jersey 2016 - HFM Global

HFM WEEK
S P E C I A L
R E P O R T
JERSEY 2016
SUPPORT
A well-developed service provider community
EXPERIENCE
High calibre managers operating in global markets
REGULATION
A strong and well-structured regulatory framework
FEATURING Fairway Group // Jersey Finance // Mourant Ozannes //
Ogier // PwC // Systematica Investments
JERSEY 2016
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T
INTRODUCTION
he choice of home jurisdiction for your investment management
entity is a significant, but challenging decision for any hedge fund
manager. A number of factors drive the decision. Hedge fund
manager structures have become increasingly complex over the
years and the days of a single manager entity based in London and
solely regulated by the FCA seem a long time ago.
Over time, we have seen nearly every form of legal structure
and combination of regulatory profiles as the industry sought
to adapt to the rapidly changing legal, regulatory and financial
environment facing the hedge fund industry.
So what are the key factors for a hedge fund manager in
choosing its home jurisdiction? Looking back over our experiences in setting up Systematica
at the end of 2014, I would say that stability and working with a regulator that is willing to
engage with your particular circumstances, are certainly two key areas.
Our particular group structure is relatively complex and utilises limited partnerships,
corporates and branch entities across numerous jurisdictions. We face several regulators and
are registered or working with each of the FCA in the UK, SEC/CFTC/NFA in the US,
FINMA in Switzerland, MAS in Singapore, CBI in Ireland, CSSF in Luxembourg and the
JFSC in Jersey.
Obtaining regulatory approval therefore involves working with the regulator in order
for them to understand your group, business and the regulatory issues they may pose.
Throughout the process of setting up in Jersey, the JFSC were supportive, understanding and
very commercially minded in their approach to us. Furthermore, Jersey’s managed account
exemption rules which came into effect at the close of 2014 were first conceptually borne
from discussions with us about the launch of Systematica. The speed with which the JFSC
addressed our applications and particular circumstances was also impressive and a clear sign
of the two-way open discussion approach that is in operation. The application process is
genuinely fast and efficient – we submitted our applications at the end of September 2014
and had our licences for all three Jersey regulated entities by December 2014.
Marketing our existing Cayman funds is not only encouraged by Jersey regulation, but
the regulation has specific aims to make this process as fluid and simple as possible. As a
Jersey-based investment manager, under AIFMD we are a non-EU AIFM managing non-EU
AIFs. This means, with respect to marketing as a Jersey manager, to the extent possible under
AIFMD, the private placement regimes have been retained. In addition, now that Jersey has
been approved under the passport regime, Jersey-based managers will get the best of both
worlds – accessing non-EEA/EU investors with non-AIFMD structures and accessing EEA/
EU investors using private placement regime and the passport when available.
One of the key factors for us during our set up process in Jersey, given our Geneva-based
presence, was MOU that the JFSC concluded with FINMA that allowed to approve our
Geneva branch. I know that these discussions were lengthy and complex, but both regulators
were committed to reaching a timely resolution.
To summarise, Jersey is an ideal jurisdiction to be based in. From our own experience,
we can confirm that it is home to a fast, efficient and commercially minded financial
environment with a strong regulator that is growing from strength to strength. Moreover, the
Jersey finance community is also a welcoming and supportive family. The efforts of Jersey
Finance, Locate Jersey and the JFSC are rapidly building an excellent regulatory and financial
environment in which global hedge fund managers can base themselves.
Ben Dixon
HFMWeek is published weekly by
Pageant Media Ltd ISSN 1748-5894
Printed by The Manson Group
© 2016 all rights reserved. No part of
this publication may be reproduced
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is general counsel at Systematica Investments Limited and former legal counsel at BlueCrest.
He qualified as a solicitor in September 2003 with Allen & Overy in London, where he worked in
the corporate and mergers and acquisitions department. Dixon graduated from Queens' College,
Cambridge University in 2000 and holds a MA (Cantab) Law. He undertook his LPC at Nottingham
Law School in 2001.
H F M W E E K . CO M 3
CONTENTS
JERSEY 2016
06
FINANCIAL SERVICES
A TOP-TIER HEDGE FUND MANAGEMENT
JURISDICTION
14
FUND MANAGEMENT
16
Geoff Cook, CEO of Jersey Finance, investigates Jersey as an
emerging finance centre and highlights how the island continues
to go from strength to strength
09
OPERATING IN JERSEY
Philippa Davidson of the Fairway Group, discusses the benefits of
doing business in Jersey and provides a detailed breakdown of the
independent owner-managed group
10
FUND OPPORTUNITIES
JERSEY RISING
Tim Morgan of Mourant Ozannes discusses the evolution and
developments of Jersey’s offering for hedge funds, across manager
location, fund domicile and related fund services
4 H F M W E E K . CO M
FUND OPPORTUNITIES
JERSEY – A LEADING EUROPEAN CENTRE FOR
HEDGE FUND MANAGERS
Debbie Payne, tax director at PwC, explains the growing reputation
of Jersey in the hedge fund industry and highlights the benefits of
domiciling on the island
FUND OPPORTUNITIES
WHY RELOCATE TO JERSEY?
