Originally published in the HFM Week Guernsey Report, 2009, distributed May 2009
Andrew Howat of Capita Financial Group talks to HFMWeek about the effects of the economic crisis, the changing expectations and the future of the hedge fund industry in Guernsey.
Guernsey has emerged as a well established and popular domicile for offshore funds over the last 30 years. Today, as the industry goes through unprecedented change, HFMWeek talks to Andrew Howat of Capita Financial Group, a leading administration service provider on the island, about its ability to deal with the possibility of increased regulatory change and the impact this will have on the industry's future.
HFMWeek (HFM): How has the economic crisis affected the administration services you provide to a fund?
Andrew Howat (AH): We provide full administration services to most, if not all, asset classes that are licensed within the island – from property to private equity, fund of funds, hedge funds and traditional investment funds – and, despite the ructions, the services that we provide have remained very consistent over the last year.
There has obviously been a slowdown in new business enquiries, which you might expect, and we have also had one or two launches that have been postponed due to difficulties in raising money, although I think this is a fairly consistent story throughout the industry. Despite this, we intend to continue to provide a top level service.
HFM: How is Guernsey in a good position to respond to the changing expectations of the funds industry today?
AH: I think the island is very well positioned as the fund industry has been well established here for a number of years, with some highly reputable players and a sound regulatory environment. As a result we are anticipating that there will be better times ahead in terms of new fund launches and we will continue to reap the benefits of being here.
HFM: In a changing industry, how can a fund administrator help entice investors back to the market?
AH: Investor comfort in today's environment is driven strongly by market activity, unfortunately the global downturn means some investors have been subject to negative market conditions. However, as an administrator, we will continue to provide a high quality service, ensuring that any new and existing administrative requirements are met. We will continue to do this through the operational processes that we have in place, which enable the funds we administer to run efficiently on a day-to-day basis, and by utilising the expertise that can only come from operating within a well-respected financial group. Consequently, Capita Financial Group is well positioned on the island. We have got a good brand behind us, a strong operating model and we are out there open for business.
HFM: How have you adapted to the heightened emphasis on corporate governance?
AH: In terms of the fund industry, Guernsey as a whole has always been strong on corporate governance; a strength we also share as an organisation. Of course, in line with investor demand, there will be continued focus on this area and I think this is where Guernsey's current level of oversight will be extremely advantageous, particularly in the way in which the offshore boards are set up.
The way in which each fund is managed from a corporate governance perspective has always been a part of the ethos behind why people base funds in Guernsey. There are some very experienced non-executive directors living in the island, which is complemented by the way in which we act as company secretaries, to ensure that corporate governance is strictly adhered to. It's a set of standards that will ensure that Guernsey's levels of corporate governance will continue to be a boon to further growth.
HFM: Where do you think that the future of the hedge fund industry in Guernsey lies in 2009?
AH: There is a fair amount of change currently being mooted for the hedge fund industry, particularly in the area of increased regulation. How much of that will come to fruition, we will just have to wait and see. However, I think funds have already reacted and there has been a degree of careful restructuring and change. Because of this, I think the industry still has a very strong part to play in the financial markets arena.
I also think Guernsey is and has always been respected as a jurisdiction which is well regulated, thus we are well positioned to meet further demands.
There are a reduced number of hedge funds out there and there are certainly a reduced number of funds being launched. But people will take stock of the situation and closely review the type of funds that they are going to launch. As a result, the type of managers that will be out there may change and there may well be a more measured approach to new funds coming to market.
In conclusion, these are tricky times but the opportunities are definitely there. I think that it is fair to say that the industry is taking a good hard look at itself. The economic cycle has turned in this direction before and the industry has come out of it in different ways, but I still think that there is a good future for this type of investment class. Capita Financial Group will support this with continued quality administration backed up with a robust and innovative service provision.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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