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Guernsey fund assets slip in third quarter as global market turmoil bites

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The assets of funds serviced in Guernsey have decreased by GBP5.8bn (2.8 per cent) during the three months to the end of September, primarily due t

The assets of funds serviced in Guernsey have decreased by GBP5.8bn (2.8 per cent) during the three months to the end of September, primarily due to the decline in global equity markets, taking the total value of funds under management and administration in the island to GBP201.4bn.

“These figures are expected given the performance of the global markets during this three-month period,” says Peter Niven (photo), chief executive of the island’s industry promotional body Guernsey Finance.

“It must also be remembered that the statistics are to the end of September and therefore don’t take into account the effect of further asset falls that we have seen across the world during October. However, the positive side is that I expect these reductions to have been regained off the back of improving market conditions by the end of the year.”

According to the Guernsey Financial Services Commission, the assets of Guernsey-serviced funds grew by GBP36.9bn, or 22.4 per cent, over the 12 months to the end of September. “Despite the volatility of global markets and the pressures faced by investment funds in many jurisdictions these figures demonstrate the robustness of Guernsey’s investment fund sector,” says Peter Moffatt, the regulator’s director of investment business.

Guernsey-domiciled closed-ended funds grew by GBP1.1bn (1.3 per cent) over the quarter and by GBP18.3bn (27.1 per cent) over the year since September 2007 to reach GBP85.9bn. The commission says that some aspects of the closed-end fund sector, such as private equity funds that are subject to directors’ valuations of investments, may be more insulated from market falls.

By contrast, Guernsey-domiciled open-ended fund assets fell by GBP8bn (10.8 per cent) over the quarter to GBP65.7bn, although they were up by GBP700m (1.1 per cent) in the previous 12 months. In addition to performance issues, the third-quarter decline also reflects the migration of an open-ended Guernsey-domiciled fund to another jurisdiction.

However, since administration functions for the fund are still provided from the island, it is now represented within the figures for non-Guernsey schemes for which some aspect of management and administration is carried out in the island.

The assets of such funds grew by GBP1.1bn (2.1 per cent) to GBP49.8bn and by GBP17.9bn (56.1 per cent) over the previous 12 months. Without the migration of the Guernsey-domiciled fund, this figure would also have declined in the third quarter.

“There is still a certain amount of new business coming through but clearly this is at a lower level than in the last two or three years, when we had record inflows, because of the lack of confidence in the wider markets,” Niven says.

“Investors certainly seem to be waiting for further falls in asset values before they feel the time is right to come back into the market. Therefore we are using this as an opportunity to take stock and make sure that we are in pole position for when confidence returns and business levels increase.”

Since the introduction of Qualifying Investor Funds in February 2005, 210 QIFs have received approval from the commission, including five in the third quarter (plus two since). A total of 126 registered closed-ended funds have received regulatory consent since the launch of the regime in February 2007, including 12 in the three months to the end of September, plus one subsequently.

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