Simon Schilder, partner at Ogier, examines the trend of hedge fund
managers transferring to Jersey and how to retain momentum
JERSEY 2016
A TOP-TIER HEDGE
FUND MANAGEMENT
JURISDICTION
GEOFF COOK, CEO OF JERSEY FINANCE, INVESTIGATES JERSEY AS AN EMERGING FINANCE CENTRE AND HIGHLIGHTS HOW
THE ISLAND CONTINUES TO GO FROM STRENGTH TO STRENGTH
D
Geoff Cook joined Jersey
Finance as chief executive
in January 2007. In promoting
the finance industry of
Jersey, Geoff visits many of
the world’s leading finance
centres on a regular basis,
highlighting the strengths
of Jersey as a financial
jurisdiction. Previous to
his role at Jersey Finance,
he was head of wealth
management for HSBC Bank
Plc, based in London.
6 H F M W E E K . CO M
espite forecasts that 2016 looked set globally to be another year of uncertainty and
volatility, panellists at last month’s Jersey
Finance Annual London Funds Conference, for which HFMWeek was a media
partner, were positive about the future of
Jersey’s alternative funds business.
In particular, the line-up of experts speaking and participating in our panel sessions agreed that, as regulation
continues to shift and markets evolve, the hedge fund
manager community’s growing focus on governance,
substance and reputation is actually presenting opportunities for Jersey to build on its well-established fund
servicing platform, affirming itself as a major centre for
fund management.
A PROMISING JURISDICTION
In the world of regulation and tax transparency, the Base
Erosion and Profit Shifting (Beps) project progresses
with surprising speed, AIFMD trundles on, the implementation of Mifid II has been postponed yet again to
January 2018, and the Common Reporting Standard
now looms large, adding significantly to the complex tax
information sharing burden presented by Fatca.
Speakers at the event were quick to highlight that, even
against this uncertain backdrop, 2015 proved to be another strong year for Jersey’s funds industry, with business flows suggesting that the international funds community continues to respond well to Jersey’s approach to
market developments.
At the end of 2015, the net asset value of regulated funds under administration in Jersey increased to
£226bn, the third-highest level since December 2008,
while practitioners are reporting a strong pipeline of
business across the alternative asset classes as we head
into 2016. Not only is hedge fund business on the rise,
but Jersey is also seeing growth in the other well-established and complementary real estate and private equity
asset classes, as well as in emerging areas including debt,
credit and infrastructure funds.
Meanwhile, the value of total funds under investment
management in Jersey rose to £21.6bn at the end of the
year, with hedge fund management figures now placing
Jersey in the top 10 centres globally.
As panellists at this year’s conference suggested, Jersey is earning a good reputation beyond fund servicing
as shifts in regulation and changes in attitudes towards
reputation are prompting managers to look closely at
FINANCIAL SERVICES
their reporting requirements, corporate governance, jurisdictional substance and operating models.
The AIFMD and the Beps project in particular are
encouraging managers to reconsider their business models, providing Jersey with real opportunities as a ‘substance’ jurisdiction offering genuine asset management
expertise. The direction of regulatory traffic, including
AIFMD and Beps, points to a real opportunity for those
jurisdictions such as Jersey that can provide robust crossborder investment platforms and demonstrate a mature
response to regulatory change.
Moreover, despite global uncertainty, an ageing global
population that needs to save together and a move by
consumers away from traditional banking products,
means there remains a huge long-term opportunity for
asset managers worldwide. Preqin figures for 2015 also
show that far more hedge funds launched (829) than
closed (695). As far as Jersey is concerned, the key will
be in ensuring it captures the opportunities that these
market conditions present.
The indications are it is doing just that. With the additional support of government inward investment body
Locate Jersey, the jurisdiction is witnessing a rise in the
inward migration of hedge fund managers. There are now
126 fund promoters operating in Jersey, representing a 113% increase since 2011, providing
evidence of a significant and exciting trend towards inward migration of hedge fund managers
to Jersey.
proving crucial, meaning that Jersey is well set-up to cater for
managers targeting, for example, the rapidly growing
Asian hedge fund market.
It was pertinent that at this year’s conference, panellists agreed that the AIFMD is still considered the biggest
regulatory issue for fund professionals but that, while the
trend is towards a more exacting regulatory environment,
the sort of flexibility that Jersey offers remains key for alternative managers.
It is noteworthy, for instance, that 2015 saw a number
of brand new fund promoter clients move to Jersey, availing themselves of the opportunities provided by its very
private and private placement fund regimes and many operating within the AIFMD’s sub-threshold space
– a perfect environment for start-up managers,
looking to incubate new strategies, but without
the scale to meet the higher regulatory costs of the
AIFMD.
FLEXIBILITY
There are a number of reasons for Jersey’s ongoing success in hedge fund servicing and rapidly
growing management sector, including its close
connections with the UK and being subject to
more certain economic, political and regulatory
conditions than other fund domiciles.
Jersey’s desire to embrace technology and FinTech, its long-standing expertise and its focus on
innovation is also proving attractive to managers
who are faced with increasingly complex due diligence, reporting and efficiency challenges.
In addition, Jersey, as a non-EU ‘third country’,
has succeeded in positioning itself strongly when
it comes to accessing European investor capital
under AIFMD, offering a range of options.
