Previously Published By The EMFM Global Domiciles Report 2012
Among the various offshore islands, one of the stand-up features of Jersey is its true full service offering. It has all the components required to comfortably accommodate and run an investment fund; variety of competition and proper service levels from custody banks, lawyers and fund administrators. It has the ability to fully service the funds industry, as well as having modern efficiencies where necessary to outsource to cost efficient jurisdictions for back office.
The same cannot be said of all jurisdictions, which have specialisations in particular areas, but Jersey not only has a broad offering, but a very real presence of fund managers themselves.
Principal structures on the island involve unit trusts, limited partnerships and corporate vehicles. Corporate vehicles can be single corporate or cellular structures, incorporated cell companies or protected cell companies.
In addition, other options available are limited partnerships that are incorporated limited partnerships or separate limited partnerships that are not incorporated but have their own legal personality, foundations and common contractual funds.
As the market has developed, it is now the norm that for real estate investment, typically, it would be a unit trust or corporate structure; for private equity, it would be a limited partnership, possibly a corporate structure if it's going to be listed; and for hedge funds, a corporate structure or a cellular structure, sometimes a limited partnership.
Jersey can service and provide all of the above structures, so that everything that is the accepted norm in the global funds industry is available in Jersey.
A major feature of this jurisdiction is the flexibility and access to the regulator. Jersey boasts a very strong regulatory reputation combined with a choice of regulated and unregulated offerings, so it is possible to opt for an unregulated fund structure if that is what most suits you and your investor base. Alternatively, there's a selection of different levels of regulated fund offerings, which very much depends on the particular need of the investor base and the manager.
Going forward, the most significant factor of change will be the Alternative Investment Fund Managers (AIFM) Directive coming out of Europe. Although Jersey will be classed as a third country for the purposes of the directive, because of Jersey's proximity to Europe, at the moment, a large proportion of its fund industry is European focused, so responses must be made to the directive.
It is the intention of Jersey to maintain a strong fund offering, including one that addresses, adopts and adapts to the AIFM Directive. Appleby expects Jersey to be able to provide an alternative for those managers who don't need to adopt or comply with the AIFM Directive, because their focus and investment base is different. For example, as well as offering products that comply with the directive, for managers who are not looking to raise money from Europe or invest into Europe, and don't have to have exposure, Jersey offers products that don't need to comply with the directive.
Because of the increasing sophistication of Appleby's clients, now looking for multi-jurisdictional solutions and/or a comparative approach to the jurisdiction that identifies what suits them most, we're finding that our global spread is more in demand than ever. We are fully able to address either of those requirements, whether, for example, an investor requires a Jersey fund manager with a Cayman fund, or, a Jersey fund with a Mauritian investment structure to go into Africa. Appleby has the ability to advise on and assist with all of those elements, and, as well as having the legal advisor capability, we've got the corporate and fiduciary services covered.
It's quite common for European private equity structures to involve an English limited partnership, which is then managed and controlled by the use of a general partner that is resident in Jersey. Similarly, a Real Estate Investment Trust (REIT) aimed at the UK real estate investments can use a Jersey company that would be tax resident in the UK. In both of these cases there are a variety of different methods of assistance and help.
With the limited partnership there is the benefit and comfort of being an English limited partnership, although it can be argued that actually the Jersey law of limited partnerships is much more current and much more straightforward than some of the complexities of an English statute that's more than 100 years old.
An important development that has occurred in the last two months is the introduction of the private placement fund classification, which is a fast track appropriately regulated regime aimed at structures that would come in sub-AIFM Directive and would continue to use the private placement regimes even when the AIFM Directive comes into effect. This identifies a particular demand from clients for speed, certainty and a clear and appropriate approach from the regulator.
Beyond that, we expect to see developments in Jersey's laws in relation to regulation of custodians, which will be classed as depositories under the directive, to allow clear application of the directive within Jersey law. Jersey will, of course, be accommodating the directive and adapt as it develops.
Looking ahead, Weaver predicts that more fund managers will be based on the island, and the sustained real estate and private equity fund industry will continue to maintain its stronghold. That said, it is likely there will be a broader geographical spread and focus for both real estate and private equity. In particular, markets like the Middle East and North Africa are definitely areas where there's an appetite for Jersey opportunities, vehicles and domiciled funds, especially private equity related.
Weaver also highlights change for the private equity industry, with decreasing large buyouts, and more credit and mezzanine funds to replace the more limited bank lending, and more complex and interesting structures, which utilise the private equity and real estate asset classes. Finally, there will be more hedge funds seen coming out of Jersey because of different demands from different sectors in the world.