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Issue 35: November/December 2014
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FUNDS ISSUE Aifmd
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Issue 35: November/December 2014
Esma
Channel Islands
business news . views . comment . lifestyle
Welcome
businesslife.co businesslife.co is published six times a year by Chameleon Group Limited +44 1534 615886 www.businesslife.co Editor-in-Chief Nick Kirby nick.kirby@businesslife.co
Nick Kirby
Advertising Carl Methven, Director carl.methven@businesslife.co Publisher Kirsten Higgins, Director Art Director Angela Lyons
Carl Methven Sub Editor Nicola Tann News and editorial news@businesslife.co
Kirsten Higgins
General enquiries enquiries@businesslife.co
businesslife.co Discussion Forum Follow us at @businesslifeco and @bizlifejobs Registered Office, Meadowlands, La Rue a la Dame, St Saviour, Jersey, Channel Islands, JE2 7NQ © Chameleon Group Limited, all rights reserved. Reproduction in whole or in part without written permission is prohibited. Views expressed by our contributors are their own and do not necessarily represent the views or policies of Chameleon Group. While every effort is made to achieve total accuracy, Chameleon Group cannot be held responsible for any errors or omissions.
The funds story keeps rolling on The Channel Islands’ funds industries have been through the mill with the rest of the world in recent years. But as this special funds edition shows, the way forward is becoming clearer
A
t the beginning of October, businesslife.co held its annual funds forum in Jersey. Based on previous years, we expected a good turnout and an interesting, thought-provoking day – and we certainly weren’t disappointed. Because the funds industry is such a huge part of financial services in the Channel Islands, it’s easy to become a little matter-of-fact about funds in general. But the packed house of senior industry figures and an array of lively sessions clearly showed funds are anything but mundane, and that there’s a great deal going on in the industry at the moment, both locally and internationally. This is something very much in evidence in this special funds issue. A couple of months ago, when we were deciding what subjects to cover, we reached a point where it became more about what we were going to have to leave out, rather than struggling to find stuff to put in. From the Alternative Investment Fund Managers Directive (AIFMD) and private equity right through to competitive
jurisdictions and hedge funds, we found ourselves with an embarrassment of riches. Funds have been undergoing a transition in recent years – partly because of legislative changes emerging out of the UK, Europe and the US, but also because finance on the global stage is still recovering from the crisis that hit just six years ago. As a result, the funds industry is still trying to settle itself. That process is likely to take some time, not least because some regulation is still being rolled out and the effects will take years to truly be realised. But things are becoming clearer. From an industry perspective, there are challenges that need to be met, as well as opportunities that must be grabbed with both hands. From our point of view, it means there’s no shortage of material to write about – and you can be sure that with 2015 just around the corner, funds are going to remain high on the agenda for some time to come. n The businesslife.co team
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To get involved contact Carl Methven +44 (0) 1534 615886 +44 (0) 7797 796377 and carl.methven@businesslife.co November/December 2014 businesslife.co 3
Contents
80
November/december 2014
76 76 Real estate
Bricks and mortar are enjoying a renaissance
48
92
8 News
A round-up of the latest business news from the Channel Islands and beyond
14 Appointments
92 Skiing
A vehicle for specific, targeted investments
114 Last word
Christopher Good on fund management
Are Jersey and Guernsey making the most of PE’s recent recovery?
The ongoing impact of the European Directive
28 Interview
60 FATCA
How the ripples are still being felt
Danny Masters from Global Advisors talks innovation
64 Japan
34 Multi-asset
Is the sun rising in the east again?
Are they a must-have for investors?
Who are the Channel Islands’ main competitors?
70 Funds jurisdictions
funds
How Brits and Americans differ
Chalets for the mega-wealthy
56 Private equity
24 AIFMD
Can Jersey and Guernsey attract more business?
42 Private fund What happens when a star player jumps ship?
Where do the Channel Islands’ funds industries stand?
82 Hedge funds
86 Business culture
The investment responsibilities of trustees
48 Fund managers
18 Funds review
The nine types you need to avoid
38 Funds and trusts structures
Recent key hires for Jersey and Guernsey businesses
80 Business people
The Agenda
97
From Springbok footwear, blingy earrings and designer éclairs, to printed ‘crazy’ suits, baroque furniture and racing green nail polish, this issue’s Agenda is a feast of the weird and the wonderful. Enjoy!
contributors
David Burrows
Orlando Crowcroft
Vicky Meek
Dave Waller
Financial writer David examines the responsibilities that trusts have when it comes to investments, and then heads to Japan to see whether the country is worth investing in again.
Regular contributor Orlando looks at two funds areas and how they are doing in the Channel Islands – real estate, which already has a presence, and hedge funds, which are looking to grow.
Private equity specialist Vicky gets to grips with the current state of play of the industry in Guernsey and Jersey, and examines where the islands sit on the global stage.
It’s another threesome for businesslife.co regular Dave as he makes sense of AIFMD and private fund structures, and looks at where funds competition to the Channel Islands is coming from.
