Introduction
Why are JPFs in demand?
What makes Jersey an attractive funds jurisdiction?


Introduction

Statistics released by the Jersey Financial Services Commission (JFSC), as at 31 December 2020, support the trend seen over the past year – that of the continued popularity of the Jersey private fund (JPF) product alongside the growth of the private equity and venture capital asset classes.

In fact, alternative asset classes now represent 89% of total funds business in Jersey, with private equity and venture capital funds under administration growing 21% year on year to £164.6 billion. Further, during the past year, despite the turmoil caused by the COVID-19 pandemic, almost 100 new JPFs were registered, bringing the total number of JPFs in Jersey to over 400, the vast majority of which are Jersey-domiciled structures.

Why are JPFs in demand?

Private equity has always been a key asset class for Jersey funds. The growth in JPFs as a product has largely been driven by, on the one hand, the rise in managers raising first-time funds and, on the other hand, the increase in the number of funds with fewer investors but larger ticket sizes. JPFs are used to raise capital from a worldwide investor base, as well as investors located in the United Kingdom and the European Union, and invest in every conceivable industry. Investors range from institutions, sovereign wealth funds and pension funds to family offices and high-net-worth individuals.

It is easy to understand the demand for JPFs, given the regime's simplicity and flexibility. The key selling points of the regime include:

  • suitability for funds making fewer than 50 offers to investors meeting certain eligibility criteria;
  • carve-outs for holding structures, joint ventures, special purpose vehicles, employee incentive arrangements and family structures;
  • speed to market – a 48-hour approval process following the submission of a complete application to the JFSC via a dedicated web portal;
  • competitive regulatory fees – the fee payable to the JFSC is just over £1,000 upon registration and approximately £1,000 per year thereafter;
  • proportionate, light-touch regulatory supervision while still being subject to Jersey's full anti-money laundering/combating the financing of terrorism regime;
  • an ability to access investors worldwide, including to be authorised as an alternative investment fund for access to European capital via established national private placement regimes; and
  • no requirement for an offer document (although there is a standard for content requirements where there is one and investors must receive and sign an investment warning in prescribed terms).

With growth in venture capital funds fuelled by the pandemic, as living and working patterns were adapted, JPFs have served an important function in funding progress in technology innovation, particularly in the healthcare and education technology sectors.

Early-stage businesses and start-ups that can demonstrate fast growth rates or potential are attractive prospects for venture capital investors. For the reasons articulated above, there is likely to be a continued appetite for venture capital funds using JPFs.

What makes Jersey an attractive funds jurisdiction?

For those engaged in the domicile debate and wondering 'why Jersey?', below are some of the key considerations to bear in mind. As a funds jurisdiction, Jersey offers fund managers and investors the whole package:

  • an excellent reputation – Jersey has a robust yet flexible legal and regulatory framework and has been endorsed as a top international finance centre by the International Monetary Fund, the Organisation for Economic Cooperation and Development, the European Union and Moneyval;
  • a pragmatic, approachable and well-established regulator – the JFSC is charged with safeguarding Jersey's reputation and maintaining its position as an international finance centre meeting the highest regulatory standards;
  • universal recognition as a leading fund domicile, having been at the forefront of fund services for 60 years;
  • a jurisdiction with real substance for fund managers, a skilled workforce, regulated service providers and resident directors with expertise in all asset classes;
  • considerable expertise, particularly in relation to legal, administration, accounting and banking services;
  • solid infrastructure, with strong transport links to the United Kingdom, and the same time zone as London;
  • political stability;
  • tax transparency or zero tax for investment funds, ensuring no unnecessary tax leakage for investors;
  • recognition as a third country for EU purposes but an ability to access European capital; and
  • a forward-thinking jurisdiction, as demonstrated by the recent commitment to support funds with an objective of sustainable investment and to introduce measures to combat the risk of 'greenwashing'.

Jersey is the perfect 10 when considering the right jurisdiction for a new fund. The post-pandemic recovery is expected to drive further growth in the funds sector during 2021 and lead to a further increase in the use of JPFs in the context of private equity and venture capital funds.

For further information on this topic please contact Sophie Reguengo at Ogier by telephone (+44 1534 514 000) or email ([email protected]). The Ogier website can be accessed at www.ogier.com.