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Jersey – thriving in the face of complex challenges & change
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SANNEGROUP.COMIssue 15 | October 2019
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SANNEGROUP.COM
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The Jersey roundtable gathered leading industry experts from a wide range of sectors that included #######.
Our panel was chaired by #####, and included the following experts:
> Brij Bhushan Assistant Vice President Finance HSBC Retail Banking & Wealth Management
> Siddharth Shah Partner Khaitan & Co
> Rashmi Guptey Chief Financial Officer Lightbox India Advisors
> Dr. Ramakrishna Sithanen Chairman and Director SANNE
> Brij Bhushan Assistant Vice President Finance HSBC Retail Banking & Wealth Management
> Siddharth Shah Partner Khaitan & Co
Welcome to our 15th issue of Connect,
SANNE’s regular, technical bulletin for
fund managers, their intermediaries and
investors.
Ranked as a leading International Financial Centre, an
increasing number of businesses are relocating to Jersey,
citing its business environment and highly skilled
professionals as the motivating factors. Together with
prominent industry experts, SANNE hosted a technical
roundtable to explore the steps implemented to enhance
Jersey’s attractiveness to international fund managers.
The Jersey panel was moderated by Caroline Burkart,
Associate Partner at Scorpio Partnership and included the
following experts:
> Ashley Vardon – Director, Private Equity at SANNE
> Jonathan Ferrara – Managing Director at SANNE
> Jonathan Freeman – Chair of the Jersey Association of
Directors & Officers
> Martin Moloney – Director General at the Jersey Financial
Services Commission
> Martin Paul – Partner at Bedell Cristin
> Miguel Arraya – Professional Independent Non-Executive
Director and Principal at MFA Consulting Limited
> Tim Morgan – Partner at Mourant Ozannes
Various industry authorities have shone a light on
International Finance Centres. Governments and revenue
authorities are increasingly calling for a number of
regulatory changes for structures to be compliant and
more transparent. In light of these changes, the three key
themes under discussion by our expert panel include:
> How is Jersey growing and how is its role as a financial centre changing?
> What impact will Brexit have and what are the opportunities for Jersey?
> How is Jersey positioned internationally and what challenges does it face?
In this special edition of SANNE Connect we hear the latest
insights affecting the industry, its practitioners and their
clients. I do hope you find the read insightful.
Jonathan FerraraManaging Director – Channel Islands
SANNE
Panelists (above): pictured left to right.Tim Morgan, Ashley Vardon, Martin Maloney, Caroline Burkart, Miguel Arraya, Jonathan Ferrara, Jonathan Freeman
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KEY TOPICS
> What is the situation today in Jersey?
> What are Jersey’s USPs?
> The road ahead
Latest developments on the Island
Jersey’s reputation is long-standing and has certainly
evolved over time from a retail-focused environment
through to having a core capability centred on fund
administration for alternatives and institutional investors.
Underpinning this reputation is a strong professional
services infrastructure and concentrated
Jersey has traditionally adopted a
future-focused view. A philosophy that
has proved to be a winning formula
given the uncertain world we live in.
Jersey thriving as an International Financial Centre
The skills and talent of the island’s workforce have built up over
time and transferred well into fund administration, from the
structuring level up to relationship management. This is
complemented by increased automation and broader solutions
the industry can offer.
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expertise, which position Jersey advantageously among
other jurisdictions. Just 30 years ago, the island’s financial
services sector was mostly focused on the provision of
offshore banking and associated products for private wealth.
In more recent times, the fund administration business has
become very important to the island’s economy.
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Jersey’s USPs
With the active management sector facing an
intensifying threat from passive investing, Jersey is
nonetheless proving adaptable. The island is indeed
taking advantage of increasing investor demand for
alternatives.
The island certainly benefits from a strong reputation
built up within the financial world, which continues to
attract business as a result of past experience. If fund
managers have had a good experience with previous
structuring and fund services provided, the chances are
they will continue to use Jersey as a jurisdiction going
forward.