The ability for managers to use ‘business as
usual’ NPPRs through Jersey to access Europe under the
AIFMD is working well, with figures at the end of 2015
revealing that 230 Jersey funds are now being marketed
into Europe through NPPRs, a 12% increase compared
to June 2015, whilst 104 alternative fund managers had
been authorised, up by almost a quarter over the previous six months (24%).
In addition, it was welcome news that last year the European Securities and Markets Authority (Esma) recommended that Jersey should in due course be granted an
EU-wide passport. That Jersey has been recommended in
this way is a strong endorsement, positioning it ahead of
the field.
At the same time, an ability to offer a ‘rest of the
world’ regime outside the scope of the AIFMD is
GOVERNANCE
As well as Jersey’s position in relation to the
AIFMD being a cause of strong appeal for managers, the OECD’s Beps project has also put the
issue of ‘substance’ – an ability for a manager to be
able to demonstrate a genuine physical presence
in a jurisdiction – at the heart of the decisions being made by managers.
It is likely to place a greater emphasis on hedge
fund managers demonstrating substance in the
jurisdictions in which they operate. With an ability to boast a mature infrastructure of fund sector
firms, a healthy corporate governance ratio set
against its 1,300 regulated funds, and substance
having been an integral part of its success as a finance centre to date, Jersey is well-placed to help
hedge fund managers meet the challenge of demonstrating substance in a new highly complex environment.
As a result, Beps has the potential to encourage more
and more hedge fund managers to relocate and build future management substance in Jersey, a trend that is already becoming a reality as recent figures suggest.
Led by the AIFMD and now Beps, this new regulatory world is proving something of a challenge for some
centres, but Jersey’s proactive approach to transparency,
governance, compliance, reporting and substance is positioning it strongly, both as a sustainable hedge fund
servicing and management centre. The confidence that
is clearly being put into Jersey’s platform and as a result
means that this inward trend for hedge fund manager migration is expected to continue. n
JERSEY, AS A NONEU ‘THIRD COUNTRY’,
HAS SUCCEEDED IN
POSITIONING ITSELF
STRONGLY WHEN IT COMES
TO ACCESSING EUROPEAN
INVESTOR CAPITAL UNDER
AIFMD, OFFERING A RANGE
OF OPTIONS
”
H F M W E E K . CO M 7
FUND MANAGEMENT
OPERATING IN JERSEY
PHILIPPA DAVIDSON OF THE FAIRWAY GROUP, DISCUSSES THE BENEFITS OF DOING BUSINESS IN JERSEY AND PROVIDES A
DETAILED BREAKDOWN OF THE INDEPENDENT OWNER-MANAGED GROUP
Philippa Davidson
has built up a strong fund
administration background
together with significant
regulatory experience for
providing administration,
manager and trustee
services to all fund
classifications offered in
Jersey. She has also gained
considerable expertise
in governance and risk
management and can
provide significant support
and oversight for all types
of fund structures. Pippa’s
qualifications include an
International Compliance
Association Diploma and
a Fund Administration
Certificate practice.
HFMWeek (HFM): What unique services and products does the Fairway Group provide?
Philippa Davidson (PD): We have a full services offering on the island to corporate and fund clients, including
administration, provision of directors, Trustee, AIFM services and manager of managed entity services (allowing us
to incubate other regulated businesses and provide office
infrastructure to start-ups). We actively provide all of these
services to clients and therefore can be bespoke in our offering on a per structure basis.
HFM: What are the core principles
that underpin the Fairway Group?
PD: Independence. We are a local owner-managed business which
maintains its entrepreneurialism and
provides a more personal and tailored
service to our clients. We always seek
to add value for our clients and stay
one step ahead of their administration needs so that they can focus on
making their own business ventures a
success. We actively seek to cross introduce clients and intermediaries so
that we can be a value add partner, this
is something the clients seem to really
appreciate in the current markets.
In support of this, Fairway Funds has recently expanded
its operation to include a bespoke fund management system allowing us to deliver sophisticated reporting to our
clients. The reporting can be branded for each investment
manager and delivered to investors in a number of ways,
including hosted websites where investors can pull relevant information. The implementation of this system has
accelerated our business and will allow us to offer an efficient and competitive service in the hedge space.
HFM: What are the key advantages
of operating in Jersey?
PD: Firstly, the diversity of clients
that come to Jersey and the range
of products and fund classifications
available to those clients. Jersey continues to offer a competitive environment for funds and attracts both
start-up managers wishing to launch
their first fund, and high calibre experienced managers that compete in
the global markets. The funds market
in Jersey is very buoyant and levels of
new funds are back up at pre-2008
levels, which is great for our industry.
Over recent years, the island has built
further on its reputation as a leading
offshore finance centre and also on
the high level of expertise and diverse skills available in the
finance industry.
We try to create a positive experience for clients, many
of whom continue to create repeat business for the island
and some we have worked with have also set up Jersey offices for their regulated businesses. This is a great thing to
be involved in and furthers the success of our industry and
the number of fund managers choosing to use the island.