6 businesslife.co November/December 2014
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FOR MORE INFORMATION, PLEASE CONTACT ADAM NORRIS IN JERSEY AT +44 (0) 1534 283496, ADAM.NORRIS@RBC.COM, OR DANIEL BISSON IN GUERNSEY AT +44 (0) 1481 744395, DANIEL.BISSON@RBC.COM, OR VISIT
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There’s Wealth in Our Approach.TM BANKING | CREDIT | INVESTMENTS | TRUST | TAX CONSULTANCY | CUSTODY | FUNDS | EMPLOYEE BENEFITS The value of investments may fall as well as rise. You may not get back the full amount that you originally invested. This advertisement is issued by Royal Bank of Canada (Channel Islands) Limited (“the Bank”) on behalf of RBC® companies that comprise RBC Wealth Management in the British Isles The Bank is regulated by the Guernsey Financial Services Commission in the conduct of deposit taking and investment business and to act as a custodian/trustee of collective investment schemes in Guernsey and is also regulated by the Jersey Financial Services Commission in the conduct of deposit taking, fund services and investment business in Jersey. The Bank’s General Terms and Conditions are updated from time to time and can be found at www.rbcwminternational.com/terms-and-conditions-British-Isles.html. Registered Office: Canada Court, St Peter Port, Guernsey, Channel Islands, GY1 3BQ, registered company number 3295. Deposits made with the offices of the Bank in Guernsey and Jersey are not covered by the UK Financial Services Compensation Scheme; however, the Bank is a participant in the respective Deposit Compensation Schemes in Jersey and Guernsey (“the CI Schemes”). Links to the official websites which provide details of the respective CI Schemes are available on the Jersey and Guernsey pages of our website Copies of the latest audited accounts are available upon request from either the registered office or the Jersey Branch: 19-21 Broad St, St. Helier, Jersey JE1 8PB. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence
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News
In the news... Mourant Ozannes advises on deals Guernsey enjoys migration success
Investec Asset Management Guernsey has redomiciled Investec International Funds, a $1.2bn fund-of-funds unit trust, from Ireland to Guernsey. Mourant Ozannes oversaw the process, which involved all legal and regulatory aspects, including investors’, Irish Central Bank and GFSC approvals, and changes to the fund documentation, to move the fund and authorise it as a Guernsey Class B open-ended unit trust. The first migration of a foundation from another jurisdiction to Guernsey has also taken place. Lloyd’s Trust Company (Channel Islands) has moved a Liechtenstein-based foundation to Guernsey following the introduction of foundations legislation into Guernsey law last year. Carey Olsen prepared the migration application for submission to the Guernsey Registry and advised Lloyds on the foundation’s new charter and the rules that needed to be adopted to comply with the Foundations (Guernsey) Law, 2012. n
Guy Hands buys Grand Jersey Hotel Guy Hands and his wife Julia have bought the Grand Jersey Hotel and Spa in St Helier for an estimated £15 million. The couple’s privately owned chain, Hand Picked Hotels, has taken over the five-star property from RBS Real Estate Asset Management, taking its total holding to 21 hotels. The Grand becomes the country house hotel group’s third property in the Channel Islands after its purchase of the L’Horizon Hotel and Spa, also in Jersey, and St Pierre Park and Golf Resort in Guernsey. n
Mourant Ozannes has advised Hermes Real Estate on the £430 million sale of three business parks to asset management groups Oaktree Capital Management and Patrizia. The industrial-based business parks are Chineham Park in Basingstoke, Birchwood Park in Warrington, and Hillington Park in Glasgow. The Mourant Ozannes team advising Hermes was led by Partner James Hill and assisted by Senior Associate Iain Millar. Mourant Ozannes provided Jersey law advice on all aspects of the disposal. Berwin Leighton Paisner LLP acted as the English legal advisers to Hermes and Reed Smith LLP and Carey Olsen advised the buyers. The firm has also advised an affiliate of Greystar Real Estate Partners on the £174 million acquisition of a portfolio of student properties in London from Oasis Capital – a joint venture between Oasis Capital Bank and Unite Group. Greystar is the largest student accommodation group in the US, and since its first UK acquisition in September 2013, it has gone on to acquire more than 30,000 student rooms in the UK. The company is now the largest student accommodation owner in the country. The finance and corporate team at Mourant Ozannes was led by James Hill and assisted by Iain Millar and Senior Associate Jon Le Rossignol. Jones Day acted as English legal advisers to Greystar, while Nabarro and Bedell Cristin provided Jersey legal advice to the sellers. James Hill commented: “It has been a pleasure working with the Greystar team, and we look forward to working with them in the future as they look to replicate the success of their Northern American operations in Europe.” n
Sign up for our daily Channel Islands’ business news email updates at www.businesslife.co 8 businesslife.co November/December 2014
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Intertrust is a global service provider with offices in 24 countries and this global presence lends itself to multi-jurisdictional solutions. We have developed particular expertise in administering property funds and private equity funds. Services include initial advice on fund establishment, provision of fund directors and sponsorship for listings on the CISE. For further information please contact Frank Moon or Peter Griffin.
Global reach, local knowledge.
Intertrust Fund Services Limited PO Box 119, Martello Court, Admiral Park St Peter Port, Guernsey GY1 3HB tel +44 (0)1 481 211 000 fax +44 (0)1 481 211 001 funds-guernsey@intertrustgroup.com
www.intertrustgroup.com
Intertrust Fund Services (Guernsey) Limited (Registration Number: 34447) is licensed in Guernsey by the Guernsey Financial Services Commission under The Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended. Telephone calls may be recorded for monitoring and training purposes.
News
Mergers and acquisitions ● J ersey insurance and pension business Vantage has acquired Capital Insurance Brokers (CI) for an undisclosed sum. Regulatory approval has been granted and the transaction completed on 1 October 2014. All of Capital’s staff will be employed by Vantage and will move to their offices in Grenville Street, St Helier. ● First Names Group has agreed terms to acquire Jersey trust and corporate services provider Seymour Trust Company. The strategic acquisition of Seymour (which remains subject to regulatory approval) will expand First Names’ presence in Jersey. This is the seventh acquisition for the Group since its management buyout in July 2012. Seymour’s trust and corporate services business will be integrated into First Names’ Private Client Service Line.
Aztec Group opens Amsterdam office Funds and corporate services provider Aztec Group has opened a new office in Amsterdam, adding to the Group’s onshore presence in the UK, Luxembourg and Sweden, and its offshore offices in Guernsey and Jersey. The new office has been launched with the support of a longstanding client, and is headed up by a senior member of the Aztec team, Andreas Demmel, who previously worked in Aztec Group’s Luxembourg office for three years. Andreas is joined by Marc Hollander, who has on-the-ground experience of the Netherlands market, having worked in the financial services sector in Amsterdam for over 20 years. n
● Law At Work, a Channel Islands-based health and safety, employment rights and human resources firm, has acquired Normandie Health and Safety (Jersey). Law At Work’s health and safety team delivers practical training, site and office safety inspections, risk assessments and accident investigation services, helping clients meet their legal obligations and provide a safe workplace for their customers and employees. n
Carey Olsen latest deals Carey Olsen has advised on the establishment of two new Guernseydomiciled funds, Inflexion Buyout Fund IV and Inflexion Partnership Capital I, securing commitments of £650 million and £400 million respectively on behalf of Inflexion Private Equity Partners LLP. Led by Partner Andrew Boyce and Senior Associate James Stockwell, Carey Olsen worked alongside onshore legal advisor Ashurst in the formation of the new private equity funds, which closed within five months of launch.
The company also advised private equity firm Blue Water Energy on its joint venture with Blackstone to invest $500 million in Siccar Point Energy, a new North Sea-focused oil company. Carey Olsen Corporate Partner Andrew Boyce and Senior Associate Ruth Abernethy acted in relation to the joint venture structure alongside leading onshore firm Pinsent Mason. The team also advised on the involvement of a new Siccar Point Energy investor alongside onshore firm Kirkland & Ellis. n
Sign up for our daily Channel Islands’ business news email updates at www.businesslife.co 10 businesslife.co November/December 2014
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Wealth and Investment Management Barclays offers wealth and investment management products and services to its clients through Barclays Bank PLC and its subsidiary companies. Barclays Private Clients International Limited, part of Barclays, is registered in the Isle of Man. Registered Number: 005619C. Registered Office: Barclays House, Victoria Street, Douglas, Isle of Man IM99 1AJ. Barclays Private Clients International Limited is licensed by the Isle of Man Financial Supervision Commission, registered with the Insurance and Pensions Authority in respect of General Business, and authorised and regulated by the Financial Conduct Authority in the UK in relation to UK regulated mortgage activities. Barclays Private Clients International Limited, Jersey Branch, is regulated by the Jersey Financial Services Commission. Barclays Private Clients International Limited, Jersey Branch, has its principal business address in Jersey at 13 Library Place, St. Helier, Jersey JE4 8NE, Channel Islands. Barclays Bank PLC, Isle of Man Branch, has its principal business address in the Isle of Man at Barclays House, Victoria Street, Douglas, Isle of Man IM99 1AJ. Barclays Private Clients International Limited, Guernsey Branch, is licensed by the Guernsey Financial Services Commission under the Banking Supervision (Bailiwick of Guernsey) Law 1994, as amended, and the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended. Barclays Private Clients International Limited, Guernsey Branch, has its principal place of business at Le Marchant House, St Peter Port, Guernsey, Channel Islands GY1 3BE.