Miguel Arraya, Professional Independent Non-Executive
Director and Principal at MFA Consulting Limited
highlighted, “One also has to look outside Jersey to
identify major trends in the asset management market
that have had a mixed impact on financial services in the
Channel Islands. We have seen the disruptive bifurcation
away from traditional active management to passive on
one hand, which has been negative and then really
complex alternatives on the other hand, which has been
positive. Both Jersey and Guernsey have been quick to
recognise these trends and innovate in the structuring
and administration of alternative funds.”
As an independent non-executive director and Chair of
the Jersey Association of Directors & Officers, Jonathan
Freeman comments, “Jersey has been a very useful
incubator for a lot of work types. There has been a
gradual evolution of the fund structuring model, from
the partnership structure in the early 1990s towards a far
more transparent yet complex approach today. It’s true
that some very cutting edge structuring has been done
here over the years.”
“Different managers have entered the market and they
want to look at jurisdictions to help support their business.
In addition to Jersey providing structuring solutions in a
well regulated environment, if managers don’t have certain
skills in-house they’ll look to outsource, and that is also
where Jersey can add value. Jersey has demonstrated over
a sustained period that it can support managers with their
business and as alternative products have grown, new
entrants have come to the market. In addition, existing
managers who established funds 10-20 years ago have
continued to launch bigger funds, increasing their footprint
in the alternatives market place, and in turn Jersey’s assets
under administration,” Ashley Vardon, Director, Private
Equity at SANNE.
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“Jersey has a great depth of skilled people at
all levels. The funds business has become
important to the island’s economy, in respect
of the size and the growth that has occurred
recently. It has been well supported by the
expertise and skills that have been built up
over time.” JONATHAN FERRARA
Businesses have also been supported by the growth in the
alternative asset sector. As investors have sought higher
yields and turned to other options for growth, away from
listed securities, alternative markets have expanded.
Ashley VardonDirector, Private Equity
SANNE
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“The trick for a small capacity constrained
jurisdiction is to ensure that it has close
alignments and the best partnerships to keep
abreast with what is going on globally. The
answer will always be to draw on wider
relationships and choosing where we can add
the most value as a jurisdiction.” TIM MORGAN
For the jurisdiction to remain nimble and leverage
opportunities, it must have seamless technology, which can
be challenging at a time of fee compression. For Jersey to
continue to act as a nexus for global commercial
arrangements, it must nurture advisory talent that can work
with leading asset class advisors around the world.
Tim MorganPartner
Mourant Ozannes
“Jersey has adapted its service and product
offerings well in response to regulatory change
and evolving demand. That will need to
continue – and adapting to new markets and
following global trends in relation to the
sources and deployment of capital will be
vitally important.” MARTIN PAUL
There will always be risks associated with being a fast
mover (or occasionally, fast follower) into new product
areas. There is also a certain risk profile that comes with
being the first into a market or product so the benefits
versus the risk have to be considered carefully. Alongside
this sits the challenge of having the right quality of people
on board to manage and understand the risk. Innovation
and risk go hand in hand, but the need to manage this
carefully and be aware of the landscape is essential.
While firms on the island do not necessarily need to be
first in the game, it is important to be seen as agile and
demonstrate agility in adapting to a fast-changing
environment as firms are heavily reliant on their talent, in
addition to robust technology platforms.
“It’s partly habit but it’s also more than that.
It’s about what works, relationships and
confidence. Fund managers want to work with
service providers they know well and will tend to
do things the same way they did before, and will
use the structure again if it worked well first time
around. Knowing that Jersey has excellent service
providers and directors gives managers confidence
to continue to use Jersey.” MIGUEL ARRAYA
Miguel ArrayaProfessional Independent Non-Executive Director and Principal
MFA Consulting Limited
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There is undoubtedly an advantage to being a first mover,
as fund managers will tend to use what has worked
previously.
Having a niche sector focus did not stop Jersey a decade
ago from extending its reach from private wealth into
transactional and regulatory expertise against the
backdrop of the global financial crisis.