As a business, we work with Jersey Finance and the regulator as much as possible and stay involved in consultation papers or working groups about our financial services
industry. This ensures not only that we are able to maintain best practice, but also that the impacts and views of a
smaller organisation are considered. Both Jersey Finance
and the regulator locally contribute hugely to Jersey’s place
as a top financial services jurisdiction. ■
JERSEY CONTINUES TO
OFFER A COMPETITIVE
ENVIRONMENT FOR
FUNDS AND ATTRACTS
BOTH START-UP
AND HIGH CALIBRE
EXPERIENCED MANAGERS
”
HFM: What are the next steps for the Fairway Group
and how do you stay ahead of the competition?
PD: To stay honest to our independence and transparent
with our clients. To ensure that we deliver a personal, helpful and consistent service that is not always fee-driven but
aims to support our clients and be proactive.
We thoroughly enjoy new challenges as a team and
therefore particularly thrive on new types of structure or
asset classes. Recently, we have worked on a number of
new FinTech related structures, which are very interesting
and have expanded our business to fully service the hedge
fund market.
We have also been working with strategic partners in
Jersey to explore the development of a new product for the
hedge fund industry and are very excited about what this
could offer.
H F M W E E K . CO M 9
JERSEY 2016
JERSEY RISING
TIM MORGAN OF MOURANT OZANNES DISCUSSES THE EVOLUTION AND DEVELOPMENTS OF JERSEY’S OFFERING
FOR HEDGE FUNDS, ACROSS MANAGER LOCATION, FUND DOMICILE AND RELATED FUND SERVICES
Tim Morgan joined
the market leading team
of eight funds partners at
Mourant Ozannes in Jersey
in 2015. Tim has more than
20 years of experience
and regularly advises
fund promoters, investors,
boards, regulators and
service providers to hedge
funds, and also regularly
advises on governance and
regulation.
10 H F M W E E K . CO M
HFMWeek (HFM): There has been much discussion
recently about a growing hedge fund industry in Jersey. Is this a new phenomenon?
Tim Morgan (TM): Recently, we have seen tremendous
buoyancy around Jersey’s success in attracting managers to
the jurisdiction. The trend is partially seen in the overall
number of fund promoters in the island (approximately
125 promoters, up from 70 five years earlier), but also specifically in the number of hedge fund management companies, standing at around 25, many of which have established operations in the post financial crisis environment.
What is particularly interesting is that the managers and
other institutions that we are working with and who are
new to the jurisdiction, are coming to the island because
they can see that the very best practice in terms of regulatory developments, invester preferences and governance
arrangements is delivered in Jersey, combined with stability in regulation and tax.
HFM: How important has regulatory policy been to
this success? Has Jersey deliberately implemented legislation to attract this type of business?
TM: The need to get the regulatory approach right has
been central to Jersey’s strategy for many years. The regime
for service providers dates in broad terms to the late 1990s,
as further modified in 2007, and is a framework which has
been recently validated by external agencies such as Esma,
the IMF and Moneyval. Improvements in response to industry developments can be made efficiently. For example,
Jersey recently streamlined the process for hedge fund
managers to advise managed accounts – previously it was
necessary for hedge managers to operate under two separate regulatory regimes, one for the funds that they managed (as funds services businesses) and another for the
parallel accounts that were run (as investment businesses),
which meant parallel sets of codes of practice and licensing. Next on the regulatory agenda will be implementing
AIFMD passporting, as well as providing equivalence
guidance in relation to Mifid II.
HFM: Is Jersey competing with the Cayman Islands?
TM: Cayman undoubtedly has led as a centre for the domicile of hedge funds, and continues to shape the market for
this product, servicing international markets from North
America, Europe, Asia and further afield. Jersey continues
to be used alongside Cayman, particularly for managers
who require a balanced level of governance from a European location and time zone perspective. For this reason
there has been a long-standing set of examples of Jersey
management structures (where regulation and governance
can be demonstrated) with Cayman funds (where the familiarity of a Cayman fund has been attractive).
FUND OPPORTUNITIES
there particular strategies that work well for managers
based in Jersey?
TM: There has been a specialisation in the industry generally. The strategies that tend to be seen the most are either
those which are mobile businesses (for example, macro
and CTA strategies where the whole business itself can
relocate), or those strategies which fit well around an advisory model combined with a strong offshore governance
function.
However, there is also a strong track record in domiciling hedge funds in Jersey which should not be overlooked.
Product regulation has traditionally been carefully designed
to provide meaningful regulation for alternatives: for example, when the Jersey Expert Funds Guide was launched back
in 2004, it expressly provided a regime designed for specialist funds, including requirements that applied to appointments of prime brokers, administration and investment
management functions in line with best industry practice.
This has been further developed to provide real optionality
for managers depending on the number and types of investors, as well as the marketing location and strategy.
There is accordingly a deep pool of hedge-related experience on the product side – for example, the
Mourant Ozannes Jersey funds practice currently
advises the best part of 200 Jersey hedge funds
– this depth of experience is critical in providing
the ability to effectively service funds, particularly
when combined with the wide experience and
practice of our Cayman colleagues.
HFM: Does this success mean that there are
regulatory delays in practice?
