Jersey: The Future Is Still Global Despite Protectionist Fears

One of the strong themes to emerge from more than 400 sessions of thought provoking topics at the World Economic Forum in Davos was support for globalisation.

At a time when political agendas appear to be moving the world into a sadly fragmented situation, Indian Prime Minister, Narendra Modi, steadfastly suggested that resistance to globalisation is one of the three biggest threats to economic success.

"Many societies and countries are becoming more and more focussed on themselves," he said. "It feels like the opposite of globalisation is happening. The negative impact of this kind of mind-set and wrong priorities cannot be considered less dangerous than climate change or terrorism."

Indeed, Angela Merkel, Federal Chancellor of Germany, concurred:

"We think that shutting ourselves off, isolating ourselves, will not lead us into a good future. Protectionism is not the answer."

These views chime well with our own outlook on global trade and we are most certainly well-placed to facilitate seamless cross-border transactions, by working with our key stakeholders across the globe. That's not to say it is an easy ride; Capital Economics and the World Trade Organisation noted recently that global trade-restrictive measures have more than tripled since 2010, demonstrating how much more difficult international trade is becoming. However, such measures are not impacting on our cross-border capabilities, given the evidence we can draw upon. Half of the new business in Jersey comes from growth markets outside of the UK, with the Far East and the Gulf being key markets for Jersey.

Despite regulatory moves like the EU's Alternative Investment Fund Managers Directive (AIFMD), political fragmentation as a result of Brexit and Trump's bipartisan agenda, it is clear that globalisation is still a key defining macro trend of our time, and we are on board. Should the AIFMD passport get extended beyond the EU, Jersey, having been one of only five non-EU jurisdictions to be given the unqualified and positive assessment by the European Securities and Markets Authority (ESMA), is well placed to be among the first wave of third countries to access it. Nevertheless, National Private Placement Regimes (NPPRs) will continue to provide an effective route to market into the EU as well as the rest of the world; Incidentally, figures show that the number of alternative fund managers marketing into Europe in this way has grown 14% annually.

Recent research by KPMG, 'Analysis of the Jersey Alternative Funds Sector Investor Base', Q4 2017, illustrates that same pattern and shows that the Island is actually weathering the current protectionist movement very well. In fact, according to the survey respondents, the Island's respected and reliable framework is the key reason investment funds choose to domicile in Jersey. The survey firmly supports the fact that Jersey is well-positioned in a time when globalisation is key. Results show that the five biggest sources of capital committed into Jersey Alternative Investment Funds (AIFs) are the UK (33.9%), US (18%), Ireland, Luxembourg and Canada, and that after Brexit, almost three quarters of capital in Jersey AIFs will come from non-EU sources, enhancing the global nature of Jersey's finance industry even further.

We know from our earlier research the significant value Jersey provides to markets around the globe. For instance, our finance industry is a facilitator of 5% of the UK's Foreign Direct Investment (FDI) - £0.5trillion ('Jersey's Value to Britain', 2016). In addition, Jersey is conduit of €188billion of FDI into the EU, supporting over 88,000 jobs ('Jersey's Value to Europe', 2016), and £15.5bn of FDI into Africa ('Jersey's Value to Africa', 2014). Jersey is clearly still in high demand for its fund domiciling expertise, despite any political uncertainty. In our most recent piece of research by Europe Economics, Jersey for Institutional Investors: A Clear Choice (November, 2017), it was estimated that the value of total funds under administration had risen from £209 billion in June 2016 to £246 billion by June 2017. Among the tax-exempt institutional assets under administration, those invested by pension funds account for 79%, with nearly half (£18 billion) originating from the EU excluding the UK, around £5 billion from UK based investors and a third (£12 billion) from the rest of the world excluding the US.

So, despite the growth in protectionism that we have witnessed, it is evident that globalisation remains a strong force with many advocates for its benefits among political leaders. We appreciate the value that such cross-border trade can bring, and we intend to continue working with our business partners including investors and managers across many nations to help deliver global economic prosperity in the future, that will benefit us all. 

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