Ashley Vardon, Director, Private Equity at SANNE
comments: “Diversification is such an important point.
One of the reasons Jersey has been so successful through
a turbulent period in the last decade is because it has
adapted to changes in the market place and has looked to
grow its skill set as a result. If you look at the growth of
expertise Jersey has obtained in supporting Shari’ah
compliant structures and how Jersey has grown on the
global stage, with US Managers using Jersey on the rise,
these are examples of how Jersey is developing as an IFC
outside of the EU. This growth has been supported by
changes in legislation and introducing new products
such as PCCs and LLCs.”
The road ahead
With several advantages relative to its European
neighbours, the future for Jersey as an international
financial centre looks bright but is simultaneously difficult
to predict. Weighing up where financial growth might be
sourced, Jersey is well positioned to manage capital flows
from the US to Asia, however, it may be less of a contender
if significant future growth were to come from Africa.
“Jersey's expertise in alternatives is
impressive, and that is important for
managing the risks attached, by definition, in
this asset class. Out of necessity, we manage
a significant amount of uncertainty around
our future prosperity because we are
specialists in certain areas. But that's the flip
side of creating the prosperity that attracts
people here in the first place.” MARTIN MOLONEY
The seamless tri-party relationship between industry,
regulator and the Government in Jersey is essential to
facilitate market access in any scenario.
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The fund industry in Jersey had its operational issues well
addressed and money has been spent on contingency
planning, so short term business could be relatively stable,
however, the longer-term impacts are less obvious,
particularly as banks and fund managers have created plans
that leave them opportunities to move in a variety of
directions, but with several layers of complexity.
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“The most interesting aspect here is to think
about the longer term and the idea of optionality
about where business is located, which is being
kept open by so many of the large financial
institutions. Many of those are Jersey’s clients.
It is noteworthy to look at how to keep a similar
level of optionality open for Jersey as a
jurisdiction with regard to our profile as a
financial centre.” MARTIN MOLONEY
What is the macroeconomic impact on Jersey?
Despite headwinds, our expert panel point to Jersey’s
globally-diversified economy, with capital coming from
Asia, the Middle East and the United States – often
bypassing continental Europe. On the operational side,
firms have had years to create transitional frameworks
and spend on contingency planning.
Many of the long-term affects will depend on the
structural choices made by international investment
banks and asset managers, whose relocation plans are
still ambiguous.
A no-deal exit would have a negative impact on the UK economy, with inevitable consequences for Jersey’s financial services industry. In the short-term, the major factors that will have an impact are asset valuations, interest and exchange rates.
Martin MoloneyDirector General
Jersey Financial Services Commission
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Brexit: Threat or opportunity?
The ongoing relationship between the EU27 and the UK
outside the European Union infrastructure could
determine their final choices, suggesting that the
consequences of Brexit would be felt long after the
notional deadline of 31 October 2019.
> What is the macroeconomic impact on Jersey?
> Where can fund managers seek new opportunities?
KEY TOPICS
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It is important that Jersey does not simply assume that
because it has always won business for certain areas of
expertise, that it will continue to do so. The island has
always had a significant relationship with the UK, and a lot of
advisors in the UK use Jersey for deal structuring. Going
forward it will be important to leverage relationships with
clients from all over the world, not just close to home, to
encourage investors to consider Jersey and its expertise.
To promote itself more proactively as an international
financial centre, Jersey will have to strengthen its
competitive advantage regionally. It will need to win
business away from Singapore in Asia and from the
Cayman Islands in the Americas.
Tim Morgan, Partner at Jersey law firm Mourant
Ozannes, says there is more work to be done if Jersey is
to sharpen its competitive edge globally.
“The question is, why would I refer business to Jersey
rather than build up a jurisdiction, particularly if we look
at the natural constraints. Jersey, for example, has
population constraints. After all, there are only so many
people there to do what we can do. Certainly, we need
to make sure we’re not overly-dependent on one area,
just like we’re not overly-dependent on one asset. We
need to mine our existing client base, so they use us
when they’re in other jurisdictions.”