TM: Jersey is fortunate in having, in the JFSC, a
well-resourced regulator (there are around 200
staff) which, alongside overseeing meaningful but
efficient regulation, also delivers a strong policy
capability. It means that we are able to easily discuss practical issues with the regulator, with rapid
responses possible, on issues ranging from AIFMD
filing requirements to best practice on investor
CDD and AML procedures. It also means that
managers can be established and regulated within
a matter of weeks, compared with months in other
jurisdictions.
HFM: With regards to tax, will changes arising out of
the Beps initiative put pressure on existing models?
TM: There has already been a significant focus on demonstrating substance from a regulatory perspective,
which has tended to mean a more granular analysis
on process and function. Furthermore, these may be
based on internal recruitment and systems as well as
appointment of appropriate service providers to deliver expertise in such areas as governance, risk and
portfolio management. The need to link activities to
the creation of profit and value is an area that will
sit naturally with the substantive functions that are
carried out in the island. Jersey industry bodies are
closely engaged with the process of implementing
the Beps actions in practice.
JERSEY IS FORTUNATE
IN HAVING, IN THE JFSC,
A WELL-RESOURCED
REGULATOR WHICH,
ALONGSIDE OVERSEEING
MEANINGFUL BUT
EFFICIENT REGULATION,
ALSO DELIVERS A STRONG
POLICY CAPABILITY
HFM: You mention AIFMD (which has been in
force since 2013). How has Jersey coped? Has it
meant that all European funds and managers will now
be based in EU jurisdictions?
TM: The AIFMD (which should be thought of more as a
process than an event) has in fact been very beneficial for
the industry in Jersey. While it was driven by EU political
issues more than by the industry itself (and has often been
heavily criticised by the very investors that it was aiming to
protect!), it has been on the whole an opportunity for Jersey (not only the JFSC but also the industry which is based
here) to demonstrate its excellent, and proportionate,
regulatory standards and processes. It’s fair to say that the
AIFMD forced the industry to grow up quickly in terms of
regulatory policy. From Jersey’s perspective, it was always
clear that the island needed to engage with the process and
in fact while the island adopted a clear, and in fact the first,
regulatory regime to allow AIFMD opt in which has been
in place for three years, the true reason for its success was
the fact that it was based on the existing regulatory regimes
in the island. The optionality involved here is a very attractive feature for managers. Far from damaging Jersey’s industry, it has only enhanced it.
HFM: Has AIFMD led to changes in the types of managers who are running strategies from the island? Are
”
HFM: Are there any other reasons that managers like to structure vehicles in Jersey?
TM: The credibility that comes from having a
broad-based financial services industry is very
powerful in terms of being able to deliver structural and transactional results. For example, we have
seen a number of manager-related joint ventures,
new manager incubations and ownership restructurings, as well as continual improvements in best
practice around investment committees and other
governance structures. To deliver these types of arrangements requires high-quality local expertise in
the corporate, structural and regulatory issues – what we
would call the ‘transactibility’ of Jersey as an Anglo Saxon
jurisdiction which works seamlessly and on the same
timescales with advisers in London and major global business centres.
HFM: Can all related services also be provided from
Jersey?
TM: The short answer is – yes, they probably could! In
practice however, the domicile, administration, management, governance and risk management tend to be
sourced carefully depending on the strategy, size and investor base. As local counsel, we work with the manager’s/
the investor’s onshore counsel in providing the best possible solutions, and therefore this will often mean designing
a solution that takes the best of industry models and applies this to the overall structure. Therefore, it is often the
case that elements of administration may be sourced from
places such as Dublin. Also, not all board members need
to be sourced from within the jurisdiction. In other words,
this will not always be a ‘one-stop shop’ – it is rather being
able to add value to a sophisticated industry in conjunction with the other leading advisers and service providers
in the field. n
H F M W E E K . C O M 11
JERSEY 2016
JERSEY – A LEADING
EUROPEAN CENTRE FOR
HEDGE FUND MANAGERS
DEBBIE PAYNE, TAX DIRECTOR AT PWC, EXPLAINS THE GROWING REPUTATION OF JERSEY IN THE HEDGE FUND INDUSTRY AND
HIGHLIGHTS THE BENEFITS OF DOMICILING ON THE ISLAND
S
Debbie Payne is a tax
director at PwC’s Channel
Islands tax practice and
has been a corporate
tax specialist for over 20
years. Before transferring
to the Channel Islands in
September 2013, she spent
10 years working in the
asset management tax
practice in London.
hifts in regulations and changes in attitudes
towards reputation have seen Jersey emerge
as one of the leading European centres for
hedge fund managers, with some of Europe’s
top hedge fund managers choosing to base
their headquarters on the island.
To those of us already based in Jersey, this comes as
no surprise because over the last 30 years the island has
built a reputation as a centre of excellence for alternative
investment funds, particularly private equity and real estate funds, through a workforce of over 12,500 finance
professionals.
The growing focus on governance, substance and
reputation presented opportunities for Jersey to affirm
itself as a major centre for fund management as well as
fund servicing. AIFMD and the OECD’s Base Erosion
and Profit Shifting (Beps) project in particular was encouraging managers to reconsider their business models,
which provided and continues to provide Jersey with real
opportunities as a jurisdiction, offering real substance
and genuine asset management expertise. With its close
proximity to London, continental Europe’s major financial centres and its stable regulatory and tax regimes, it is
easy to see why Jersey is an attractive domicile for these
businesses.