News
Ogier launches dispute resolution team in Hong Kong
Offshore law firm Ogier has expanded the reach of its dispute resolution practice into Hong Kong to serve Asian clients in their own time zone. The Hong Kong dispute resolution practice will work closely with the wider dispute resolution team across BVI, Cayman, Guernsey and Jersey. The new practice is headed up by Partner Ray Ng who has relocated from BVI to Hong Kong. Ray’s move is a direct response to increasing client demand for on-the-ground access to BVI-acquired litigation experience and Mandarin language skills. Ogier’s dispute resolution service in Asia will advise on BVI, Cayman, Guernsey and Jersey law; companies, board and shareholder disputes; corporate insolvency and winding-up issues; the effect of decisions in Hong Kong’s matrimonial division on Cayman and BVI trusts; as well as investor and founder disputes. n
HSBC moves trust business to Jersey HSBC Private Bank is moving its trust administration services business from Switzerland to Jersey, which will effectively consolidate its European private trust and fiduciary administration services in the island. The bank will retain Swiss-based trust front offices in Geneva and Zurich, as HSBC Switzerland is a key international booking centre for its global private banking operations. Franco Morra, Global Private Bank Regional Head, EMEA, said: “The concentration of our European administration services in one hub in Jersey, where we already manage some of our largest trust relationships, will further improve our operational efficiency and will ensure that the structures we administer meet the ever-growing regulatory requirements… To accommodate the additional business arising from the transfer, HSBC Private Bank is currently adding a number of roles to its trust administration teams in Jersey.” n
Channel Islands tumble down GFCI
Having dominated the offshore category in the Global Financial Centres Index (GFCI) for the last seven years, Jersey and Guernsey have dropped down the offshore rankings in the GCFI 16 (September 2014 edition), falling to 5th and 7th positions respectively – their lowest offshore position since the index began in March 2007. Their fall in the offshore section has been echoed by a decline in their overall positions. Jersey has fallen to 62nd place in GFCI 16 (from 41st in March 2014). Guernsey has fallen to 67th from 42nd in the same period. The GFCI provides profiles, ratings and rankings for 83 financial centres, drawing on two separate sources of data – instrumental factors and responses to an online survey. The top seven offshore centres in GFCI 16 are (with their overall position): 1. BVI (47) 2. Gibraltar (53) 3. Cayman Islands (54) 4. Hamilton (Bermuda) (58) 5. Jersey (62) 6. Isle of Man (64) 7. Guernsey (67) Responding to Jersey’s position in the rankings, Richard Corrigan, Deputy CEO at Jersey Finance, pointed out that the Channel Islands were not alone in slipping down the rankings. “Western Europe and all offshore financial centres have experienced a fall in ratings in the Global Financial Centres Index 16,” he said “We understand that there has been a shift in the level of responses to the survey from respondents in North America and the Asia Pacific region by as much as 20 per cent, and a decrease in the equivalent number of responses from Europe. This change will have a detrimental impact on our rankings and will inevitably give a greater bias to both Cayman and the BVI, which have traditionally had more clients in the region.” n
Sign up for our daily Channel Islands’ business news email updates at www.businesslife.co 12 businesslife.co November/December 2014
News
Appointments
business development director joins first names First Names Group has appointed Matt Haynes as Group Business Development Director. Based in the Jersey office, Matt will develop key client and intermediary initiatives in addition to new business opportunities across the Group’s 14 locations. He joins the company from Hawksford where he was Director of Business Development, responsible for driving business development activity, and played an active role in the development of relationships with both clients and intermediaries.
New ceo at brooks macdonald Brooks Macdonald International (BMI) has appointed Darren Zaman as Chief Executive of its offshore business. Darren is the former CEO of DPZ Capital, the Jersey-based wealth management business acquired by BMI in April 2014. Darren, who founded DPZ in 2007, has over 28 years’ experience in the financial markets, previously as the Managing Director of HSBC Investments (International) and Le Masurier James and Chinn, where he had responsibility for international fund management teams based in Jersey and London.
Salamanca Group appoints new md Salamanca Group has appointed Paul Douglas as Managing Director of Salamanca Group Trust and Fiduciary, Jersey. He will be responsible for running the operation in Jersey and growing its book of business. Prior to this appointment, Paul was based in Switzerland as Managing Director of Salamanca Group Trust & Fiduciary. As a qualified lawyer with a background in private banking, he has a comprehensive knowledge of the management of international wealth planning and family office structures.
three new partner appointments at ogier Fabien Debroise has been appointed to Partner in the Luxembourg office. He has special expertise in syndicated lending and leveraged acquisition finance. Niamh Lalor (pictured) has become a Partner in the Jersey office. She’s been with the Group for over 13 years and has developed a strong funds practice. New Partner Bruce MacNeil joined Ogier in 2008 as part of the Jersey Banking and Finance team. He has led on numerous high value and high profile banking and finance transactions.
business development addition at equiom International trust and corporate services provider Equiom has appointed Richard Tribe as Business Development Director. Richard will be based in Jersey, with overall responsibility for Equiom’s business development and marketing teams. He joins the company from Coutts, where he had overall responsibility for the Channel Islands’ Private Client Team. Richard’s worked within the international finance industry for over 27 years, and has specific expertise in private banking and wealth management.
deutsche bank appoints new head of compliance Deutsche Bank has appointed Nadia Lewis as Head of Channel Islands Compliance. A practising solicitor and MBA graduate from the London Metropolitan Business School, Nadia joins Deutsche Bank from the RBS Group, where she most recently held the position of Head of Conduct Standards for RBS Group Compliance in London. Returning to Jersey, where she was educated and worked for a number of years, Nadia brings with her strong expertise in a range of legal, secretariat regulatory risk and compliance issues.
