New Fund Regulations Could Still Present Opportunities for Jersey
Wednesday 26th January 2011
There has been lengthy commentary on the potential negative impact of the EU’s Alternative Investment Fund Manager Directive, but jurisdictions such as Jersey are also conscious of new opportunities that may arise.
In assessing the threat from the Directive, it is wise to reflect on the history of the funds industry in offshore markets which provide a telling commentary on the current situation.
In particular, when the first UCITs Directive was introduced in the EU in 1985, which restricted the manner in which funds could be sold within the EU, there was widespread concern in jurisdictions such as Jersey that funds business would be badly affected. Undoubtedly it resulted in locations such as Dublin and Luxembourg being more attractive for the marketing of retail funds into Europe at the time and some fund groups re-located as a result.
However far from weakening the appeal of Jersey’s Finance Industry, the Directive prompted Jersey’s fund professionals to diversify their offering and to appeal more widely to institutional clients. The Industry was quick to appreciate that it had the technology, the skills, expertise and the legal structures which could be channelled toward new products. The shift created a more balanced industry and sowed the seeds for the huge growth the Island enjoyed in the alternative investment fund arena during the last decade.
We need to take this balanced approach when assessing the potential impact of this latest EU Directive on both the jurisdiction and our clients. Of course it is sensible for Jersey and other jurisdictions outside of the EU to lobby on the matter and thankfully Jersey’s interests are closely aligned with the majority of the alternative investment funds industry and its investors, as well as the City of London and the US.
However, away from the European scene, the priorities of investors in other markets such as the Far East and the Gulf, should also be taken into account. Non EU investors will not take kindly to the increasing costs of doing business within the EU, an inevitable consequence of the introduction of yet more regulations within Europe. Non EU investors and their advisers will assess the whole market and they will no doubt wish to explore the jurisdictions which remain independent of overall EU control.
Jersey, highly regarded in regulatory terms and with a stable, tax benign economic environment, continues to have an increasing appeal in the Far East and elsewhere in the emerging markets. Fund professionals have also demonstrated an ability to innovate and re-invent their service offering to meet the needs of the global marketplace. So whatever the outcome of the Directive – and it is by no means clear yet what will finally be agreed upon - Jersey as a jurisdiction will remain broadly independent with its hard earned reputation for probity and will be able to adapt to the market conditions, helping in particular to address the needs of non EU investors who will be anxious to avoid the increased costs associated with the formation of funds within the EU.
PR-260111.pdf