Guernsey's investment industry began in the 1960s providing
services to predominantly open ended unit trusts which were sold
mainly in the UK to retail investors and were unconstrained by
prescriptive regulation or codified corporate governance.
Today the Guernsey investment fund industry is dominated by
closed ended structures, which are all subject to regulation and
attract predominantly institutional investors and high net worth
individuals. We have become experts in complying with the very
highest standards of regulation and corporate governance.
Funds under management in Guernsey increased by £8 billion
or 4.45% in the 12 months to 30 June 2013 from £179 billion
to £187 billion.
Closed ended schemes, which at £137 billion comprise 74%
of the total, grew in value by £11 billion from £126
billion. Meanwhile open ended fund values in Guernsey have fallen
in the same period by £3 billion from £53 billion to
Of the 830 Guernsey domiciled funds: 324 invest in private
equity, 153 in equities, 145 in property, 81 in debt and 72 are
funds of hedge funds and 55 others. Over the last 12 months private
equity, equities and debt funds have risen in number.
Survival of the fittest
Closed ended funds, especially private equity funds, are
Guernsey's key strength. Guernsey is home to funds managed by
some of the best known names in private equity including Terra
Firma, Apollo, Cinven, Pantheon, Permira, HarbourVest and Apax.
Also falling within the closed ended sector but with a different
investor profile and a wide variety of both liquid and illiquid
asset classes are the closed ended listed funds. Guernsey has more
investment funds listed on the London stock exchange than any other
jurisdiction outside the UK. Already in 2013 there has been a
number of high profile investment companies listed on the LSE,
typically investing in income generating strategies including debt
Facing extinction or genetic drift?
Open ended funds comprise only 26% of funds under management in
Guernsey and the numbers and values of these schemes have been in
gradual decline since the credit crisis. This is an area where we
need to work harder to attract new structures to enable
Guernsey's open ended sector to adapt and flourish. For
instance there are only 28 hedge funds incorporated in Guernsey so
this represents an asset class where improvement is potentially
Evidence of Guernsey's capability to adapt is provided by
the growth by £7 billion or 7.8% in value over the last
twelve months in the values of Non Guernsey schemes where some
element of administration, custody or management is provided from
Guernsey. There are actually 263 Non-Guernsey open ended schemes
with £99 billion of funds under management (including 130
Cayman and 37 BVI schemes).
Adaptation to the changing environment
For the moment Guernsey funds can be marketed in much of the EU
via national private placement rules and given that most fund
promoters in Guernsey have funds which are privately placed to
institutional asset managers this is nothing new to them.
Guernsey has created a dual regime to accommodate EU AIFMD thus
enabling promoters to have the choice of forming EU AIFMD compliant
and equivalent structures (once third country provisions come into
force) and/ or non-compliant structures.
Some managers wish to remain outside of the EU and this presents
opportunities to Guernsey for managers who wish to relocate here or
for those who wish to employ teams in Guernsey to provide either
portfolio management or risk management on island.
While the EU is a large market, it is not the only market for
Guernsey and efforts continue to promote Guernsey funds
internationally, which are managed outside the EU, to non-European
institutional investors who prefer lighter regulation.
How has a small jurisdiction like Guernsey surrounded by much
larger competitors survived so long and developed such a strong
niche position in the ecosystem? Because like a family of meerkats
in the Kalahari desert Guernsey survives as a funds domicile
through team work, responding quickly to threats, working
exceptionally hard and nurturing the next generation of
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