Originally published in MENA Fund Review, October 2011
Peter Niven, Chief Executive of Guernsey Finance – the promotional agency for the Island's finance industry, explains why the jurisdiction continues to prove attractive to MENA managers.
As the promotional agency for the Island's finance industry, we have just returned from exhibiting at SuperReturn Middle East in Dubai. Making a visit to the region in the final quarter of the year has become a staple part of our promotion and marketing activity in recent years. Once again, we were joined by practitioners from the Guernsey investment funds community, including administrators Legis, Praxis and Kleinwort Benson and law firms Ogier and Appleby. What we have learnt is that Guernsey remains a jurisdiction which is very attractive to MENA fund managers.
Guernsey's position between the UK and France makes it a convenient location for doing business. There is connectivity to the London and European markets and being in the same time zone as the UK means that business can be conducted with the MENA region – as well as both the Far East and the Americas – during the same working day. In addition, Guernsey is English speaking and uses the British pound (Sterling). As a British Crown Dependency we have legislative and fiscal independence and our special relationship with the EU means that Directives do not apply, unless voluntarily accepted.
Infrastructure and expertise
This environment has attracted several hundred financial services firms to the Island during the last 50 years. Today, we have a broadly based finance industry, including a leading investment funds sector with a wealth of expertise and first class infrastructure for the structuring, management, administration and custody of not just traditional funds but also alternatives and esoteric asset classes.
This diversity has helped the sector insulate itself from the worst effects of the financial crisis and rebound more quickly than many of our competitors. The net asset value of investment funds under management and administration in the Island reached more than £274 billion (US$ 428 billion) at the end of June 2011 – up 4% in the quarter and 22.5% year on year.
One of our greatest strengths is the ability for Guernsey structures to list on the Channel Islands Stock Exchange (CISX) – which has more than 4,500 securities listed, Euronext Amsterdam, the exchanges in Frankfurt, Toronto and Australia, as well as the London Stock Exchange (LSE). Indeed, data from the LSE shows that there are more Guernsey entities listed on its markets than there are vehicles from any other competitor jurisdiction.
In addition, Guernsey has also recently received the green light for local companies to list on the Hong Kong Stock Exchange (HKEx). This approval is a particularly significant step in helping us to diversify our business base. We remain focussed on maintaining streams from our traditional introducer markets of the UK (principally the City of London) and Europe but we are also seeking to attract more flows from further afield and in particular the 'emerging' markets.
A MENA favourite
Guernsey already has significant business from the MENA region.
For example, Global Investment House has launched Global MENA Financial Assets Limited, a Guernsey closed-ended authorised fund, which raised approximately US$500m and is listed on the LSE. The fund is managed by Global Capital Management, one of the largest private equity teams in the MENA region, and is investing into a diversified portfolio of financial sector assets focused predominantly in the MENA Region.
In addition, Arab Bank has established Guernsey-domiciled Class B authorised open-ended investment schemes as PCCs with the cells, the AB MENA Feeder Fund, the IIAB Sukuk & Murabaha MENA Fund and the IIAB MENA Feeder Fund. These were established with legal advice from Mourant Ozannes and are serviced by administrators Legis and custodians Butterfield Bank as well as being listed on the CISX.
The IIAB Sukuk & Murabaha MENA Fund and the IIAB MENA Feeder Fund have been established as adhering to Shariah principles. Guernsey's reputation for expertise in this area is further illustrated by the fact that last year the locally based Argyll Investment Services launched the World Shariah Funds PCC Limited, a Guernsey-based suite of Islamic-compliant investments, listed on the CISX. The legal advice was provided by Ogier, the fund administrators are Legis.
These examples illustrate the way in which Guernsey is already a favourite among MENA managers but we are looking to build on these relationships so that these flows are enhanced in the future.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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