<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Jersey's 'light touch' fund domicile regime was introduced last year with the aim of making the island a more attractive domicile for hedge funds.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
While the regime has undoubtedly been critical in raising Jersey's profile as a hedge fund centre, its introduction has also had wider-reaching effects and has resulted in a large inflow of hedge fund business, and not purely of funds domiciled in the jurisdiction. So what is the attraction between the hedge fund industry and Jersey?
Jersey's position is significantly different to that of the Cayman Islands in a hedge fund context. Whilst Jersey's fund domicile regime is analogous with Cayman's, the focus is also on servicing the permanent establishment issues that are in the forefront of asset manager thinking, driven by regulatory, corporate governance and tax imperatives.
Managers have to take these factors into account when considering their overall business strategies to ensure that they remain competitive. They are increasingly looking to jurisdictions like Jersey that have ease of access, a heavyweight professional services sector and a pool of experienced investor relations and asset management specialists.
Domiciling funds in the same jurisdiction as asset management and servicing entities is a natural corollary. Jersey's strong corporate governance and regulated environment, plus its accessibility to Europe and tax advantages, make it a natural fit for the hedge fund manager.
This model also fits well with Channel House, an independent financial services group established in 1977. It differs from many other players in the industry by providing not only 'traditional' services such as fund domiciliation, administration and fund board services, but more tailored services such as fiduciary and permanent establishment work. As a result, it attracts larger, often institutional fund managers, while some smaller or cost-conscious organisations may go elsewhere.
Jersey enables a lot of things to be done in one place, and the size of the financial resources sector means that Jersey has strength in depth to deliver City standard services within easy reach of London airports. Channel House has structured its business and hired quality people to enable the group to deliver across the range of services required by hedge managers. Today, Channel House's hedge fund unit offers a wide variety of services to around 18 hedge fund groups, managing from USD100m to USD5bn. This is typical of the range of businesses found in Jersey. Hedge fund firms operating out of Jersey and managing USD20m or USD30m are very welcome, but are untypical.
This is also reflected in a preponderance of single manager funds using Jersey as opposed to funds of hedge funds. Bundling together hedge assets and distributing them to a wider client base will not in Channel House's view be Jersey's primary focus. Although some Jersey-based players, such as Liberty Ermitage and Ashburton, do this very well, most organisations will probably want an EU compliant platform and look to Dublin or Luxembourg as a natural domicile. Channel House has already facilitated the set up of permanent establishments for a number of hedge fund groups, and there is currently a high level of interest both from existing UK-centric businesses and from US inbound entities, so significant growth is expected.
By Richard Boléat
Channel House Financial