Jersey: Private Equity Thriving Thanks To Alternative Thinking

Last Updated: 30 October 2017
Article by Michael Johnson

In a world short on socio-political certainty the amount of 'dry powder' in private equity is increasing as investors hold back and bide their time for the right investment opportunity. Additionally one of the consequences of uncertain traditional markets is a flight to alternative assets, something often structured through the Channel Islands. Michael Johnson, head of fund services at Intertrust in the Channel Islands, takes a look at some of the alternative asset classes that are on the rise and the reasons behind this diversification of investment.

After the geopolitical upheaval of 2016 it would have taken a brave forecaster to stick their neck out and predict a completely stable 2017 in the social and political spheres. Anyone doing so would have been made to look fairly foolish when Theresa May called a snap general election in April. That decision resulted in the FTSE 100 Volatility index climbing to its highest point in five months against a backdrop of near-constant pressure on equities and general wariness across global stock markets.

The early political forecasts were not reflected in the results of the election and, on the morning of June 9, a shock result saw a continued volatility in bond and equity markets as the future direction of the government's fiscal and monetary policies were completely up in the air.

This, combined with broader global uncertainty, contributed to investors either looking to keep their powder dry when it came to actually deploying the capital or seeking alternative asset classes that could represent more stable returns. In light of this and their recent strong performance, the private capital markets are larger than ever before – as a recent private equity (PE) report commissioned by Intertrust has found. Returns and distributions have remained robust and general partners (GPs) exiting from their investments find themselves in a seller's market due to intense competition.

Alternative assets research firm Preqin has found that private equity assets under management hit $2.49tn in June 2016 (an all-time high) and Tim Hames, Director General of the British Private Equity & Venture Capital Association (BVCA), in a foreword to Intertrust's recent report, said that the volume of uninvested capital could hit $1tn by the end of 2017.

So private capital is still plentiful, but the pressure to deploy it in a timely and meaningful fashion is greater than ever and the industry wants to ensure continued health through any future financial crises. This pressure has resulted in a flight to newer asset classes as managers look to diversify portfolios and find optimum efficiency in both long and short-term structures that offer greater security than traditional investment vehicles.

Building stable investments

One such alternative asset class is infrastructure, which has had a much greater role for private capital in recent years as a consequence of government cutbacks across the world. Governments have had much less money to spend since the 2008 financial crisis so large-scale infrastructure projects such as the building of roads, bridges, hospitals and schools have required the input of private capital.

This trend has coincided with an increased PE allocation from institutional investors such as pension funds and sovereign wealth funds, which are often looking for long-term assets and yield so are perfectly suited to investing in the infrastructure asset class.

As infrastructure projects are important for the functioning of society they represent a stable long-term investment with less sensitivity to external economic factors, the likes of which can have a significant and immediate impact on bonds and equities.

Infrastructure projects are often outlined and planned as a means of gaining political capital, as in the case of Donald Trump's infamous wall or Theresa May's industrial strategy for the UK, launched earlier this year. But just because politicians promise investment in order to win credit and votes; it doesn't mean that infrastructure projects are not for the greater good.

Intertrust has proven expertise in servicing infrastructure assets and is proud to be associated with the asset class as it provides real, tangible value to communities. On behalf of our clients we administer major infrastructure initiatives covering sectors such as healthcare, education, social housing, highways and street lighting.

Powering investments

Another area of growth over recent years has been the energy asset class, with the race being on to find the most sustainable and effective way to provide power to populations all over the world.

Traditionally, PE involvement in energy has been to increase the efficiency of fossil fuel sources or seed renewable energy companies like those that use biomass, for example. These are two relatively classic uses of PE – improving efficiency and finding new solutions – but are applied to an alternative asset class in this case.

The drive towards renewables for PE investment represents a significant growth area and a necessity as we move towards the future. This is an example of PE mirroring what's going on in the real world as individuals and companies face the challenge of providing sustainable energy.

Eyes on the future

As the world moves towards an increasingly digital future, so PE begins to make the transition as well. The technology sector has undergone rapid growth over the past 20 years but initially this was funded by angel investors and venture capitalists due to its inherent riskiness.

Now however, the technology sector has reached a point of maturation where investments look a lot more sensible and sustainable over the long term.

We are now seeing greater capital than ever being deployed by traditional limited partners (LPs) but also from tech companies who find themselves capital rich coupled with a thirst to ensure they continue to benefit from the '4th Industrial Revolution'.

At Intertrust our interest in technology funds is twofold as they are not only sensible investments for our clients but they also inform the direction of our own significant investment in emerging technologies so we can enhance our client experience and maintain our high credibility.

Broader reach for the Channel Islands

The flight to multiple alternative asset classes is a positive thing for the Channel Islands as it results in the widening of their sphere of influence. The areas noted above aren't generally centred in London, which is where the islands have traditionally done most of their work. Therefore alternative PE investments allow Channel Island practitioners to broaden their reach and expand their global footprints.

These assets are more global in nature so there is an opportunity for large, international firms like Intertrust to use our expertise and draw on the experience and knowledge of our colleagues in our 41 offices in 30 jurisdictions around the world.

Working globally also means we have increased the size of Intertrust's portfolio of non-Channel Island domiciled funds, which is a good Brexit buffer and a means of diversifying our local offering.

A diverse offering is also a real positive for our employees, as they get to engage with funds and asset classes that have real-world impacts.

Diversity is key in a volatile world and our multi-jurisdictional, multi-asset model is sustainable, effective and built with the long term in mind.

Click here to learn more about our private equity offering.

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 Mondaq.com.

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

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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