Ernst & Young's Andrew Dann examines the factors that make Jersey an attractive relocation prospect for UK-based hedge fund managers.
The launch last year of the Expert Funds Guide has given a massive boost to Jersey's hedge fund industry by removing a number of key constraints on the domiciling and servicing of funds on the island.
But it has also proved the catalyst to set right a number of important misconceptions that have dissuaded promoters from using Jersey as a hedge fund centre.
First, it has been a perception that Jersey lacks administrators with the experience necessary to service hedge funds. However, there have been a significant number of hedge funds already on the island for many years. In total, about £23bn in assets is already in hedge fund structures either administered on the island or in Jersey domiciled vehicles that are administered elsewhere. That's a fifth of the total net asset value of Jersey funds.
Société Générale, Liberty Ermitage, Deutsche Bank and Standard Bank have had hedge funds for many years. Now, with the Expert Funds regime as well as the nondomiciled fund rules that provide the opportunity for administrators to service funds from other jurisdictions, increasing volumes of new hedge fund business are coming to the island.
In fact, this huge influx of new business has created a perception in the UK and elsewhere that there are capacity issues that could prevent Jersey administrators taking more work. Again this is unfounded, because there are a significant number of service providers that are looking to gear up in terms of both people and systems.
While there's always a difficult balancing act to match resources with the flow of new work, efforts are already underway to ensure that the capacity exists to accommodate more hedge funds and other alternative investment vehicles on the island. One way of resolving this issue has been found by administrators on the island who can call on extra resources through ties with very substantial hedge fund administration operations in Dublin.
As a result, Jersey is now very much in the minds of lawyers in London who specialise in hedge funds. While a recent survey of law firms indicated that the Cayman Islands are still the most popular domicile for hedge funds, Jersey is actually getting a mention. Two years ago it wasn't even on the radar screen, but now people are talking about us.
It's also been necessary to overcome misconceptions in order for Jersey to encourage hedge fund managers to relocate to the island. A number of our clients are considering setting up in Jersey, and two have already done so. There's no doubt that the quality of life and the various fiscal advantages make Jersey a very attractive location.
But there are a lot of other considerations, including schooling. The education system here is excellent, but there has been the perception that it's very difficult for new arrivals to find places for their children. In fact this is not the case - hedge fund managers have found no problem in getting their children into schools. This all goes to make relocation a very attractive proposition for managers currently based in the UK.
By Andrew Dann, Channel Islands Managing Partner, Ernst & Young.
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