14 businesslife.co November/December 2014
International Funds Certificate new head of trust and fiduciary at LJ group LJ Group has announced the appointment of Marc Farror to the newly created post of Head of Trust and Fiduciary. Previously, Marc was a Director heading up the trust and fiduciary team for JTC Guernsey. Marc has spent the last eight years in Jersey and Guernsey working for leading trust companies, including Vistra, Sanne and Mourant Private Wealth. He focuses on structuring solutions for international high-net-worth families, particularly from the CIS, Asia and the Middle East.
airtel-vodafone recruits chief technical officer Airtel-Vodafone has appointed David Fowler as Chief Technical Officer, with responsibility for introducing the Channel Islands’ 4G network, as well as its maintenance and development. During his 30 years in the industry, David has worked in Europe and the US for many major firms, including BT in the UK, Proximus Belgacom in Belgium and Polkomtel in Poland. In 2010 he joined Sure as Chief Operating Officer with responsibility for operations in the Channel Islands and Isle of Man.
marc Lainé appointed to c5 alliance group board Marc Lainé, MD of C5 Alliance in Guernsey, has been appointed to the C5 Alliance Group board. A well-known local businessman and former politician, Marc has over 25 years’ experience in the telecommunications and technology sectors. In 1994 he founded ATLAS Telecom, which was sold to the Jersey Telecom Group in 2002, the same year he was awarded ‘Entrepreneur of the Year’ by the Confederation of Guernsey Business. He held various other senior positions before joining C5 Alliance in 2010.
Director promotion at Deloitte Marc Cleeve has been promoted to Director at Deloitte in Jersey. Marc’s been with Deloitte for over 12 years, and in his new role will lead the company’s banking and debt fund offering, as well as being responsible for recruitment in the Jersey office. He’s a member of the Association of Chartered Accountants, the Institute of Directors and the Technical Committee of the Jersey Society of Chartered and Certified Accountants, and has a wealth of experience in banking, debt funds and real estate funds
senior employment lawyer joins appleby Senior employment lawyer Richard Sheldon has joined Appleby in Guernsey. Richard practises in all areas of employment law, including strategic advice, litigation and transactional support, as well as advising on matters such as executive severance, restrictive covenants, bonus disputes and trade union issues. He’s a member of the Employment Lawyers Association and a regular trainer on a wide variety of employment issues, both on public courses and in-house training to clients.
Gillian Browning joins the GFSC The GFSC has appointed Gillian Browning as Director of the Fiduciary Supervision Policy and Innovations Division. Gillian joins the Commission from the UK Financial Conduct Authority, where she supervised a wide range of financial institutions, including, most recently, large retail banks. She also played a leading role in the Financial Services Authority’s ‘difficult cases’ team. Gillian joined the Financial Services Authority from the Cabinet Office, where she was a Minister’s Private Secretary and Policy Officer.
Working in the funds industry or looking to switch across to this growing sector? Need a wider perspective of international funds? The International Funds Certificate gives a good all round knowledge of the type, structure and use of funds plus an overview of roles and responsibilities of the key players and fund regulations. Study towards this new qualification using a choice of online classroom or face-to-face courses. Next course starts 29 January 2015.
For more details, including sample material and lectures, phone 711800 or email bppjersey@bpp.com or go to bpp.com/jersey
November/December 2014 businesslife.co 15
2015 Conference Diary businesslife.co is running six conferences in 2015 Family Office Conference Tuesday 17 March, in Jersey (see opposite)
Jersey Trusts Conference Wednesday 13 May Guernsey Funds Conference Wednesday 8 July Channel Islands Insurance Forum Wednesday 16 September, in Guernsey Jersey Funds Forum Thursday 1 October Guernsey Trusts Conference Wednesday 11 November
To register interest in any of these events, and to be notified when delegate places become available, please email events@businesslife.co stating the event you’re interested in. Sponsorship and exhibitor packages are also available for all events. Contact Carl Methven on +44 1534 615886 or +44 7797 796377, or at carl.methven@businesslife.co for more information.
A businesslife.co event
family offices: past, present and future
Tuesday 17 March Pomme D’Or Hotel, St Helier, Jersey 9am – 2.30pm For more information and to book your place, visit www.businesslife.co/events or email events@businesslife.co
Funds:
the here and now Funds have become an increasingly important element of Jersey’s and Guernsey’s financial services industries, enabling the islands to play a key role in providing a range of organisations with access to global capital markets. In this post-credit crunch era, Kirsten Morel takes a look at the current state of play in the islands’ funds sectors
18 businesslife.co November/December 2014
funds
T
here are many ways to look at the health of the funds industry in the Channel Islands, and the most tempting is to look at the net value of funds under management and administration. The reality, however, is these figures can be affected by a number of external factors, including currency movements. Assets held within the funds industry are intrinsically linked to the wider global financial markets, and affected by other events around the world, meaning that while the scale of funds figures make for good headlines, they don’t tell us much about the state of the funds sector. The figures in the Channel Islands at the moment paint a rather grey picture. Total funds under management and administration in Guernsey fell from £286bn at the end of June 2013 to £261.3bn at the end of June this year. In Jersey, where the funds sector is a bit smaller in relation to the whole of the finance sector, the net asset value of funds under administration slipped slightly by £0.9bn from £201.3bn at the end of Q2 2013 to £200.4bn at the end of June 2014. Admittedly, the silver lining here is that this is a rise from the £192.1bn figure that Jersey had fallen to at the end of 2013. A more comprehensive understanding of the overall health of the funds industry can be found by looking at the figures that give a snapshot of the activity in the sector and the popularity of the jurisdiction when it comes to new funds. These paint a different picture for each island. Guernsey saw a small rise in the 12 months to the end of June 2014 with the number of funds approved for domiciling or servicing rising by 15 from 1,093 at the end of June 2013 to 1,108 at the same point this year. In Jersey, the picture isn’t quite as rosy. While the number of unregulated funds rose by 13 to 202 in the 12 months to the end of June 2014, the number of regulated funds fell to 1,283 from 1,337 – a fall of four per cent over the same period. With the figures showing a mixed year for the islands’ funds sector, Ben Robins, Chairman of the Jersey Funds Association, believes other indicators tell a different story. “I have to say the number of funds we have and the assets under management figures are interesting benchmarks, but not the only benchmarks. One is how busy people are, and over the last 18 months, we’ve seen a lot of activity in Jersey.” Backing this up, he explains, is the arrival of formerly UK-based hedge fund Brevan Howard to the island, as well as the presence of private equity fund managers CVC, Nordic and other “very large European funds”.
