31 Oct 2012, Geoff Cook, Hedge Funds Review
As one of Europe’s leading centres for funds business, Jersey has been quick to set out a strong long-term position in supporting the hedge fund industry. To do so is vital – Jersey continues to assert itself as a major player in the alternative funds space, with alternative fund classes accounting for around 70% of the total value of funds under administration in Jersey, and hedge funds alone making up one-quarter of that total.
Overall, Jersey’s message is clear – it has the right frameworks in place to continue to provide hedge fund establishment, management and administration services on a ‘business as usual’ basis.
With its funds industry, government and regulator continuing to be intensively engaged on the Alternative Investment Fund Managers Directive (AIFMD), Jersey is committed to continuing to facilitate hedge funds business within the European Union (EU), and will be able to do this through national private placement regimes until at least 2018.
Jersey is also committed to introducing the option of a fully AIFMD-compliant regime and obtaining an EU-wide passport by 2015 – as soon as is possible for non-EU third countries.
Meanwhile, as a non-EU jurisdiction, Jersey is able to offer a choice by maintaining a separate regime that lies outside the scope of the AIFMD, for managers who don’t want to access EU capital or operate in the EU.
Combined, this range of options places an emphasis on providing managers with the flexibility to market to investors both inside and outside of the EU.
While EU member states will have to fully comply with the AIFMD from July 2013, national private placement regimes in individual member states can remain in place for non-EU funds being marketed into the EU by non-EU managers until at least 2018.
For Jersey these private placement regimes will require individual agreements between its regulator and the regulator of each member state in which its funds are marketed. Jersey’s regulator is fully engaged with the European Securities and Markets Authority and member state regulators on these agreements to ensure they will be in place in good time.
Beyond private placement, Jersey is also well on track. Keen to fully embrace the AIFMD as soon as possible for non-EU countries, Jersey intends to have a fully compliant ‘passport’ regime ready to go by 2015.
Jersey already regulates and authorises alternative fund managers in accordance with International Organization of Securities Commissions standards, and has a number of tax information exchange agreements in place, including with 13 member states. With this in mind, Jersey is confident that it will satisfy the criteria needed to comply with the AIFMD ahead of the 2015 deadline.
Between 2015 and 2018, non-EU funds and fund managers will have the option to benefit either from an EU-wide passport or to continue marketing through private placement regimes.
The AIFMD may actually present Jersey with some opportunities.
The route adopted by Jersey, for example, offers managers a choice between an option that is fully AIFMD-compliant and a route that remains outside the EU. In the current climate, fund managers aren’t just focusing on Europe, they are adopting global strategies targeting Asian and Middle Eastern investors, for instance. In such circumstances, a flexible offshore solution will remain attractive.
In addition, hedge fund managers are still showing significant interest in relocating to Jersey. Driven by high taxation in onshore locations, a prevailing sentiment that they are being unfairly targeted and a desire for a high quality of living, managers consider the flexibility of Jersey’s approach to the AIFMD as another real attraction.
Far from being a burden, the AIFMD could actually pose some opportunities for Jersey as a safe, specialist, ‘no-change’ solution. Jersey recognises that stability and flexibility are key considerations for fund professionals in the new alternative funds landscape, and has borne that in mind as it responds to the AIFMD.