Originally published in HFM Week, Guernsey Special Report, June 2010
Stuart Tyler of Babbé explains why Guernsey's reputation means he has confidence that the island's market will grow in the next three quarters.
The marketing message that Guernsey has been putting forward over the past few years, alongside its structural development, has all been geared towards the jurisdiction's focus on quality. There is a strong message being relayed from Guernsey to the fund industry as a whole that the island is a well-reputed and well-regulated jurisdiction and, while that requires a commitment to do business, the quality of the result is worthwhile.
"Guernsey is known as a financial centre rather than an offshore tax haven," says Stuart Tyler, of Babbé Legal.
In this sense, Guernsey is in an excellent place to ensure that it can respond to the changes in the fund industry. As the market evolves into a new phase, where investor demands are far greater in terms of transparency and reporting, the jurisdiction is home to many qualities which investors, and consequently managers, are looking for to secure a long-term future in the industry.
In terms of the hedge fund industry in Guernsey in 2010, it is difficult to judge how the rest of the year will play out. While the information is coming through, for example, asset value has grown by 7.2% in the first quarter of the year, pinpointing and allocating where that growth has come from exactly is a harder challenge.
The move of Bluecrest's management business to Guernsey could well indicate a sign of things to come. The reasons for this move were stated to be a response to increasing UK corporate and personal tax.
Tyler's view is that an increase in migration is a distinct but not definite possibility. "I suspect we will see more migration of hedge funds to Guernsey," he says. "As to when that happens, we cannot be certain."
In terms of new regulations, there has been nothing new on the horizon since the financial crisis. That is not to say that the jurisdiction has not taken note of the problems. It is evident that on a deeper analysis, the reason for the lack of new regulation is that the jurisdiction had already successfully anticipated the regulatory requirements for the future.
The emphasis on quality across Guernsey over recent years has seen it develop ahead of its competitors, and this need for a quality market meant that Guernsey had already addressed issues that many jurisdictions have been, or are now facing, in terms of investor transparency and security through regulation.
"I think the general feeling at the moment is that people are comfortable with the regime that already existed before the crisis," says Tyler. "It is for this reason that there have been no regulatory changes since the inception of the crisis, and there are no changes in the foreseeable future."
As a result of this strong underpinning, hedge fund managers are keen to flock to Guernsey under the banner of its well-reputed offering.
"You don't come to Guernsey if you want to do something quick, cheap and nasty," says Tyler. "You come to Guernsey because you are creating a product that people will be able to look at while taking comfort in knowing which jurisdiction it is under."
Tyler's view is that across Europe, investors and managers alike have a strong belief in the security of the jurisdiction and are aware of its stability. This comes as welcome news, especially with regard to the crisis, and can only stand Europe, and therefore Guernsey, in good stead for the future after the recent turmoil has settled.
"All the European jurisdictions are stable," says Tyler. "What this stability gives people is the comfort that they are somewhere where they know what the regulations are, and they know how the regulations work. Essentially, the gaps have been taken out of the structure."
The future of Guernsey
The year ahead for the island is entirely dependent on the movement of the market, something which is out of Guernsey's hands. There have been a limited number of new funds launching. Where there has been an increase in asset values, this has largely been the result of existing funds selling to further investors, rather than new structures being put in place.
"Guernsey's future depends on the general economics improving," according to Tyler. "However, in terms of the regulatory needs of the global hedge fund industry, which can be assimilated generally to investor comfort, Guernsey is excelling."
Babbé has experienced a great increase in enquiries from hedge fund managers globally in the past few months. As a result, Babbé has been making inroads with respect to non-Guernsey funds and their management in the jurisdiction, a growing area for hedge funds.
"We have seen numerous enquiries and acted in respect to non-Guernsey funds that are being managed here and funds migrating to Guernsey from other jurisdictions," says Tyler. "That's because people like the integrity of the locally regulated managers, regardless of the fact that they have not actually located the fund here."
He adds: "On the back of that, I feel some confidence in the market growing in the next three quarters. I am actually going to recruit senior staff to be ready for that, so that's a testimony to the way we see the immediate market growing in the future."
Babbé is a leading Guernsey law firm with a well-established international reputation for providing high-quality legal services in the offshore finance sector. The firm aims to provide a better service to clients than any other law firm on the island and in a demanding and challenging business environment; clients value the firm's dynamic ethos and focus on directness and efficiency, combined with a strong tradition of personal service. Babbé fields a team of exceptionally experienced lawyers offering a range of specialist expertise including funds, focusing on understanding and meeting the commercial objectives of individual clients
For more information about Guernsey's finance industry please visit www.guernseyfinance.com
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