Crunching the numbers
November/December 2014 businesslife.co 19
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Funds
Funds:
Trends in funds
the here and now
G
rowth may be roughly neutral, but that doesn’t mean the funds industry in the islands isn’t moving forward. “We’re renowned for our listed funds,” says Fiona Le Poidevin, Chief Executive of Guernsey Finance. “We’re listings leaders in London, and at the end of July, we had 125 listed entities on the stock exchange.” Leading the rest of the world when it comes to LSE listings is no mean feat, and lends credibility to the claim that Guernsey is the listings jurisdiction of choice. Jersey isn’t too far below on the leader board, with 95 entities registered on the LSE at the end of June 2014, confirming the trend to use the Channel Islands as a gateway to the London markets. Funds listed include energy and infrastructure funds, which mirrors an industry-wide trend. “The trend for infrastructure funds has been prompted by governments investing in infrastructure during the recession,” says Tom Amy, Director at Elian Fund Services. “And real estate and private equity funds, over the last three years, have become more popular. A classic example is real estate debt which is debt investment as opposed to holding real estate itself.” It’s a sentiment that Ben Robins echoes for Jersey, saying: “Private Equity was a strong story in 2013 – and 2014, I think, will be about real estate.” Large scale investment in infrastructure and energy as well as growth in sectors such as fintech and mining funds brings with it large scale investment vehicles – and the Channel Islands are benefitting. William Simpson, Partner at Ogier in Guernsey, on the other hand, isn’t entirely sure about trends. He says: “Investment companies have been established, some listed, to acquire one or more businesses, ranging from banks, mining and related assets to food and chemicals. There have also been a number of feeder structures to facilitate US and generally non-EU investors. It’s therefore difficult to identify any particular trend save to say, as always, Guernsey remains broadly based and continues to attract a wide range of interesting and sometimes challenging funds.” So why are the islands being chosen for funds business? Robins sees “the tax base and also European regulation, such as AIFMD,” as drivers of business to Jersey. This growing trend for business originating from non-UK markets is also seen in Guernsey, says Amy. “We’re certainly seeing US fund managers looking at Europe, and as soon as they start looking at that, they start asking about Guernsey.”
20 businesslife.co November/December 2014
AUM in Guernsey fell from
£286 billion
June 2013
£261.3 billion June 2014
AUM in Jersey fell from
£201.3 billion June 2013
£200.4
billion June 2014
Guernsey: number of funds approved for domiciling or servicing rose by
15 ➔
In the year to June 2014
Jersey: number of regulated funds has fallen by
4%
In the year to June 2014
Funds
Regulation, regulation, regulation…
Funds:
the here and now
“We’re renowned for our listed funds. We’re listings leaders in London, and at the end of July we had listed entities on the stock exchange”
125
Fiona Le Poidevin, Chief Executive of Guernsey Finance
End of June 2014
95
Jersey entities registered on the LSE 22 businesslife.co November/December 2014
“G
uernsey did the right thing in having a dual regime,” says Fiona Le Poidevin, acknowledging that the Channel Islands’ two-track approach has made the most of the potentially tight regulatory corner created by AIFMD. The dual regime means funds can opt in or out of AIFMD as best suits their client base, so providing a route to Europe via the Channel Islands if needed and avoiding the extra administration and cost if not (see page 24). Such a strategy plays to the many firms in Guernsey that have limited or no interest in Europe. “Thirty-four members sell into European countries from here,” says Mike de Haaf, Consultant to the Guernsey Investment Funds Association (GIFA). “Of the 27 jurisdictions we’ve signed a bilateral cooperation agreement with, we sell into 15. There’s a mix of members here, some for whom Europe doesn’t come into the equation.” The Channel Islands have taken a serious and proactive approach to AIFMD, ensuring something that first looked as though it could lead to them becoming excluded from European markets has, in some respects, turned into a bit of an opportunity, particularly in the provision of depository services, which are required by AIFMD for funds holding non-financial assets. “It creates an opportunity for individual companies, and a few have chosen to go down this route,” says de Haaf. “There are a couple of private equity managers here who have been issued depository licences for AIFMD purposes.” Of course, the other major piece of regulation that has affected the islands’ funds sector is the US – and subsequently the UK – FATCA regimes (see page 60). Again, the Channel Islands moved fast to get to grips with the legislation, and, according to Ben Robins, have given themselves an advantage. “There was less scope for negotiation but the way the States of Jersey tax team got to grips with regulation was excellent. People looking to use your jurisdiction want to know you’re aware and ready for it, and I hope that we’ve shown that, for a small jurisdiction industry, the regulator and government can come together quickly, even when the issues are complex.” Fiona Le Poidevin agrees that this collaborative approach should continue, as the islands are increasingly subjected to international regulations. “With any external regulation we need to approach it in the same ways we did with AIFMD – with the government, regulator and industry working together.” This approach is already being applied to MIFID 2, the successor to the EU’s Markets in Financial Instrument Directive that seeks to make financial markets more transparent, resilient and efficient as well as offering investor protection. “MIFID 2 is one of the big regulations coming our way, and there’s already a working group set up,” says Le Poidevin. It’s natural that the implementation of international regulations can cause the islands great concern, but one of the big stories over the coming months and years will be the reorganisation of domestic legislation to make the islands’ funds regime easier to negotiate. “A huge project is the need to simplify and streamline the funds regulatory regime in Jersey, and there’s a very important project already underway to deal with this,” says Robins. The odds are that international regulation will only get tighter, at least for the foreseeable future. With the islands taking a heads-up and hands-on approach to dealing with both domestic and international regulations, there remains, says Robins, “a lot of optimism” in the industry. n Kirsten Morel is a freelance financial writer
MD
With the transition period over and reporting deadlines looming, Dave Waller examines the state of play with AIFMD, and finds there are still hoops for managers to jump through
The
Longand
winding road W
hen the EU introduced its Alternative Investment Fund Managers Directive (AIFMD) in July of last year, it caused its share of consternation – almost as if the four horsemen had saddled up on the shores of the Channel Islands, followed by thunder and lightning and an ominous train of red tape. But with the dust now settling on AIFMD’s year-long transitional period, it seems the impact on the Channel Islands hasn’t been all bad. The Directive’s aims are sensible enough. It was designed to prevent instability in the provision of alternative funds, improving investor protection through new standards and enhanced transparency, and it introduced extra reporting requirements and a stronger focus on risk management. In essence, if nonEU-based fund managers wanted to market into Europe, they’d have to jump through a whole load of new hoops. Which is where the dark clouds come in. With the first reporting deadlines for many approaching this December, some fund administrators have been frantically looking at existing client structures to ensure they’re fit for purpose. This extra reporting, not only to investors but to regulators, presents a daunting challenge for many fund managers,
24 businesslife.co November/December 2014
who need to pull information from disparate sources and report it, often in unfamiliar XML formats, within the given time constraints. Then there’s additional training, and obligatory new custodial requirements like depositaries [see box on page 26]. “We’re seeing fund administrators thinking about the reporting that’s required and getting ready for that in advance of the reporting dates,” says Kirsty Mackay, Executive Director in Advisory and Assurance Business Services at EY. “People are working out whether they paid sufficient attention to adapting to the new regulations and whether they’ve put the resources in place to deal with it. We’re still speaking to some who haven’t fully identified the impact on their clients – they obviously underestimated the requirements.”
