Originally published in ACQ Magazine, November 2012
Fiona Le Poidevin, Chief Executive of Guernsey Finance, looks at why Guernsey remains a popular destination for funds.
As a leading international finance centre, Guernsey has continued to demonstrate its resilience in the face of the worldwide economic downturn.
While some jurisdictions struggle to react to the changing global economic landscape, the key indicators suggest that Guernsey remains a popular location for doing business.
For example, Appleby's Offshore-i report, which provides data and insight on the M&A market offshore, found that up to the end of June 2012 Guernsey had experienced an increase in deal volume, up 12% from the preceding three months and up 24% from the same period last year. The Island is particularly dominant in financial services where it saw 40 deals in the sector, with the jurisdiction the recipient of one dollar in every five spent on offshore financial services assets.
Another indicator is the Island's net asset value of investment funds under management and administration reaching more than £271 billion ($440 billion) at the end of June 2012 – up 20 percent on the same time two years ago. Private equity and venture capital have also experienced particularly strong growth, reaching more than £80 billion ($130 billion) at the end of June 2012.
Indeed, Guernsey's expertise in the private equity space was confirmed by a Private Equity News and State Street survey, in which 61 percent of chief financial officers who responded said the Island was their preferred destination for private equity outsourcing. Another independent survey published earlier this year by www.FundDomiciles.com also highlighted the Island's enviable position, as Guernsey was found to be the most popular fund domicile among a sample of UK-based alternative investment fund managers.
The Island's reputation as a leading private equity fund domicile is highlighted by the fact that promoters of Guernsey-based funds include Apax, Better Capital, Cinven, Coller Capital, EQT, Permira and Terra Firma. Coller Capital recently made headlines when it announced the final closing of its latest Guernsey fund, Coller International Partners VI, with commitments of $5.5bn – a substantial fundraising amount in the current climate.
The growth of Guernsey's private equity industry can be put down to a range of attractive factors. Guernsey administrators and custodians provide services to non-Guernsey funds, but a large part of their business relates to Guernsey open and closed-ended funds, which are now promoted and sponsored by leading institutions in more than 55 financial centres globally. These can be established through a range of flexible investment vehicles such as unit trusts, limited companies, the Guernsey-pioneered Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs) and limited partnerships.
There is also a broad range of administrators in the Island, many with specific bespoke IT solutions for alternative assets. These include specialised private equity administrators such as Alter Domus, Augentius, Aztec, International Administration Group (IAG) and Ipes, as well as globally recognised names such as JP Morgan, HSBC, Northern Trust, RBC and State Street who can also act as custodians.
Guernsey also has strength in banking, wealth management and risk management, as well as a network of investment, legal, tax, audit, accounting and actuarial advisers, including multi-jurisdictional law firms and global accountancy practices.
In addition, Guernsey has a reputation for its robust yet pragmatic approach to regulation. The Guernsey Financial Services Commission is known for its open-door approach, whilst also ensuring the Island continues to be recognised as a leader in global regulation and co-operation.
Another of the Island's strengths is the ability for Guernsey vehicles to list not just on the London Stock Exchange (LSE) but exchanges in Hong Kong, Amsterdam, Frankfurt, Australia, Toronto and Johannesburg, among others, as well as the local Channel Islands Stock Exchange (CISX), which now has more than 4,300 securities listed.
Data direct from the LSE to the end of December 2011 shows that Guernsey remains home to more non-UK entities listed on its markets than any other jurisdiction globally. A prominent example of a LSE-listed, private structure from Guernsey is Better Capital. It was founded by Jon Moulton, who has a property on the Island. Better Capital is a closed-ended investment company which has been established in the form of a PCC. It has two cells, the Better Capital 2009 cell and the Better Capital 2012 cell, which invest in portfolios of distressed businesses. It is the first time a closed-ended PCC has had two cells listed on the Main Market of the LSE.
Guernsey is also fully engaged regarding the EU's AIFMD. It is anticipated that in both the immediate and long-term, Guernsey will continue to be able to service structures with a connection to Europe, while the Island's position outside the EU will enable it to offer an appropriate regime for funds not touching that marketplace. In doing so, Guernsey will ensure that it continues to be a leading international centre for private equity.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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