This article was originally published in Corporate INTL, July 2010
The recent storms that have rocked the financial sector have left many international finance centres bruised and battered with question marks over their continued viability in the face of tightening global regulation.
All economies have suffered but some have fared better than others, with Guernsey as a prominent example of a steady rock that the storm has largely broken against.
The fund industry in Guernsey is a good example of its enduring success, with an initial fall in funds under management in Guernsey-domiciled funds continuing through 2008 and 2009, but picking up in 2010 as the global economy brightened up.
Official figures from Guernsey Financial Services Commission (GFSC) for the first quarter of 2010 show that the value of investment funds in the island increased by £13.2 billion (7.2%) during the quarter, continuing growth from the second half of 2009, which saw two quarters of growth. The increase means that Guernsey now has £197.4 billion of funds under management, a 12% increase year on year to the end of March 2010.
Guernsey's commitment to the funds sector can be demonstrated by the recent Funds Forum held in London and attended by more than 250 fund professionals from London and the Island itself. It was designed to tackle recent issues, such as the AIFM directive, head on and reassure fund promoters that Guernsey will not be adversely affected by the problems.
Peter Niven, chief executive at Guernsey Finance, says that the event was aimed at reassuring key supporters in London that Guernsey Finance is dealing positively with current uncertainties.
He said: "As a result of this work, the Island continues to be an attractive and competitive funds domicile. It was a recurring theme that came from all our panelists and one that was accepted and well received by the many delegates. It was also reinforced that Guernsey is seeing an increasing amount of fund business coming through the pipeline as confidence returns to the markets."
Mr Niven says that the there are encouraging signs within the investor community that money is now being invested and more funds are being formed.
He said: "We are still seen as a jurisdiction of choice in bad times as well as good times. We are in position to pick up business when it comes through and our professionals are telling us that there are a good number of people with strong ideas marketing funds and confidence is returning to the investor community. We have had a good number of funds through the door recently with a 7% increase in the quarter compared with the end of last year. We are not expecting a boom, but slowly and surely that kind of increase shows there is some sort of steadiness returning to the industry."
A breakdown of the figures show that Guernsey domiciled open-ended funds reached a net asset value of £56.1 billion at the end of March, which was a rise of £5.4 billion (10.7%) during the quarter and an increase of £3.6 billion (6.9%) year on year. The Guernsey closed-ended sector was valued at £92.3 billion by the end of March – up £6.9 billion (8.1%) during the first three months of 2010 and £9.8 billion (11.9%) compared to twelve months ago.
Non-Guernsey schemes, where some aspect of management, administration or custody is carried out in the Island, increased by £900 million (1.7%) during the first quarter to reach £49 billion, which is £8.1 billion (19.8%) higher than the value at the end of March 2009.
The Alternative Investment Fund Managers Directive (AIFM) is a major topic of discussion in the fund arena at present as many investors and managers are concerned about the effect it will have on funds domiciled outside the EU. Guernsey Finance is committed to removing this doubt and confronting the "elephant in the room" directly.
Mr Niven said: "We want to confront issues like tax rates and the AIFM directive head on, because we have a good story to tell and we want to get across an upbeat message. We hope that will be put out there positively and help keep the market on the right track. The markets are in some turmoil with the story in Europe and we want to put out an upbeat message to our supporters."
The message that Guernsey wants to send to fund managers is that the AIFM directive will cause the island no problems and there should be no concerns about re-domiciling funds.
"We are ahead of the pack and we can point to very robust regulation and feedback that shows that equivalence will be no problem at all. We will be first on the list, if it is required, and so people with funds domiciled in Guernsey shouldn't need to consider moving them into Europe. We don't believe they should change their course because Guernsey still has a huge amount to offer. When the dust has settled, we will come out extremely well and it will be a good decision to stay with Guernsey."
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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