Jersey: Jersey - A Credible Option For Fund Managers

Simon Hopwood and Stephanie Edge speak to global hedge fund industry organisation, the Alternative Investment Management Association ("AIMA") on the options that Jersey presents for fund managers.

Introduction

Despite the current challenges facing the financial services industry, the Jersey funds industry remains resilient with a positive future outlook, presenting fund managers with an alternative jurisdiction to establish a manager or investment manager, or to domicile a fund.

Jersey's total funds business is up 13.8% year on year, with regulated fund's net assets standing at £301.7 billion.1 Alternative investment funds ("AIF") represent over 81.3% of all Jersey funds, with hedge representing 18.3%.2 The number of Jersey-based fund promoters has nearly doubled in the last five years.3 There has also been a 14% annual increase in fund managers seeking authorisation in Jersey to market their funds within the EU.4

This article focuses on why Jersey remains attractive for fund managers, particularly hedge fund managers, by touching on some of the key factors that make Jersey a credible option.

Jersey as an IFC

Jersey is a highly-regarded international financial centre and known as a leading jurisdiction for AIFs. Jersey is politically and economically stable with its own government, but not part of the UK or the EU.

Having a modern and sophisticated legal system, Jersey is also internationally recognised as well-regulated jurisdiction, complying with international standards set by the IMF, OECD, IOSC, ESMA and FATF.

As a regulator, The Jersey Financial Services Commission ("JFSC") is both pragmatic and approachable, welcoming applications from new fund managers. There are a wide range of flexible entities and innovative fund products with fast-track authorisation procedures, suiting most promoters, without compromising investor protection.

With a simple tax system offering tax neutrality for funds and 0% corporate tax for fund managers, as well as low personal income tax rates and no capital or inheritance taxes, Jersey is fiscally attractive and offers economic substance. Jersey has an extensive infrastructure to support its funds industry with high quality professionals providing tax, legal, accounting, administration and depositary services.

Conveniently located within the European time zone, Jersey has excellent travel connections to and from the UK and Europe and offers a good lifestyle and culture on a scenic island.

Jersey Manager

In recent years, the number of fund managers setting up a new manager or investment manager in Jersey ("manager") has greatly increased particularly for hedge fund managers and PE start-ups. The approach to presence and substance has varied.

Some fund managers set up a 'full presence' manager with substance, securing premises and staff, as well as key persons relocating to Jersey. Most partnered with a regulated administrator to act as a 'manager of a managed entity' ("MoME"), who manage the manager in Jersey, providing presence, substance and appropriately experienced directors. Others used a hybrid of these two approaches.

The key drivers depend on the fund manager, its strategy and the promoter's personal circumstances. Some examples include locating outside the EU; reducing costs of regulatory compliance; a lighter touch regulatory environment; delegating discretionary management from a third party AIF manager ("AIFM"); and tax neutrality suiting promoters who reside in different locations.

Regulation

Generally, a manager carrying on investment business (dealing in investments, discretionary investment management and giving investment advice) ("IB") or fund services business (acting as a manager, investment manager of or investment adviser to a public fund) ("FSB") in or from within Jersey, must be licensed under the Financial Services (Jersey) Law 1998 ("FS Law"), unless an exemption applies.

If a fund (Jersey or non-Jersey domiciled) is established as a Jersey private fund ("JPF"), which complies with the Jersey Private Fund Guide ("JPF Guide"), its manager will be exempt from the IB and FSB licensing requirements.

Where a manager is FSB licensed, it will be exempt from the IB licensing requirements. License applications are made to the JFSC, with timescales ranging from 30 working days for a 'full presence' manager to 14 working days for a MoME manager.

For Jersey's economic substance requirements, a manager must show it is managed, conducts core income generating activities and it has adequate staff, premises and expenditure for its business, in Jersey. A manager must maintain appropriate records and comply with filing requirements.

A 'full presence' manager must apply to the Populations Office of the States of Jersey for a business licence before starting its business in Jersey, normally processed within 10 working days. The license may be issued with conditions, particularly in relation to staff.