POLITICAL AND FISCAL CERTAINTY
Unlike many onshore and offshore jurisdictions, Jersey
offers political and fiscal certainty in a highly regulated
and transparent regime. Jersey is a crown dependency,
meaning that whilst it has its allegiance to the British
Crown, it’s not part of the UK, nor is it represented in
the British Houses of Parliament. The island’s domestic
autonomy has been preserved via charter and convention
through 800 years of English history. This means that it
has a separate tax regime from the UK.
Jersey is also not a member of the European Union, although they have representatives in Brussels who actively
engage with the EU. This allows Jersey to follow EU law
if it is the right answer for the island without necessarily
imposing all the cost burden attached to basing an alternative fund manager in an EU country. Financial services
is the largest single contributor to the island’s economy;
consequently, the government is committed to keeping
14 H F M W E E K . CO M
a stable environment which remains attractive to the financial sector.
Jersey tends to shift its fiscal policy in line with external requirement, and not as a result of internal needs.
Where there is change required in response to developing international standards, Jersey looks to deliver a
consistent and least disruptive outcome for its corporate
residents, free of undue administrative burden and with
minimal risk of change.
JERSEY’S REGULATORY ENVIRONMENT
Jersey offers hedge fund managers the best of all worlds
– the flexibility of an offshore jurisdiction and the standing of a reputable international financial centre, with the
skilled individuals to match.
As a trusted partner of European and international
regulatory bodies, Jersey’s independence, straightforward and flexible regime enable it to be at the forefront
of regulatory change, ahead of many European countries.
Further supporting this, Jersey has in the past few years
received a host of positive reports from the IMF, the
OECD, the Financial Action Taskforce, the Global Peer
Review Forum, the World Bank and the UK Government
(HM Treasury and the Ministry of Justice), with overwhelming endorsement by the international community
of Jersey’s excellent track record in respect of good governance and sound regulation.
JERSEY’S TAX REGIME
Jersey was an early adopter of the new global transparency standards and continues to stay at the forefront of
this initiative being an early adopter of the OECD’s Common Reporting Standard. Its aim is to ensure acceptance
as an international financial centre while maintaining a
competitive tax environment and appropriate client confidentiality.
Jersey’s policy of low and simple taxes is attractive for
the individual based in Jersey. There is a single income tax
rate, currently 20% for high earners, together with other
personal tax incentives to encourage high net worth individuals to locate their business in Jersey. There is currently no tax on capital gains in Jersey.
For individuals working in Jersey, their effective tax
rate is significantly lower than the rates of between 40%
FUND OPPORTUNITIES
and 50% experienced in other countries. For example,
US tax payers who are also tax resident in Jersey will see
their overall tax liability capped at their US tax bill. In
many jurisdictions this is not the case. In addition, certain jurisdictions, which historically had
more beneficial tax regimes for non-domiciled individuals have become more hostile. Jersey does
not tax by reference to domicile. Generally, tax
is only imposed on residents of Jersey allowing
a single Jersey structure to be used to reward or
incentivise all the key individuals working in the
business.
For a company or partnership the main advantage is stability and neutrality. Although, Jersey
has changed aspects of its tax regime in recent
years in response to developing international
standards, it continues to deliver tax neutrality
free of undue administrative burden and low risk
of change for both fund managers and fund structures. The current tax regime has three rates of tax
being 0%, 10% and 20%. The rate of tax for most
fund managers is linked to their regulatory status
meaning that most businesses qualify for the 0%
rate.
In the new era of tax transparency, Jersey has fully embraced exchange of information principles, has an intergovernmental agreement with both the US and UK,
and is part of the early adopters group for the Common
Reporting Standard, an OECD initiative intended to
standardise automated exchange of information between
countries for tax purposes.
A LEADING EUROPEAN CENTRE FOR HEDGE FUND
MANAGERS
The government and island as a whole is dedicated to making Jersey an exceptional place to do
business, which is demonstrated in its commitment to developing the hedge fund industry into
one of Europe’s leading centres for hedge fund
managers. Global organisations in law, administration, regulation, advisory and audit, employ
specialist teams on the island. What’s more, the
island is home to a large financial services workforce. All of this gives a hedge fund manager/adviser the means to effectively manage both investments and operations locally.
Jersey offers hedge fund managers the highquality regulation of a reputable international
financial centre, together with the benefits of an
offshore jurisdiction. Its regulatory environment
is tailored to the needs of alternative houses in the
emerging regulatory environment, with Jersey’s reaction
to AIFMD being a clear example of this.
Above all, Jersey is safe, stable, tried and tested – and
investors trust it. This is why it’s Europe’s unique offshore
location for hedge fund managers. n
JERSEY’S INDEPENDENCE,
STRAIGHTFORWARD
AND FLEXIBLE REGIME
ENABLE IT TO BE AT
THE FOREFRONT OF
REGULATORY CHANGE,
AHEAD OF MANY
EUROPEAN COUNTRIES
”
H F M W E E K . C O M 15
JERSEY 2016
WHY RELOCATE TO JERSEY?
