Investor demands could drive business to Guernsey

By: GIFA , Tuesday, February 20, 2018

Opportunities are emerging for Guernsey’s funds industry to take advantage of changing investor demands and uncertainty surrounding Brexit.

Guernsey Finance’s ‘Funds Masterclass’ event in London drew a crowd of more than 200 industry figures from the island and the capital to discuss the regulatory environment outside the EU and the advantages of operating outside the block.

Among issues raised in a panel discussion at the event was an assessment of why managers are increasingly looking to establish parallel funds in and out of Europe to meet the demands of investors. Concerns about European regulation and the increasing costs of UCITS funds in Europe are driving managers to consider duplicate structures outside of Europe. Guernsey is well placed to accommodate that demand.

Andrew Seaman, executive partner and chief investment officer at Stratton Street Capital, has parallel Renminbi bond funds, with one based in Guernsey. He said that managers had to respond to investor concerns about increasing costs.

“The reason we have both is that they appeal to very different audience – there is huge demand for UCITS in Europe, if you haven’t got it, you can’t really sell in Europe at all. But a lot of regulation and cost goes with it. The UCITS brand is extremely successful but comes with a lot of regulation, and eventually it may regulate itself out of business.

“In comparison in Guernsey the cost of setting up is very cheap, the speed to market is very quick, and if you are based outside of Europe and looking where to put your funds, why would you want to put it in a very bureaucratic, highly regulated area, which is more expensive than elsewhere?

“We are increasingly seeing clients in Asia, Australia, Switzerland and the US considering options other than UCITS. That wasn’t the trend a few years ago, but is much more common today.”

The event also heard that a lack of clarity about the UK’s regulatory position could lead managers to seek to launch new funds before March 2019, and to use stable and understood regulatory environments such as that in Guernsey.

“I think there is a real wind of opportunity,’” said Robert Mellor, UK Asset Management Tax Partner at PwC, who delivered the keynote address.

“If you look at the pace of fund launches, London-based alternative managers want to get their funds away now. If you can get a fund away before March 2019 or during the transition, then you’ve got a closed-ended funds on the books. Then when it comes to raising their next fund, they’ll then know what the landscape is.”

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