EU Market Access

While not subject to Alternative Investment Fund Managers EU Directive ("AIFMD"), Jersey implemented its own 'opt-in' AIFMD regime for funds and their managers wishing to be located outside the EU, with the ability to access the EU. Jersey offers AIFMD compliant fund products, as well as an effective route for funds or their managers to access EU investors through the National Private Placement Regime ("NPPR"), without the additional costs and burden of full AIFMD compliance. Conversely, Jersey managers wishing to market to investors outside the EU, will not be subject to the requirements of AIFMD.

Since the introduction of the AIFMD regime, fund managers now have the following options: (1) market in the EU under the NPPR, (2) use their own AIF manager ("AIFM") outside the EU, (3) use a non- AIFM outside the EU, (4) use a third party EU AIFM or (5) use a third party non-EU AIFM.

Referring to those options, a Jersey-based FSB licenced manager may market a private or public fund in the EU under the NPPR. A Jersey-based manager, which is not FSB licensed, wishing to market a JPF in the EU under the NPPR, must be licensed for AIF services business under the FS Law.

Jersey is in a strong position providing a route for fund managers to market to investors outside the EU or selectively in the EU. This will continue to be the case post-Brexit.

Latest Products for Managers

Jersey, in recognition of it being a leading funds jurisdiction, is aware that in order to maintain this status it needs to be proactive and innovative by offering efficient solutions to attract and maintain fund managers based in Jersey.

Firstly, Jersey introduced the Qualifying Segregated Managed Account ("QSMA") regime aimed at hedge fund managers. A hedge fund manager, who is FSB licensed, can establish and manage QSMAs and will be exempt from the IB licensing requirements and, for an EU-based investor, outside the scope of AIFMD.

A QSMA investor must sign a prescribed form investment warning. In addition, the hedge fund manager can only implement hedge fund strategies used by one or more funds in respect of which it is appointed.

The introduction of the QSMA regime demonstrates Jersey's pro-activeness in light of the increased number of Jersey-based hedge fund managers, who now benefit from a simplified and favourable regulatory and tax environment, in order to attract more hedge fund managers.

Secondly, the JFSC launched the JPF in April 2017, with the release of the JPF Guide, detailing the JPF's eligibility criteria. The JPF has simplified Jersey's private funds space by replacing various historic fund classifications with one Jersey private fund product for 50 or fewer investors.

As a result, the JPF is a more streamlined and flexible regime, with a light regulatory touch for certain professional or eligible investors (including those investing at least £250,000 (or equivalent)), who acknowledge an investment warning.

A fast-track 48-hour authorisation process applies to JPFs, which now features an online application facility. A Jersey designated service provider must confirm in the application that the JPF meets, and on an annual basis that it continues to meet, the eligibility criteria.

The JPF is essentially an investment fund pooling capital raised by it and invests on the basis of risk spreading. It can be structured as open or closed-ended, Jersey or non-Jersey domiciled and using any type of vehicle. In addition, there is no need for the promoter to be approved by the JFSC nor an auditor appointed.

The high volume uptake of the JPF product is indicative of Jersey's innovative approach to supporting institutional and professional investors. With its speed, ease and versatility attractive to a range of funds, the success of this product is set to continue.

Finally to note, while most new managers are formed as Jersey companies, fund managers may now consider using the Jersey LLP, which has separate legal personality. This is an attractive and flexible option following the introduction of the new Limited Liability Partnership Law in August 2018.

Summary

In light of current challenges facing the financial services industry, Jersey has a bright outlook for managers. Its reputation as a stable IFC combined with seamless market access and its drive to be proactive, makes it a credible option for hedge fund managers.

Footnotes

1. Source: Based on statistics published by Jersey Finance Association as at 30 September 2018.

2. Source: Based on statistics published by Jersey Finance Association as at 30 September 2018.

3. Source: Monterey Insight Jersey Funds Reports and Jersey Finance Association.

4. Source: The Jersey Financial Services Commission and Jersey Finance Association.

Originally published by Alternative Investment Management Association.

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
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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