Guernsey: The Rise Of Private Equity

Last Updated: 18 March 2016
Article by Michael Betley

Most Read Contributor in Guernsey, September 2018

How has the increase in private equity investment in the trust sector in the Channel Islands and beyond impacted the industry and what will the consequences be, asks Michael Betley of Trust Corporation International.

The entrepreneurial spirit has much to do with the successful evolution of the trust sector in Guernsey which has developed beyond all recognition from its embryonic state in the late 1960s. It started with the arrival of the first of many international merchant banks on the island.

External demand created opportunities which spawned the offshore trust industry and has shaped the sector into what it has become. One of the more recent catalysts of change has been the increasing influence of private equity firms (PE) interested in the sector not for its product set but for its investable qualities. The simple operating models and stable cash flows are particularly attractive and easy for PE to exploit.

It is the more mature and scalable investment funds sector which has seen the most significant investment activity of this sort and gives an indication of how PE may end up influencing the less mature trust sector. Whether you view the private equity influences positively or negatively, you cannot ignore their presence or influence in the ongoing transformation of the industry.

The early investors in the sector were the banking institutions who were attracted by the ability to "harvest" assets and charge the same client for a range of services and financial products. This cross-selling opportunity and cross-border regulatory arbitrage meant that banks were able to move clients from one jurisdiction to another to minimise the increasing regulatory burden whilst still retaining the multiple income lines.

During the 1990s, changes to international accounting standards and practices meant that the big international accounting firms who had in-house trust companies sought to divest themselves of those businesses to enable them to continue to represent global audit and advisory clients unencumbered by potential conflicts.

The likes of Royal Bank of Canada seized on this as an opportunity to acquire professionally owned and run trust businesses starting with the acquisition from PwC of Abacus Financial Services and later Regent Trust Company from Ernst & Young. Kleinwort Benson entered the fray and acquired Orbis Management from KPMG in a competitive bidding process. It has only been since the global financial crisis starting in 2008 that private banks more clearly understood what "fiduciary risk" meant and there has been a full scale retrenchment of private banks from non-core business including divesting their trust businesses.

Guernsey is currently home to 156 regulated trust companies that are authorised to provide a range of professional services. In addition to the usual creation and management of a variety of different holding and trading vehicles, trust companies are developing more specialised investor orientated services, managing family offices, creating pension products and establishing global custody and unregulated lending platforms. The excellent service level systems which are in place have provided trust companies with new market opportunities and greater potential for growth.

Many structures have a lengthy life span which means there is considerable annuity value in the predictable income streams. Whilst not all 156 licensees will necessarily have a physical presence in Guernsey, they have the ability to undertake regulated activities from the island. Many of the licensees have acquired a fiduciary licence so that they can undertake ancillary regulated activities which may simply be a by-product of their core offering.

For example, a number of collective investment scheme administrators who are regulated under a different regime may also have a fiduciary licence to allow them to provide a fuller range of services unconstrained by the peculiarity of Guernsey's division based regulatory regime. A number of licensees may also be "managed trust companies" which are owned by non-Guernsey based practices or institutions who engage a Guernsey manager to administer their own book of business from the island.

Recent statistics show that 44 percent of trust companies are manager-owned locally. The other major ownership categories are international financial groups (27 percent) and those owned by international legal and accounting practices (15 percent).

It is interesting to note that during the initial transitionary phase following the introduction of the Fiduciary Regulations in April 2001, there were 160 trust companies with an additional 34 pending applications awaiting approval.

The transitioning of the trust sector into regulated business created immediate opportunities for consolidation and, by 2003, the number of full fiduciary licensees had reduced to 151. In over a decade, therefore, and with the current number of 156 operators within the trust company space, the sector has remained largely static. In the 10 years to 2015, reported turnover in the sector has increased by 494 percent but over the same period the number of trustee appointments within the trust sector has diminished by 29 percent. Business is clearly becoming more profitable. It is this impressive growth trajectory which is at the heart of why PE finds the trust sector so attractive.

There remain more buyers of trust businesses than active sellers, however, there continues to be M&A activity despite what the statistics might infer. Whilst the headline numbers have remained largely static over the last decade, there has been consolidation but the pace of innovation and change has attracted new entrants too.

Prior to the Fiduciary Regulations, business practices and anti-money laundering procedures were not embedded within the firms and a considerable amount of remedial work was needed to bring not just the client book up to the new regulatory standard, but the businesses themselves.

The introduction of the Fiduciary Regulations was a welcome benchmark for private equity houses as whilst client and business remediation would still take some time to work its way through the system, it offered the opportunity for external investors to have confidence in investing in a more transparent and compliant book of business.

The emergence of PE as an interested investor in this sector started to take hold soon after regulations came in. The first obvious private equity deal was the creation of Equity Trust by Candover Investments plc who saw the potential to create an international business platform by bolting together a number of separate Crown Dependency and international trust and corporate service businesses, starting with its acquisition of Insinger de Beaufort.

Candover sold Equity Trust in 2010 for an enterprise value of EUR 350 million suggesting it had achieved a 24 percent uplift in value over that period. It is not just PE seeking investment targets which is at play as businesses themselves seek financial backing to help deliver their strategic plans.

Successful businesses can outgrow their management, others can reach their growth ceiling due to capital constraints and, often, business ownership and succession drive management to seek funding options. The apparent abundant capital available to many PE houses is an attractive source of finance to help management and business owners achieve their aims and overcome growth hurdles. PE can help stimulate expansion and diversification, incentivise employees and re-invigorate stagnating businesses.

However, PE invariably comes at a cost. Ultimately this means the loss of control so that choosing the right PE firm to properly align the capital providers with the management strategy is key. Whilst PE has been the dominant player in consolidating the trust sector in Guernsey, new capital providers are emerging. Private or family investment offices are entering the market, attracted by the stable returns and easily understood businesses. Such investors are likely to be less demanding regarding management change, targeted returns and more sympathetic to management objectives.

An interesting new development adopted earlier this year by the Sanne Group, was the first independent fund and corporate service provider to list on the London Stock Exchange. Following its IPO, Sanne is currently trading at 22 times its enterprise value showing how it is possible to stimulate the capital value of businesses.

This is at a time when there has been a wholescale divesting programme by international banks of their trust companies, including the likes of Royal Bank of Canada who until this year had probably acquire d more trust business than any other. Is this likely to be cyclical? I have no doubt these financial institutions will return to the sector as senior management reappraises its risk and return objectives over the next 5 to 10 years.

As a consequence, there remain continuing opportunities for trust businesses to nurture their future either alone or as a target for savvy investors wanting to participate in stable income from growing businesses. This is a positive outlook for Guernsey and its trust sector with a significant number of quality businesses within the industry. PE has undoubtedly fine-tuned business models to make them attractive investment targets, but it is the businesses themselves who must continue to make their offering compelling by evolving and creating future demand.

An original version of this article was published in the eprivateclient Special Review – Guernsey 2016 report, January 2016.

For more information about Guernsey's finance industry please visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions