Guernsey has weathered the financial storm and is now well placed to capitalise upon its reputation as a well-regulated jurisdiction of choice for the investment funds sector. Its reputation remains top-tier, as evidenced by the scrutiny and reviews it has successfully come through, including membership of the OECD’s white list alongside Jersey, the UK and US.
RBC Wealth Management has also come through the financial turmoil intact, with an enviable platform that remains in growth mode. Its parent RBC has a tier one capital ratio and a triple-A credit rating from Moody’s. Investors remain comforted by the strength and stability of RBC, which has been paramount to its success as a fund service provider during the market upheavals.
RBC’s Corporate and Institutional business segment, through its associated Guernsey company, Royal Bank of Canada (Channel Islands), is licensed and regulated as a custodian trustee and fund administrator, with a total of 84 staff providing services to funds in the Channel Islands.
Its best of breed approach means that regardless of where a fund is domiciled, its promoter and directors of the fund can be assured of the highest regulatory standards. The custodian trustee position has traditionally been overlooked by promoters, but recently it has played an increasingly important role in providing the transparency investors now expect from a fund.
RBC C&I continues to see new fund and custody business. In addition to traditional hedge fund and fund of hedge funds offerings, other alternative products require an experienced and well-established fiduciary overseeing their operation.
Private equity, property and more esoteric alternative structures such as funds investing in art, antiques, commodities and fine wines are growing in popularity as investors seek greater diversification of assets within their portfolios, in order to reduce the volatility of returns while maintaining outperformance. With its flexible approach toward such products, Guernsey should be a beneficiary of this new business.
Guernsey will continue to face ongoing challenges, such as finding a replacement for its zero-10 corporate tax regime, and it will co-operate closely with other jurisdictions to ensure it continues to prosper.
External threats such as the European Union’s proposed Alternative Investment Fund Manager Directive may also challenge Guernsey’s fund sector, but the industry and government will work to ensure the island benefits from the regulatory equivalence necessary to compete on a level playing field.
Other future initiatives from the international community will undoubtedly focus on the standards maintained by offshore centres. We will continue to respond with professionalism and ensure that our regulatory standards remain high, maintaining our reputation as a leading jurisdiction for financial services business.
Despite the challenges that Guernsey will continue to face in the future, members of the industry, the regulator and the political authorities are committed to ensuring that the jurisdiction remains capable of punching above its weight.
A prolonged low interest rate environment should ensure that alternative funds remain a compelling investment choice. Guernsey’s strong financial infrastructure and expertise including law firms, banks, accountants and non-executive directors mean the island is well placed to benefit from a growing appetite for offshore funds.
RBC C&I remains bullish that the Channel Islands as a whole will see further expansion in the funds sector, which is set to be one of our key growth areas during 2010.
Andy Creber is director and head of the custodian trustee department at Royal Bank of Canada (Channel Islands)