in different countries and subsequently to facilitate the deployment of this capital into global assets.”

It says that of the GBP155bn of funds under administration (excluding fund of funds) in Guernsey, 46 per cent of the assets are deployed into Europe (excluding the UK), 32 per cent are deployed outside Europe and 22 per cent are deployed specifically into the UK. It adds that 50 per cent of investors are located outside Europe, which demonstrates that global investors are comfortable using Guernsey structures. The key reason identified for this is the Island being well respected and transparent with an established regulatory track record.

The report concludes that “… these statistics support the notion that Guernsey is utilised as a facilitator of global investment and, as a transparent jurisdiction, can play a major role as cross-border investment continues to grow.”

ECONOMIC BENEFITS TO EUROPE

KPMG go on to state that Guernsey’s role in this flow of global capital means that it is a conduit for GBP25bn of inward investment into the UK from overseas investors and predominantly non-European investors. Furthermore, non-European investors in Guernsey funds contribute GBP51bn of investment to assets deployed in Europe as a whole. In addition, there is GBP54bn of investment in Guernsey funds from European investors that is deployed in countries that are different from the underlying investor country, thus demonstrating inward investment into individual European countries.

ALTERNATIVE ASSET HUB

KPMG’s research indicates Guernsey is a hub for alternative investment assets. Private equity is the dominant sector in the Guernsey funds market with 70 per cent of all assets being deployed into this sector, predominantly located in the UK and wider Europe.

Infrastructure and property each account for 8 per cent of the market. Infrastructure assets are predominantly located either in the UK (42 per cent) or outside of Europe (55 per cent). Property assets are predominantly located in the UK (37 per cent) or wider Europe (53 per cent).

CAPITAL MARKETS

One of Guernsey’s key strengths in facilitating global investment is the ability for Guernsey entities to quickly and easily access a wide range of international capital markets.

This includes not just the locally based Channel Islands Securities Exchange (CISE) but also the exchanges in
Ireland, Paris, Amsterdam, Frankfurt, New York, Toronto, Johannesburg, Australia and Hong Kong, as well as the London Stock Exchange (LSE).

Indeed, there are more Guernsey-incorporated companies listed on the LSE than from any other jurisdiction except the UK.
Many of these of are entities established for cross-border investment, including a significant number of funds.

CONCLUSION

The KPMG report showcases the way in which Guernsey acts as a facilitator of global capital flows and the benefits that this brings to Europe, and especially the UK, through investment into predominantly private equity and the development of property and infrastructure assets.

Fund managers and their investors should remember that a key reason for Guernsey’s position is its ability to offer quick and easy access to the international capital markets. The Island is well respected for its transparency, proven regulatory track record and expertise in listing entities of a wide range of stock exchanges globally.

An original version of this article was published in Investment Europe, May 2015.

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