Balancing the costs As you’d imagine, these added requirements mean extra costs. And there are further complications. While AIFMD has been adopted across the EU, with each country obliged to introduce it as legislation, the likes of France have added their own additional requirements and fees. So managers who are complying with everything required by AIFMD may still have additional hoops to jump through for each different country. “It’s meant to work like a passport giving access to the EU,” says Justin Partington,
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AIFMD
November/December 2014 businesslife.co   25
Depositaries: a must-have? Among the requirements introduced with AIFMD was a more robust form of custodian service for alternative assets – depositaries. These would monitor and verify the ownership of assets, and provide oversight on cash and transactions. The majority of depositaries established in the wake of AIFMD in July last year are via existing fund administrators, who are already blessed with the necessary custodial expertise and client base. The only snag? A depositary isn’t exactly a money-spinner, and the liabilities are significant – if the depositary makes any mistakes, it’s going to pay. As such, it’s seen as a cost burden more than anything, but for many fund administrators it’s a necessary move. Many establish a depositary to prevent their clients seeking the obligatory service from another provider, which may lead them to seek other services elsewhere too. Depositaries have thus proven to be more about holding on to existing business than generating anything new. And thanks to the intricacies of AIFMD they tend to be based onshore. While the UK and EU have seen them spring up in droves, the Channel Islands have only about half a dozen. Yet, as with many facets of AIFMD, this may well change in the future. The EU introduces its AIFMD passport in 2015, and the number of depositaries setting up offshore may increase. And the Channel Islands certainly have the custodial experience and expertise to benefit.
The Channel Islands have responded intelligently, putting in place a dual regime that gives managers the opportunity to opt in to AIFMD-compliant rules if needed Commercial Director at Ipes in Guernsey. “But instead of just waving your documents at the border guard and driving straight through, you have to stop the car, sign 80 pages of papers and wait for a month before you can get out of the country.” As such, even if this isn’t exactly a Book of Revelations-scale disaster, it still represents quite a pain. In July, research by Preqin showed that only 16 per cent of real estate and investment fund managers thought AIFMD would have a positive impact on the industry (with 47 per cent predicting a negative impact, and 37 per cent saying it wouldn’t have any). For many, the costs outweigh the benefits. “At the outset it was seen principally as a downside aspect that just had to be covered off – the same as other tax reporting or standards-related regulations,” says Tim Morgan, a Partner at Ogier in Jersey. “These can seem to be the result of a potentially flawed policy-making process, which is
26 businesslife.co November/December 2014
in fact used for political purposes, to give certain European centres an advantage over the UK and offshore world.” Yet rays of light are breaking through the clouds. The Channel Islands occupy a peculiar position on AIFMD – as they lie outside the EU, neither Jersey or Guernsey are required to comply with the Directive, but any funds that are domiciled in the EU and marketed there are. Both islands have responded intelligently, putting in place a dual regime that gives managers the opportunity to opt in to AIFMD-compliant rules if needed. One regime, fully compliant with the Directive, is for fund managers who are marketing to the EU. This can be done under the EU’s private placement provision, allowing for an agreement with each particular jurisdiction on a case-by-case basis. The other is the regulatory framework that existed before AIFMD – for those funds that
AIFMD don’t need to be, or choose not to be, regulatory compliant. “It enables Jersey to continue to do what a well-balanced jurisdiction would have done prior to AIFMD,” says Morgan. “Non-EU clients raising non-EU money can continue with the full approach, which is of course something an EU jurisdiction can no longer offer. And if those non-EU clients want to target EU money, but don’t know how much of their business that will represent, they can dip in without having to take the whole lot. Jersey has been able to reflect AIFMD in its own regulations on its own terms, and that’s been a real strength. It gives additional credibility compared to less regulated jurisdictions like those in the Caribbean.”
Silver lining Indeed, get beyond the administrative scramble and uncertainty, and a positive marketing picture has emerged for the Channel Islands. As the one-size-fits-all model doesn’t work for every fund promoter, they may be turned off by any EU jurisdiction that imposes added costs because they’re straitjacketed by the regulations. Suddenly the appeal of the Channel Islands, with their
proven resilient, substantive and now more flexible regimes, increases. “Jersey is now the low-cost, flexible way into Europe,” says Charles Le Cornu, a Director at Elian Fund Services in Jersey. “Many non-EU fund managers will go offshore to Jersey, as a third country, where they can benefit from the light-touch Directive legislation.” According to the Jersey Financial Services Commission, 164 funds had opted to use Jersey’s private placement option as a route into Europe as of 22 July. There’s also the fact that such regulations soon become a standard that the majority of managers need to have. As the alternatives sector becomes more mainstream, regulation and reporting standards may be the next logical step, rather than something to be feared. “The more the regulators know about the industry, the more they’re likely to trust it,” says Tim Andrews, Ipes’ Guernsey AIFMD Depositary Director. “And the less of a bad reputation the alternative sectors might actually have. As AIFMD beds down between national legislators, it becomes business as usual and much less scary than it was.” Indeed, it’s important to remember that not only is AIFMD more than a single set of rules
OUTSTANDING VISION...