SIMON SCHILDER, PARTNER AT OGIER, EXAMINES THE TREND OF HEDGE FUND MANAGERS TRANSFERRING TO JERSEY AND HOW
TO RETAIN MOMENTUM
Simon Schilder is a
partner at Ogier, based in
the Jersey office. Simon’s
practice covers investment
funds, cross border and
multi-jurisdictional mergers
and acquisitions; corporate
finance; equity capital
markets including listings of
special purpose acquisition
companies (Spacs) and joint
ventures.
HFMWeek (HFM): Why are hedge fund managers relocating to Jersey?
Simon Schilder (SS): The current trend for hedge fund
managers looking at Jersey as a potential location for the
redomicile of all or part of their operations seems to be
driven by a number of factors, some of which are economic
or regulatory considerations and others less tangible.
The economic considerations are easiest to break down
and rationalise. Domestic tax changes, particularly around
the treatment of carried interest, together with the evolving regulatory landscape onshore for investment managers
has undoubtedly prompted some hedge fund managers to
re-access the optimum location for their operations. The
onshore political agenda has also contributed to some
hedge fund managers feeling uneasy about risking having their business and personal
arrangements being used as a political football. These ‘push factors’,
when coupled with the Jersey Government, through its Locate Jersey
arm, actively targeting hedge funds
managers to encourage them to
redomicile to Jersey, has assisted
in also creating a number of ‘pull
factors’ for hedge fund managers
re-assessing the optimum location
of their current operations.
Jersey’s regulator, the Jersey
Financial Services Commission
( JFSC), has also been proactive
in creating a regulatory landscape
which offers an appropriate level
of regulation for hedge fund managers and, where the current Jersey
regulatory landscape has had unintended consequence which might
otherwise adversely affect Jersey’s
competitiveness, have been prepared to amend Jersey’s
regulatory legislation so as to negate such consequences.
This was evidenced at the end of 2014 by the introduction
of an exemption to enable hedge fund managers already
regulated by the JFSC to provide ‘fund services’ business
under the Financial Services ( Jersey) Law 1998 (FSJ
Law). Additionally, managers could also provide services
to ‘qualifying segregated managed accounts’ (being managed accounts of at least $1m with a strategy which replicates or comprises elements of the strategy employed for
the hedge fund manager’s existing funds), without needing
to seek additional regulation to also be licensed to conduct
‘investment business’ in Jersey (being a more onerous
regulatory regime).
There are clear tax advantages to be derived by hedge
fund managers locating some or part of their operational
operations to Jersey. Entities licensed under the FSJ Law
to conduct ‘fund services’ business benefit from a 0% corporation tax rate. This coupled with no capital gains tax
in Jersey and a personal income tax rate of 20% (subject
a maximum tax liability of £125,000 on the first £625,000
of income with the balance of worldwide income taxed at
1%) makes Jersey an attractive proposition from a tax perspective.
In addition to these economic advantages, the availability of high quality office premises, a skilled and sophisticated local workforce, and the depth of local service providers operating within the island’s funds industry makes the
transition to operating in Jersey an easy one for hedge fund
managers considering relocating. Additionally, Jersey’s
strong transport links to the UK
and elsewhere also enables there
to be no compromise on the ability
to travel to visit investors/prospective investors.
To date, several high profile
managers have made the move, including Brevan Howard, BlueCrest
and Systematica Investments and
a number of others are known to
be at various stages of discussions
in relation to a potential move
to Jersey.
THERE ARE CLEAR TAX
ADVANTAGES TO BE
DERIVED BY HEDGE FUND
MANAGERS LOCATING
SOME OR PART OF THEIR
OPERATIONAL OPERATIONS
TO JERSEY
HFM: What innovative services
can Jersey offer that sets it apart
from competition?
SS: Jersey has all the infrastructure and expertise that hedge fund
managers would require to operate
their business from the island, with
a stock of high quality office space
and new office space under construction. Back-office functions, IT, banking, compliance and accounting functions
are also all readily available in Jersey from local service providers operating within the island’s funds industry.
Jersey also benefits from strong transport links, with
regular flights each day to the UK, including to Gatwick
Airport, London City Airport, Birmingham Airport,
Edinburgh Airport, Manchester Airport and elsewhere
in Europe.
”
16 H F M W E E K . CO M
HFM: How easy is it to relocate to Jersey? Are there any
obstacles?
SS: Whilst Jersey does not form part of the European
Union, it does apply equivalent principles of freedom of
establishment and free movement of EU citizens, subject
FUND OPPORTUNITIES
to some local licensing requirements in relation to housing and businesses. As a consequence, it is reasonably easy
for a hedge fund manager to relocate to Jersey,
subject to obtaining the requisite business licenses
required to do so, which will be a licence from the
JFSC to conduct ‘fund services business’ under
the FSJ Law and the requisite business licences
under the Control of Housing and Work ( Jersey) Law 2012 and from the Population Office in
Jersey.
HFM: Do you envisage that the current trend
of hedge fund managers’ relocation will continue?
