Perfectly positioned for private equity
Noel Walsh, Director, Private Equity
Jersey is an important fund service jurisdiction for alternative fund managers operating in Asia. Asian-focused funds seeking to attract capital in Europe and from the United States can take advantage of Jersey’s internationally recognised regulatory and legal regime, deep funds industry experience, strong infrastructure and access to public and private markets.
Sitting geographically between Asia and America, Jersey spans the working days of all the major markets, enabling effective investor communications and transaction management. Jersey has a broad range of tried and tested fund products for regulated and unregulated private equity investment structures, including limited partnerships, companies and unit trusts.
Regulation of service providers Jersey has taken a market leading approach to the regulation of fund service providers. Investors, particularly in Europe and the United States, who expect an outsourced administration model are familiar with Jersey and appreciate that administrators and other fund services businesses operating here are effectively regulated.
Regulation of the administrator, rather than of the fund, pushes the regulatory compliance responsibilities onto the service providers, whilst also providing comfort that an unregulated fund is subject to adequate independent oversight.
Jersey-based administrators and fund services businesses do not require regulatory consent to accept new non-domiciled client’s, such as Cayman private equity funds. This makes the appointment of Jersey administrators very easy. This is not the case in some other fund domiciles.
There are other significant advantages:
- Due diligence undertaken by investors prior to commitment can be concluded more efficiently when reliance is placed on the administrator’s regulatory status;
- Transaction management, particularly in relation to due diligence undertaken by a counterparty on the fund, may be completed more expeditiously, and
- Bank account opening may be faster when the bank is dealing with a regulated entity.
European capital markets Under the Alternative Investment Funds Managers Directive (AIFMD), Jersey has the status of a ‘third country’ non-European Economic Area jurisdiction. Jersey funds can market into the European Economic Area jurisdiction (EEA) through national private placement regimes where available. Jersey funds can also target investors outside the EEA without having to comply with AIFMD. As one of the first non-EEA jurisdictions with a fully compliant AIFMD product, Jersey has become the jurisdiction of choice for non-EU managers wishing to access European capital markets. Jersey will also be in the first wave of third countries to obtain a passport for Jersey managers to market their funds across the EEA. Although the implementation timetable for passporting is uncertain following the UK’s decision to leave the European Union.
Multi-jurisdictional funds Fund service providers who are serious about attracting Asian clients have established offices in key Asian markets, including Hong Kong, Singapore and mainland China. Fund structures have become increasingly complex in recent years. It is not uncommon to see feeder and parallel funds established in multiple jurisdictions for specific investor groups, such as US and Non-US investors, European investors and single investor funds for the largest investors. Fund structures frequently use a combination of Jersey, Cayman, Delaware, UK and Luxembourg entities to satisfy investor requirements.
As a fund administrator, it is essential to have offices that can service these multi-jurisdictional funds, while also having a presence in close proximity to the fund manager. Administrators offering a bespoke service are best placed to cope with the complexity and variety of fund structures now being established. Effective co-ordination of cross-border service provision is a key factor in maintaining high standards. The ability to offer an extended single working day across Asian, European and US time zones is often a critical factor for managers choosing a Jersey based administrator.
Jersey has been a leading jurisdiction for alternative investment funds for many years and is well placed to serve the growth of investments in alternative assets in China and across Asia. When Jersey-based service providers are involved, they are able to pass on their knowledge, experience and best practice to their Chinese and Asian clients. Directors with specific Chinese and Asian transaction experience, and an understanding of the nuances and difficulties in negotiations, are also well placed to act on the boards of asset holding companies and general partners.
In summary Jersey has become a jurisdiction of choice for Asian managers seeking to raise capital in Europe and the United States. To maintain the edge it currently enjoys over rival jurisdictions, Jersey must continue to improve its reputation for delivering first class fund administration services, within an effective and internationally recognised regulatory framework.
Authored by Noel Walsh, Director Asia at SANNE.