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Eurozone crisis hits Guernsey funds but closed ended sector still grows

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Figures issued this week show that the value of investment fund business in Guernsey fell by GBP3.4 billion (1.2%) during the third quarter of 2011.

This decrease follows eight consecutive quarters of growth and takes the net asset value of funds under management and administration in the Island to GBP271.1 billion at the end of September 2011. However, this is still a rise of GBP27.9 billion (11.5%) compared to the end of September 2010.

Peter Niven, Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry – says: “From the initial crisis point of 2008 we have seen the improving markets conditions reflected through a steady and sustained recovery in the Guernsey funds business. However, the ongoing uncertainty surrounding the Eurozone has led to a loss of market confidence and this appears to have adversely impacted the total value of funds being managed and administered in the Island.

“Having said that, what we can see is that despite the overall fall in business levels, the value of closed-ended funds has once more continued to rise. Guernsey has established a reputation as the leading jurisdiction for these funds and in particular alternative asset classes, such as film, dispute resolution and renewable energy. This is the area where we continue to see the greatest number of new fund launches, although the pressure on our historic introducer community in the established markets of the UK and Europe is providing even greater reason for us to try and attract new business from further afield. Indeed, the emerging markets have been a significant focus of our activity during the last quarter and will remain a high priority in 2012.”

The new figures from the Guernsey Financial Services Commission (GFSC) show that Guernsey domiciled closed-ended funds grew GBP3.4 billion (2.8%) during the third quarter to reach GBP125.7 billion at the end of September. This represents a rise of GBP19.8 billion (18.7%) compared to 12 months earlier.

The Guernsey open-ended sector reached a net asset value of GBP57 billion at the end of September, which was a decrease of GBP1.6 billion (2.7%) during the quarter but an increase of GBP3.9 billion (7.3%) year on year.

Non-Guernsey schemes, where some aspect of management, administration or custody is carried out in the Island, fell by GBP5.1 billion (5.5%) during the quarter to reach GBP88 billion at the end of September 2011. Yet, this is GBP4.2 billion (5.1%) higher than the value at the end of September 2010.

Patrick Firth (pictured), Chairman of the Guernsey Investment Fund Association (GIFA), said: “It is disappointing to see a fall in the value of funds under management and administration during the third quarter. However, this is not unexpected given the global economic conditions and is somewhat tempered by the fact that it comes off the back of a sustained period of growth and the continued positive performance of the closed-ended sector. This illustrates that the core Guernsey product remains highly valued by the introducer community, as was in evidence at the very successful private equity seminar we held in London at the end of last month.”

Guernsey’s non-fund asset management and stockbroking sector reached gross assets under management of GBP85.1 billion at the end of September. This is a rise of GBP3.7 billion (4.5%) during the quarter and GBP13.9 billion (19.5%) during the previous twelve months.

The GFSC has also published statistics for the value of deposits held by banks licensed in Guernsey. This shows that exchange rate factors helped boost the value of deposits in sterling terms by GBP0.3 billion (0.25%) during the third quarter of the year to reach GBP114.2 billion at the end of September 2011. This represents a fall of GBP1.9 billion (1.6%) year on year.

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