SS: In our view, there is every reason to believe
that the current trend of hedge fund managers relocating to Jersey will continue and, as it becomes
more of a well-trodden path, it will undoubtedly
make it easier for others to follow.
brought a level of certainty to fund structuring though
Jersey. Whilst it is still unclear as to when the marketing
passport will actually be made available to ‘third
countries’ such as Jersey, for the purposes of planning, the fact that Esma have already said that there
are no obstacles standing in the way of the marketing passport being extended to Jersey has very
definitely had a positive impact upon confidence in
Jersey’s funds industry.
The impact of the OECD’s Base Erosion and
Profit Shifting (Beps) initiative, rather than being a
threat to Jersey, also actually provides Jersey with
an opportunity. Whilst Beps is aimed at multinationals that shift profits to low tax countries or use
double taxation treaties to minimise their aggregate
tax bills, its application will become relevant to
hedge funds managers utilising low tax locations
for all or part of their operations, as it will require
them to demonstrate a material reason or to have a
substantive presence on the island. Given the availability of a skilled and sophisticated local workforce
and depth of local service providers operating in
Jersey’s funds industry, this will put Jersey at a competitive advantage to some of its competitor jurisdictions as a feasible alternative location of domicile which
is able to tick all the boxes on a Beps analysis. n
THE IMPACT OF THE OECD’S
BASE EROSION AND PROFIT
SHIFTING (BEPS) INITIATIVE,
RATHER THAN BEING A
THREAT TO JERSEY, ALSO
ACTUALLY PROVIDES JERSEY
WITH AN OPPORTUNITY
HFM: What key industry trends do you expect
to be of the most significance to Jersey over the
next five years?
SS: Esma’s positive recommendation of Jersey for
the extension of the AIFMD marketing passport has had
a positive effect on the jurisdiction, as it has very much
”
H F M W E E K . C O M 17
S E R V I C E D I R E C TO R Y
FUND
ADMINISTRATION
JERSEY 2016
Fairway Fund Services Limited, Pippa Davidson, Director - Head of Funds // [email protected] // T: +44 (0) 1534 511717 // 8th Floor
Union House, Union Street, St Jelier, Jersey JE2 3RF
FUND ASSOCIATION
Fairway Fund Services Limited and Fairway Fund Trustee Services Limited conduct fund administration, trustee and MoME services for Jersey-based fund
and managed entity operations. Our experienced and qualified team ensures that a high quality, director-led service is provided to all clients. All of our
senior team members have previously worked for large global administrators, but have now chosen to work in a smaller boutique environment, where
the client comes first.
Jersey Finance // www.jerseyfinance.je // @jerseyfinance
Jersey Finance, which is run as a not-for-profit making organisation, was formed in 2001 to represent and promote Jersey as an international financial centre
of excellence. It also has offices in Hong Kong, Shanghai, Dubai and Abu Dhabi, along with representation in London, Mumbai and Delhi.
FUND
ADMINISTRATION
Mourant Ozannes, Daniel Birtwistle, Partner // 22 Grenville Street, St Helier, Jersey, JE4 8PX // +44 1534 676 000 // www.mourantozannes.com //
[email protected]
Mourant Ozannes has an international reputation as the leading investment funds practice in Jersey. We advise on the formation, structuring and regulation of
investment funds in Jersey and provide ongoing legal advice to funds and fund managers. Our clients range from leading asset managers and fund promoters
to start-up ventures.
Mourant Ozannes dominates the funds sector in Jersey. Our team is known for quality and quantity of complex work across a wide range of fund asset classes
and global markets. We are ranked the number one legal adviser to funds in Jersey by market share for sixteen consecutive years (Monterey Insight Funds
Survey 2015).
Ogier, 44 Esplanade, St Helier, Jersey JE4 9WG // +44 1534 514000 // +44 1534 514444 // [email protected]
LAW FIRM
Ogier employs more than 350 staff worldwide and has long-established relationships with many of the world’s leading international financial institutions,
professional advisers and regulatory bodies. It has been at the forefront of the development of the offshore financial markets for more than 50 years. Ogier
offers its clients the strength in depth to handle the largest, most demanding and most complex transactions, and prides itself on providing expert, efficient
and cost-effective legal services across all time zones.
Ogier provides advice on all aspects of BVI, Cayman, Guernsey, Jersey and Luxembourg law and has won numerous industry awards for its services. Ogier
was the first law firm to establish a Channel Islands practice as its Hong Kong office to offer Jersey and Guernsey legal services to clients in the Asian time
zone.
PricewaterhouseCoopers CI LLP, Debbie Payne, Tax Director // [email protected] // +44 1534 838284 // 37 Esplanade, St Helier,
Jersey JE1 4XA // www.pwc.com/jg // follow us: PwC_CI
FINANCIAL
SERVICES
We focus on three things at PwC in the Channel Islands: assurance, tax and advisory services. But how we use our knowledge and experience depends
on what you want to achieve. So whichever one of our 320 plus staff in the Channel Islands you work with (or 208,000 people across the PwC global
network of member firms), they'll start by asking the following questions: Are you looking to build trust? Give your shareholders more value? Or do you
want to do something completely different with your strategy? When we work with you we really listen, to understand you better. We'll get to know you,
your business and your goals. They we'll share what we've learned to help you get there. We want to deliver the value that our clients, our people and
our communities are looking for.
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