Whether Jersey should be governed by European Union
norms after Brexit is a key decision for the island to make in
the coming years. Jersey should continue to benefit from
several unique features, such as its recognised expertise in
real estate structuring.
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New opportunities
For Jersey to thrive in a post-Brexit future, the jurisdiction
must remain an obvious contender in the minds of clients.
“Jersey's relationship with national and
international standard-setters are going to be
very important. We will need to maintain a
positive relationship with the EU, recognising
the EU's ability to set the tone around legal and
regulation issues. But Jersey must also be open
to the world, and be ready to adapt, preparing
for and responding to change in the manner of
a large international financial institution.”
MARTIN PAUL
Martin PaulPartner
Bedell Cristin
“Looking at opportunity in Asia, there tends to
be a nexus that will give Jersey a reason to add
value. Taking UK real estate as an example –
Jersey is a highly regarded solution for investing
global money into real estate. It is almost
certainly one of the best solutions and there is
very high awareness in the Asia market as to how
successful Jersey is for those kinds of deals.”
JONATHAN FREEMAN
Jonathan FreemanIndependent Non-Executive Director and Chair of the Jersey Association of Directors & Officers
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Workforce agility
Turning to Jersey’s talent pool, fund managers on
the island are in a continuous dialogue over
whether there are sufficient skilled resources
available to support future growth.
There is an emerging realisation that firms will
have to do more to nurture talent. A few of the
experts shared the plans they are putting into
practice.
KEY TOPICS
> How do agile workforces generate value?
> What is the price for high-quality talent?
Jersey’s talent pool: Is accelerated growth
feasible?
“In our organisation, we’re encouraging
people to move between different roles and
different types of business, encouraging them
to develop transferable skills and gain new
knowledge as they move across private
equity, real estate and debt, for example.
Those people remain specialist in their areas
when they need to be, but that doesn’t
prevent them from gaining more knowledge
by moving across.” JONATHAN FERRARA
Today’s market is constantly evolving, having a nimbler, agile
business will help to better align with clients. It was agreed
by all panelists that a well-trained, knowledgeable and skilled
workforce coupled with offering good value for money, was
key to keeping a trusted reputation on the international
stage.
The price for high-quality talent
Our expert panel confirmed that both hiring and training
costs are rising in Jersey, which presents a challenge in
terms of total cost of doing business. The industry will
have a delicate balancing-act in future, as it must
continuously invest to enhance its reputation for skilled
talent and high-quality service, without compromising
on offering good value to international clients.
“Some of our competitor jurisdictions are
increasingly known for being extremely
expensive. Part of our job is to ensure we’re
always giving clients a better value
proposition. It is so important that a new
client’s first contact with the jurisdiction is a
good experience, indicating expertise and
value.” TIM MORGAN
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SANNE has undertaken to engage with all of the markets in which it operates to share knowledge, collaborate with peers and hear from industry leaders as to their thoughts on the key issues and topics affecting the industry and its practitioners.
Established for over 30 years and listed on the Main
Market of the London Stock Exchange, SANNE has more
than 1,600 employees worldwide and has in excess of £250
billion assets under administration. Our network of offices
provide global managers with highly skilled and director-led
teams of asset class specialists.
As a leading global provider of alternative asset and
corporate services we are delighted to announce that we
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alternative markets.
Global alternative asset and corporate administration done differently
Should you wish to find out more about our services and operations please speak to us, we would be delighted to hear from you.
“We take great pride in understanding the unique needs of each individual clients to create tailored business solutions.” JONATHAN FERRARA
ASHLEY VARDONDirector, Private Equity (Funds)
Jersey
t. +44 (0) 1534 702184
JONATHAN FERRARAManaging Director
Channel Islands
t. +44 (0) 1534 755023
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To find out more about SANNE, please email Jonathan Ferrara, Managing Director – Channel Islands, [email protected] or alternatively visit us online, sannegroup.com
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