This year marks five years since Jersey Finance launched its New York office. Here's an interview with the organisation's lead in the Americas, Philip Pirecki, about how the Island of Jersey's proposition for US managers has gone from strength to strength.
Q: What kind of growth have you seen in private fund offerings in the island over the last few years?
Philip Pirecki (PP): Overall – and despite challenging market conditions globally – our funds sector has performed well. The latest figures for midway through 2024 show that regulated funds business has grown by 4% year-on-year and by some 40% over the past five years. Overall, around 88% of Jersey's funds business is in alternatives - and private equity and venture capital has been the stellar performer, growing 20% annually and a staggering 63% since 2019.
It's a trend that has been driven not only by a sustained rise in regulated funds business, but also record levels of LPs being registered in Jersey, a persistent uptake of the Jersey Private Fund (JPF) – more on that in a minute – and a growing propensity to structure funds through incorporated vehicles. Jersey is seeing record levels of company vehicles on its company registry this year.
That growth is mirrored with regards to the US in particular, where we've seen remarkable growth in the five years since Jersey Finance set up a base on US soil. We have put in considerable effort to articulate our proposition as a gateway to Europe, and this hard work has yielded significant results, underscoring the strength of our financial services offerings in meeting the needs of US managers, investors and corporates.
Managers have been attracted by the Island's tax neutrality, well-regarded regulatory environment, fund administration infrastructure and unrivalled financial services ecosystem. The result is that, since we launched the office, the value of alternative fund assets serviced in Jersey with a US promoter origin has risen by 104%.
In particular, as previously mentioned, the Jersey Private Fund (JPF) has proven to be a popular vehicle when it comes to European-focussed alternative fund structuring – a total of nearly 700 have been formed since the product was launched in 2017, with AUM rising consistently. The structure offers up to 50 professional investors a fast-track route – usually just 48 hours – that is flexible and proportionately regulated, while also providing seamless access to European investment via national private placement regimes (NPPR). It's become a go-to solution among US private equity, venture capital, and real estate fund managers.
It is this kind of offering that has set Jersey apart from other international finance centres (IFCs); the Island can provide equivalent services to some Caribbean jurisdictions, for instance, but in a time-zone that offers global coverage, with an endorsed regulatory regime and with established distribution options through NPPR.
Q: As managers continue to come to terms with the Alternative Investment Fund Managers Directive (AIFMD), are there any trends in terms of fund structures that are worth noting?
PP: The AIFMD has been in play now for more than a decade and managers have had plenty of time to explore what works best for their needs. In some cases, establishing an EU presence is necessary – but what we've discovered is that, in reality, the vast majority (around 97% according to EU figures) of non-EU managers only market into three EU countries or less. For those managers, full blanket AIFMD compliance – ie setting up a full EU operation – is not necessarily the most appropriate option.
NPPR through a non-EU domicile like Jersey, on the other hand, is proving a significantly more flexible, cost-effective and swifter route to market, and we've certainly seen more and more US managers take up this route, often using the JPF structure. More than 200 non-EU managers – including those in the US and the UK – are now using private placement through Jersey to access European capital, a figure has risen by around 60% in five years.
We've also seen corporate governance and substance emerge from the AIFMD as key areas of concern among US managers, and these are challenges that Jersey has been able to support them with head on, thanks to its deep pool of non-executive director (NED) expertise, adherence to global standards and codification of substance within its regulatory framework.
Interest among US managers in EU capital is something that looks set to continue too. A recent survey of US managers by IFI Global's Atlantic Fund Intelligence Unit, for example, found that 44% now have investors in Europe, with all managers either already having European investors or increasing their focus on Eutrope.
Q: AML continues to be a concern. What should managers know about jurisdictional differences on this issue?
PP: Anti-money laundering will continue to be a key concern for jurisdictions wishing to maintain a strong reputation for corporate governance. Not all jurisdictions are built the same, however, and managers operating across borders must be cognisant of the differences between jurisdictions if they are to avoid the pitfalls.
For its part, Jersey has been very clear about the emphasis it places on creating a robust, progressive and pragmatic AML framework that adheres strictly to global standards.
Significantly, a report was published by MONEYVAL this summer assessing Jersey against international standards, including recommendations from The Financial Action Task Force (FATF), to determine the effectiveness of the Island's anti-money laundering and counter-terrorist financing measures. It found that, in respect of risk understanding and national co-operation and co-ordination, Jersey reaches a level of effectiveness that is among the highest in those jurisdictions assessed and is praised for the accuracy and transparency of beneficial ownership information for legal persons and arrangements.
Further, it's notable that the Government of Jersey and the financial services regulator have both adopted a forward-thinking mindset that actively encourages regtech solutions that not only address regulatory requirements more efficiently, but which also enhance client experience.
In addition, the Island is home to numerous service providers, many of which trade off their expertise in operating across multiple jurisdictions, while also embracing the adoption of digital solutions to simplify and streamline AML processes.
The global regulatory environment isn't static; it is continuously evolving and at a faster pace. So it is therefore vital that managers consider carefully which jurisdiction to select – one which can provide the robust framework for today while evolving to meet future requirements – if they are to avoid needing to make costly changes further down the line.
Q: Jersey has close ties with the UK. What are the benefits and implications of that relationship, as more European private markets products come into view?
PP: Jersey's proximity to the UK offers many competitive advantages such as familiarity and time zone, as well as easy access to European investors and London as a financial hub. Being outside of the EU, but as a gateway to Europe, with strong ties to both the UK and the continent, uniquely positions Jersey.
We've found that our strong connectivity with the UK has been instrumental in helping to bolster our US proposition, with managers, as well as intermediaries and lawyers, for example, tending to have US as well as UK operations. Our reputation in London has helped us earn some fantastic advocates in the US too.
Q: What is a little-known fact about Jersey that should give both managers and investors added clarity about the jurisdiction's role in financial markets?
PP: The sheer depth of experience and global reach of Jersey's alternative funds sector is perhaps surprising to some. Jersey has developed a clear proposition for the domiciling and servicing of alternative funds within the European landscape but also outside of the EU, with truly global distribution capabilities.
Meanwhile, Jersey's funds sector has experience dating back around 50 years – there are not many domiciles that can boast that. In this time, it has honed a full suite of regimes to suit different investor types. Jersey's structuring options are compelling, not least through products such as the JPF, and the access route of private placement, but also through the introduction of fund vehicles such as the Jersey Limited Liability Company (LLC), which will be familiar to US managers.
Tokenisation is set to further transform the sector too, and Jersey's progress in establishing a virtual assets framework is impressive. This summer, for instance, the Jersey Financial Services Commission (JFSC) published new guidance focusing on the tokenisation of real-world assets and updated guidance on initial coin and token offerings. Overall, this new set of guidance provides issuers and promoters with regulatory certainty, and clarity around Jersey's approach to treating tokenised solutions in essentially the same way as securitisation products. Learn more.
US managers should be reassured that the Island's breadth and depth of services, combined with its innovative approach and robust regulatory regimes, make it a great choice for today but also a sure choice for the next five years – and beyond.
Find out more about Jersey's proposition for US managers or contact Philip Pirecki.
This interview was first published by Alternatives Watch.
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