Originally published in HFM Week, Guernsey Special Report, May 2012
Stuart Mauger of RBC Wealth Management explains how Guernsey has adapted to changes in the economic climate.
There has been no shortage of events rocking the Guernsey custody world over the years – the birth of Ucits, the spectacular growth of fund of hedge funds in the early noughties and levelling off with the market volatility of 2007-08, the impending Alternative Investment Fund Managers Directive (AIFMD) and the current dominance of private equity as an asset class. These opportunities, challenges and threats have battered Guernsey's rugged, but beautiful coastline, yet the island still continues to go from strength to strength.
The last five years have also seen a significant shift in investor influence and the return of the segregated custody account. Investor wealth has exploded in various emerging regions including Latin America, South Africa and Asia. High-net-worth individuals from these areas are in a position to create private fund structures that would be the envy of an open-ended fund. They can be relatively quick to market and do not suffer the short-termism that 'herd' mentality encourages in a crisis. Such individuals can, to some extent, dictate their own terms, while receiving their own valuation from an independent custodian. If not quite large enough to go it alone, high-net-worth clients can take advantage of the Protected or Incorporated Cell Company platforms available in Guernsey.
RBC Wealth Management (operating through Royal Bank of Canada (Channel Islands) Limited and its subsidiaries), one of the world's top 10 largest wealth managers, will be celebrating 40 years in Guernsey in 2013, and the corporate and institutional business division has been providing custody and fund administration services through locally licensed subsidiaries on the island for more than 25 years. The division has more than $35bn in assets under custody for third-party institutional and high-net-worth clients. They benefit from the continuing strength and stability of the RBC group, whose disciplined approach, risk-focused strategy, strong balance sheet and diversified business mix have helped it to withstand the recent market turmoil.
Guernsey's ability to adapt, innovate and evolve to the challenges referenced above leaves it well positioned to deal with global economic and financial developments. Further there are three key factors that favourably differentiate RBC Wealth Management in Guernsey in light of these changes.
First, a global reach is important in discovering opportunities and providing clients with a highly personalised service and access to the full suite of banking, credit, FX, escrow, fiduciary and, if required, capital market services.
Second, RBC Wealth Management has assembled a talented team that can help identify and implement bespoke solutions where specific requirements are in demand. For instance, the island is home to a number of more 'esoteric' funds; such as successful litigation funds, ground rent funds, wine funds and farmland funds, to name but a few, and RBC Wealth Management is often asked to perform the role of fiduciary custodian to such structures. This is a service that we are capable of providing, ensuring suitable due diligence is performed at every stage.
Third, the full acquisition of RBC Dexia Investor Services by RBC, due to close mid-2012, will provide considerable complementary capabilities to the rest of RBC. As a top 10 global custodian that serves a diverse base of institutional investors, RBC Wealth Management will be able to leverage RBC Dexia's access to the European market and also access its range of advice and services, including global custody, fund and pension administration, shareholder services and treasury services.
The Guernsey Financial Services Commission's (GFSC) key objective is to protect the global reputation of the island with a firm yet transparent approach to regulation. We are confident that Guernsey will meet the third-party criteria of a well-regulated jurisdiction required by the AIFMD, and it is reassuring to note that several key industry players have maintained or recently established a presence in Guernsey. The detail around depository liability will be closely watched by the custody industry and may result in additional costs to meet obligations and potential liabilities, particularly around the appointment of third-party sub custodians.
Like other financial centres, Guernsey has had to navigate carefully the recent financial uncertainty of the world economy and markets, but it is now well placed to capitalise on long-term growth opportunities in the custody sector, and as a consequence we at RBC in Guernsey are excited about our next forty years on the island.
Stuart Mauger is head of business development for RBC Wealth Management's Corporate & Institutional business in the British Isles and is responsible for the provision of global custody and fund administration services.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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