Why are fund managers thinking about relocating to Jersey?
By Chris Griffin (pictured) & Robert Milner – Recently, the unprecedented combination of Brexit and Covid-19 has generated a sharp rise in the number of fund managers contemplating a move to Jersey. In this article, Chris Griffin and Robert Milner, funds partners in the Jersey office of leading offshore firm Carey Olsen, explore the reasons behind the increase in interest.
Advantages of Jersey
Jersey is an increasingly popular choice of jurisdiction for fund managers who wish to either relocate key principals, or establish a physical presence to benefit from neutrality and certainty from both a political and tax perspective. The Island also offers highly developed infrastructure, a familiar legal system and an established and internationally recognised regulatory framework.
The main benefits of a fund manager establishing a presence in Jersey are:
• A fund management company relocating to Jersey would be subject to a rate of Jersey income tax of zero percent. Jersey limited partnerships can also be used as management vehicles, and these are recognised as tax transparent in most relevant jurisdictions.
• Neither Jersey companies carrying on fund management, nor individuals resident in Jersey receiving capital distributions from such companies (or carried interest in limited partnerships) are subject to any form of capital gains tax.
• The maximum rate of income tax for individuals in Jersey is 20 per cent of their worldwide income. There are no personal capital gains, inheritance, gift or other “wealth” taxes in Jersey.
• Under the Island’s “High Value Residency” scheme, an individual relocating to Jersey is able to reduce their tax liability to 20 per cent on the first GBP725,000 of worldwide income and 1 per cent on other worldwide income, provided they can demonstrate they will be able to contribute GBP145,000 per year in personal income tax and that their annual worldwide income is comfortably in excess of GBP725,000 per year.
Jersey is committed to the highest standards of financial regulation. In summary:
• If the manager is managing only “private funds” (i.e. less than 50 investors/formal offers) and each fund obtains approval as a “Jersey Private Fund” (48 hour turnaround), then the manager will not be required to be regulated in Jersey unless the fund is marketed to the EU.
• If the manager is managing “public funds” (i.e. over 50 investors/formal offers) then it will require a “fund services business” licence from the Island’s regulator, the Jersey Financial Services Commission (the “JFSC”). Approval typically takes six weeks from the date of submission.
• A fund management company seeking to avoid significant initial expenditure on back office support can take advantage of the JFSC’s “managed entity” regime, whereby a locally regulated administrator provides regulatory and compliance support. An added advantage of this regime is that, provided the relevant funds meet certain criteria, the management company is subject to a reduced regulatory capital requirement.
• If a regulated Jersey fund manager operates any managed accounts alongside its main fund strategies, it will be able to take advantage of Jersey’s “Qualifying Segregated Managed Accounts” regulations which remove the need to comply with any additional regulatory requirements.
EU Market Access
Jersey is outside the EU, so a fund manager based on the Island is not subject to all the onerous provisions of the Alternative Investment Fund Managers Directive (AIFMD) (such as the remuneration disclosure rules), but can still be marketed to EU-based investors under individual Member States’ national private placement regimes.
Jersey is on the list of the first non-EU jurisdictions to receive the AIFMD “passport”. When this becomes available, Jersey managers will be able to “opt in” for full AIFMD compliance.
Connectivity and Infrastructure
There are frequent flights between London every day, and with journey times of less than an hour, it is possible to live in Jersey and attend meetings in the City.
Jersey has long been home to a substantial alternative fund management industry and has a large number of experienced service providers and professionals across accounting, administration, depositary services, governance, fund management operations and tax services.
Jersey offers an outstanding quality of life, and a plethora of things to do. Sport plays a huge part in Island life, and the high quality facilities include: six golf courses, an array of water sports, a 96-mile cycling network and all types of walking terrain suitable for every age and ability.
The Island is well-served for schools, having both selective and non-selective fee-paying States and private schools. With modern facilities and low pupil-teacher ratios, Jersey students consistently outperform their mainland counterparts.
Factor in ringing endorsements from leading international bodies, including the OECD, IMF and the EU, in relation to Jersey’s well-regulated business infrastructure and its compliance with global standards on tax transparency and information exchange, then it is no wonder the Island makes complete sense as a home for global fund managers.
Partner, Carey Olsen
Chris Griffin has broad experience of both general international corporate and funds work with particular expertise in private equity and hedge funds, having spent 10 years in the City at two leading international firms and a large hedge fund. Chris advises on all aspects of fund and corporate transactions, including the legal and regulatory aspects of fund launches, and joint ventures. He also spearheads Carey Olsen’s crypto practice, having advised on a series of token offerings/ICOs, crypto funds and crypto exchanges.
Partner, Carey Olsen
Robert Milner is one of Jersey’s leading funds lawyers. He acts for a wide range of boutique and institutional fund managers and has extensive experience in establishing private, expert, unregulated and listed Jersey funds. He has particular expertise in establishing fund manager vehicles and structures, including migrating fund managers to Jersey from other jurisdictions.