with a single blanket application, but its implementation hasn’t been a single event. It’s a process, and one with further significant stages of implementation to come. From its initial implementation in July last year, nonEU managers could market funds offshore into the EU via private placement schemes. In July next year, the passport is set to come in, alongside the existing private placement provision. Then in 2019, ESMA will make a call on whether both will continue as they stand. The impact of these future changes remains, at this stage, a guessing game. This is all obviously hugely relevant to the Channel Islands, as it will affect its role in the way fund managers access Europe. The private placement model is familiar and popular, yet further changes of course remain absolutely possible. “Administrators are hoping they’ve gone through the significant change and that the next one, the passport, won’t be so significant,” says EY’s Mackay. “We’re waiting on the regulators’ lead to know the implications of the next phase. People are keen to make this – and to protect their business.” n Dave Waller is a freelance business writer
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‘Succinct and practical advice’ in ‘complex transactions’
November/December 2014 businesslife.co 27
interview
The
view from the edge Having launched the world’s first Bitcoin fund earlier this year, Danny Masters at Global Advisors believes it could transform Jersey’s funds industry, if not the island’s entire finance sector – but a seismic shift in thinking may be needed. He explains all to Nick Kirby
C
onsidering he studied as a physicist at Exeter University and subsequently at Imperial College Business School in London, it might seem natural that Danny Masters’ first step in employment was as an oil trader for Royal Dutch Shell. As he readily admits, the mid 1980s were a very interesting time, being the beginning of the free market for oil. After Royal Dutch Shell, Masters moved to Salomon Brothers, where he added to the physical oil deals he had been doing by layering derivatives and position/risk taking on top. The next step was to New York where he worked for JP Morgan, running their global energy trading business. Come 1999, with considerable experience in oil and commodities, he launched Global Advisors with his business partner Rus Newton – who’s still his partner today. The intention was to give investors direct access to the commodity markets with a dedicated, experienced manager. Starting out with a relatively narrow focus on energy and metals in the discretionary space, Global
28 businesslife.co November/December 2014
Advisors subsequently added a systematic multicommodity trading product. The major focus for the last year has been a project in cryptocurrency, which culminated in August with the launch of the world’s first-ever fully regulated Bitcoin fund out of Jersey. Masters spoke to businesslife.co about the journey from oil to fintech, and his take on Jersey’s finance industry. You sit outside of the funds mainstream and could easily be called an innovator. Looking at changes in the funds industry since you launched Global Advisors, how vital is innovation? If you take commodity markets in particular, when I look back to 1999 they had come a long way in terms of their development, sophistication, breadth, regulation and so on. But there really wasn’t much in the space that was accessible by third-party investors, which was surprising because commodity activity comprises 30 or 40 per cent of global GDP, so it’s an immensely important landscape. The way that investment managers had typically played that was to buy shares in Exxon or Mobil if they wanted
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interview
November/December 2014 businesslife.co   29
oil exposure, or Billiton if they wanted a metal exposure. But there’s a big difference between investing in companies that are active in the space and investing in the commodity itself. And that’s what we pioneered when we started Global Advisors. Since that time there’s been an explosion in the number and breadth of products that are now available, and direct commodity investing has become a very legitimate activity. I think the most powerful example of that is the concept of the exchange-traded fund, which, in many cases, is a way of expressing a pure commodity exposure in an equity form. From there, it multiplied out to a range of products covering a broad area of commodities through indices. So in answer to your question, I would say this is a great example of how important innovation and change are. Is your Bitcoin fund another perfect example of this? I see real parallels between Bitcoin and the way the oil market developed in the early days. What I saw back then was lots of volatility, lots of credit risk, illiquidity in the market, scant regulation and a generally rather chaotic scene. By the time the late 1990s came along, the market was more sophisticated, but there was a limited amount of products. So stage one is ‘chaotic market turns into organised market’ and stage two is ‘organised market spins off all these interesting products’. The early-stage products are often discretionary fund managers. To me, Bitcoin looks exactly like that – it’s a very chaotic, illiquid, volatile, misunderstood, under-regulated, embryonic market – but, like commodities, it has a very compelling and forward-looking argument. And that argument says this type of cryptocurrency or blockchain technology is a much more advanced and sophisticated way of transferring value and assets among and between people. You don’t know how you’re going to get from today’s embryonic market to one where everyone adopts this new technology. But for someone in my position you need to have a belief system that screams ‘I am armed with the truth!’, and Name: Danny Masters Age: 51 Position: Founder and Director, Global Advisors Married to: Laura Children: Honour and Oscar Hobbies: Golf and beer, in that order Interesting fact: “When I was 24, working for Salomon in Switzerland, I got roped into buying five fighter training planes from the Swiss Army. I learned how to fly and used to take one up and patrol the Channel on the weekends.”
Fact file
30 businesslife.co November/December 2014
it will get there somehow, and you then manoeuvre your way through time as that story unfolds. In the oil market for example, I knew in 1999 that by 2010 we would need 50 per cent more oil production to satisfy the depletion we were seeing in global reserves and the demand from China. The only way that could happen was for the oil price to be higher. And the way it happens is: here’s the story, here’s the market, guys like me recognise that story and package it in a way that investors can participate in – and when they do it drives the price higher, and that higher price creates the economic activity that’s required under the original thesis. So I see a great parallel between the oil markets and other commodity markets and what’s going on in Bitcoin now. Right now we are in the 1987 oil world if I look at how Bitcoin behaves. I believe there’s a very long track ahead of where it is now. But I believe the destination is one where this kind of technology is widely adopted. It seems to me that there is an embarrassment of riches for investors now – but can there be too much choice, or is this simply just a case of supply and demand? Investing in its basic form is a very simple construct. You have to buy an asset at a price of A and sell it for a price of C, as long as you don’t visit price B in the meantime – which is so low that it makes you sell it. There’s nothing investors like more than a good story, a little bit of price momentum with the feeling there will be more in the future and a robust vehicle by which they can express their view in that asset appreciation. For someone like me, who wants to create new products for investors, you have to think about that amplitude of where is price point A and price point C and how do I create that product so it’s both an attractive return but the volatility and the negative excursion is acceptable. So it really is a question of scouring the world for opportunities and finding where you think you have that raw return that can be exploited, and you go from there. With this in mind, it’s perhaps not surprising that the funds universe has grown so much, with managers and providers carefully looking for those opportunities. Coming back to Bitcoin – why Jersey? Well obviously I have history, having based Global Advisers here, but it’s more than that. On the spectrum of global regulators where you have Beirut at one end and New York at the other, Jersey fits a unique spot. It’s high up that scale but, unlike New York and London, a product like our Bitcoin fund, which is complex and new and quite difficult to understand, requires a tremendous amount of face time with regulators – and you’re not going to get that in London. So once the opportunity presents itself, Jersey’s a very good fit because a lot of the early work is around regulation. I look at Bitcoin and say this is a great fintech with problems. I’m supposed to get paid for solving those problems, and Jersey is supposed to get paid by helping me solve those problems – and the way that we’ve worked in really close cooperation with the regulators here on this product has put Jersey on the global stage as a place that has managed to get its head around this complex new thing in the very early stages. Some people have said Bitcoin was not only risky from a reputational perspective, but also that this is very new tech. What would you say to that? I think these things are hard to understand. But whenever disruptive tech like this comes along, I think common sense should prevail
interview
– people should take a look at these things and weigh them purely on their merits. What’s more, I really think the island’s reputation shouldn’t just be solely a squeaky clean, well-run, transparent place. It should be an innovative, squeaky clean, well-run, transparent place. And Jersey hasn’t really had to innovate – it innovated in the 1980s in trusts statutes and open-ended investment funds by going to London, finding out what clients wanted and couldn’t get done over there, and provided it here. That has been a great technique for the islands over the years. So why can’t it happen again? What are the roadblocks to this innovation? When we started this project, I imagined that the commercial service providers in the island would be behind it – the accountants, auditors, lawyers and administrators – and the regulator would be holding it back. It didn’t turn out that way. I think the regulator approached the project with the most maturity and brain power and sense, and ultimately many of the other professionals had little experience in this space. But consider this – we employ KPMG to audit the Bitcoin fund, and I think they’ve subsequently got two more pieces of work from referrals from us from companies in the Bitcoin business. All of a sudden KPMG has a Bitcoin accounting business! At a moment when some of the other Big Four hesitated and said they didn’t like the sound of Bitcoin, KPMG are going to develop an expertise these other firms aren’t going to have. If you take a bit of risk, you should be able to manage your business to avoid those risks turning into problems. And if you’re good at it, you end up with new business. And that’s as true at island level as it is at company level.
