Richard Le Tocq of Locate Guernsey examines the financial infrastructure of the island and why it remains a favoured domicile.
HFMWeek (HFM): For its size, Guernsey has a very large funds sector, how did that come about?
Richard Le Tocq (RLT): It's been steady organic growth for many years. There are now more than 800 Guernsey domiciled investment funds, which shows the scale of the industry. In private equity alone, for example, there is more than $120bn worth of assets under management.
We've had a funds business community in Guernsey since the 1960s, which was attracted, in the beginning, to the island's offshore status and our own independent government. But it was the UK's suspension of exchange controls in 1979, and their subsequent abolition that produced a step change for the funds sector in Guernsey. The island proved adept at being innovative in funds structures: able to execute things that couldn't be achieved in the more traditional UK marketplace. Growth was rapid and the island became known as a centre of excellence with a strong funds infrastructure. And, that island expertise and infrastructure is now the key driver for business flows into Guernsey. Ultimately, success breeds success.
HFM: What fund types tend to be administered in Guernsey? Why do these types of funds thrive in Guernsey?
RLT: Guernsey has a wide range of fund types managed or administered on the island. Some of the notable categories of fund would be private equity, commodities, debt, emerging markets, infrastructure, real estate, equity funds and alternative funds. Outside of London itself, Guernsey is the favoured domicile for funds listed on the London Stock Exchange. I doubt if I've mentioned all the types and, of course, these can be in either open-ended or closed-ended funds. Furthermore, there's a very broad geographical spread too. Why do they flourish? Once again, that's the combination of very positive hygiene factors including pragmatic regulation, infrastructure, tax neutrality, our well-justified reputation and the island's funds expertise.
HFM: Guernsey is an industry-leader in fund administration, but why would it be a good location for fund managers to consider basing themselves?
RLT: The environment in Guernsey is very supportive of funds businesses, whether that's funds managed or administered in Guernsey, so it's easy to see why the conditions are right for fund managers to flourish. It doesn't overstate things to call Guernsey a centre of excellence for the funds sector and managers can and do take advantage of that by basing themselves in the island. With the professional services sector, and here I'm thinking primarily of legal and accountancy firms, the level of expertise and funds-related experience is akin to that of a major European city. On top of that, Guernsey's proximity to the UK and its regular flights to London in about 40 minutes are also positive features of island living. Talk to businesses that have relocated to the island over the last few years and they've all got positive stories to tell.
HFM: Is it all about the business reasons, or does lifestyle play a part too?
RLT: Lifestyle definitely plays a part. I might be a bit biased, but Guernsey is simply a fantastic place to live. The quality of life is exceptional: a great work-life balance where commutes are measured in minutes rather than hours means that you can put in a full day at the office and still get home for time on the beach, on the bike or on the boat. It's also a safe place for families, the schools are good and it happens to be beautiful too. As I say, I may be a bit biased, but plenty of others have come to Guernsey over the years, put down roots and been very glad they did.
HFM: Explain where Locate Guernsey fits into this and the role you and your team provide.
RLT: Locate Guernsey is all about assisting in the process of relocation, both business and individual. Whether it's a corporate relocation, such as a fund management business, or indeed the principal or members of the senior management team of that firm for example, we help in a number of ways. It can manifest itself in different ways, but one important common theme is that we're the primary single point of contact for the client. That's a help for them of course as we can ensure the answers they need are provided quickly. That will probably involve navigating and contacting the various Guernsey stakeholders who might be touchpoints for the enquirer. It's helpful that, unlike some locations, there's no requirement to register a business with the government in order to be allowed permission to trade.
We also have a marketing role too, to promote and explain why Guernsey is such a good place to live and work. Our strapline is 'Locate Guernsey: Your Home, Your Business, Your Life', which neatly covers all the important aspects about living and working in Guernsey.
HFM: How do you view the future for Guernsey's funds sector and perhaps new businesses setting up in the island? What industry trends will be of the most significance in the next 18 months?
RLT: I'm really bullish about the future. Anyone who attended the Guernsey Funds Forum in London could only have that view. The Guernsey funds sector is vibrant, the numbers being posted by island administrators and managers remain very positive, even if the industry itself is globally slowing.
Guernsey will continue to be a market leader given the positive funds infrastructure and our expert practitioners and professional services companies. But innovation remains another Guernsey hallmark and the recent announcement by the Guernsey Financial Services Commission of what's called the 'manager led product' represents another chapter in Guernsey's long history of innovation.
Quite rightly, there's a lot of interest in this and it will be of particular interest to AIFMs who are seeking to market an AIF into a European host country under the national private placement regime. Globally the regulatory landscape will change in the years to come, as we've seen in the past of course, but Guernsey's excellent international regulatory reputation together with its track record for innovation will continue to see the island well regarded and these changes will, I expect, continue to present opportunities.
An original version of this article was first published in HFMWeek's 2016 Guernsey report, June 2016.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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.