Looking at fintech as a broader issue – do people really ‘get’ the opportunities that exist, or is there a danger they’ll miss the boat? I believe the blockchain on which Bitcoin sits will prove to be the backbone for a whole new way of doing finance and trusts and managing assets. I remember Dublin back in the 1980s creating the tax-free banking zone on the edge of the Liffey – it transformed Ireland. Fifteen years ago, my stepfather took Victor Chandler Limited to Gibraltar and created a gaming industry that’s now the backbone of Gibraltar’s economy. So once in a decade or so, along comes an opportunity that’s really multiple commercial opportunities in one. I know that if Jersey puts forward a holistic solution to Bitcoin, including regulation, government, consumer protection, insurance, population, economic development, Digital Jersey and banking, this place would become the global hub for blockchain technology this side of the Atlantic. And so much so that I can pinpoint half a dozen businesses that would come here that meet a lot of Jersey’s requirements of high-value, low-footprint, strong growth businesses. This is exactly why the Isle of Man is so aggressively pursuing the same opportunity. Over the next six to 12 months, that window will close because someone is going to put this all together. And Jersey is remarkably high on the list of contenders and is a banking solution away from having that holistic formula. So much so that exchange businesses, payment processors, mining companies, other blockchain-based businesses, could look at Jersey and say: I can walk around the streets and talk to people from all spheres who understand it. I’m hoping sense prevails. To protect traditional commercial banking is a rearguard action.
“If my Bitcoin fund is a success, it will be a success between the government, treasury and Global Advisors. If it goes horribly wrong, I will be lynched in the town square as a heretic”
And what of the banks? My experience is that the commercial banks have almost universally refused to engage in this project. It was ‘no’ from the very beginning – I had some of the quickest answers I’ve ever had from banks in my life. The response would be the bank has no appetite for the Bitcoin business, and the back channel would say we are concerned about the money laundering and the reputational risk. But I believe that Bitcoin and distributed trust as a broad subject is such an enormous competitive threat to the conventional banking system, that banks are rightly treading cautiously at the moment. I suspect the rejection either comes from unfamiliarity, laziness or fear – but somewhere in there are turkeys not wanting to vote for Christmas. So the problem is that no bank will handle it? We have banking relationships for the fund now – in Germany and in Austria and we are about to have one in Asia. I think that’s a shame, given all the government and regulator support for what we’ve done. So we’re working with Digital Jersey, and with treasury and government ourselves to try and find a banking organisation we can build a relationship with on the island. Maybe by creating a licensing environment where the bank is going to have to make an investment in understanding, but should then be rewarded by the fruits of that going forward. Or there is the nuclear option, which is to crowdfund a new bank and get an exception to the Top 500 banks in the world rule and have a Bitcoin Bank of Jersey.
Will all of this change the way the funds landscape looks in the years to come? Clearly a lot of international financial engineering is tax driven – but the opportunities to do any kind of tax-driven structures are massively lower and have been shrinking rapidly as the advantage that one jurisdiction has over another has narrowed. The cross-border transparency and cooperation now demanded has shrunk the universe of opportunities for all offshore jurisdictions. You can see it quite clearly in the size of Jersey’s deposits, which are going down quite dramatically in my view. There has got to be a Plan B – the current status quo is not going to be a happy outcome for the island in five or 10 years time I don’t think. But that Plan B has to involve all the players – people don’t exist in silos any more. Exactly. If they want things to be successful, they can’t say ‘I’m all right Jack, I’ve got enough business coming in’. You poke a hole in one side and it will start leaking out everywhere. There’s been some great really uplifting moments in our Bitcoin journey where smart people have got their heads around it as much as they can and have said ‘we’ll give it a go’. I’m not naïve – I think if my Bitcoin fund is a success it will be a wonderful success between the government, treasury and Global Advisors. If it goes horribly wrong, I will be lynched in the town square as some irresponsible heretic. But that’s the risk one takes – this is the bleeding edge of fintech, and it’s succeed or go home. n Nick Kirby is the Editor-in-Chief of businesslife.co
November/December 2014 businesslife.co 31
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It’s in
the mix
Multi-asset funds have enjoyed a growth spurt in recent years, but are they going to be the investing way of the future? David Craik investigates 34  businesslife.co November/December 2014
Investing
I
nvestors are always looking for one holy grail or another. If it’s not the highest return for the smallest risk, it’s diversification into various asset classes, and the two often come together. As a measure of investor confidence has returned – despite some global volatility in early October – it’s perhaps unsurprising that multi-asset funds seem to be the investment du jour. According to figures from the Investment Management Association (IMA), mixed asset was the second-best selling asset class in July 2014, with net retail sales of £390 million. That’s up from £211 million in July 2012. And it’s a similar picture across Europe. Thomson Reuters states that some €62.5bn was committed to mixed asset funds in the first six months of 2014 in Europe – €2bn more than flowed into pure equity. Multi-asset funds, however, aren’t straightforward. Yes, they’re funds pieced together by fund managers that comprise a broad and diversified range of assets. But they come in all shapes and sizes and can include equities – both domestic and global – bonds, commodities, property, currencies and derivatives. What’s more, they differ in composition – with some favouring equities over property – or have vastly different splits between UK and international assets. Managers can also go ‘short’ or ‘long’ on assets and switch between them to maintain performance. Tristan Hanson, Head of Asset Allocation at Ashburton Investments, says the make-up of multi-asset funds keeps evolving. “There’s been increasing use of derivatives, financial innovations such as exchangetraded funds, different ways of accessing exposure to infrastructure, property and commodities,” he states. However the main incentive remains the same – to reduce risk. “If you’re just with a single asset, you have all the fluctuations that go with it. If you spread your assets effectively you should be able to reduce your risk and generate better risk-adjusted returns.” Hanson believes the financial crisis was a serious driver in making multi-asset funds a more tempting option for investors. This is true
for those holding equities, or cash investors dampened by record-low interest rates. “Certainly we saw a move in the years immediately after the crisis. In the UK, most portfolios were biased towards equities, and multi-assets were seen as a safer bet,” he says. “Bonds have done incredibly well recently, but yields are low so future returns will be low. Those people coming up to retirement holding bonds may be looking for ways to generate a return with more diversification,” he states.
Something for everyone David Vickers, Senior Portfolio Manager at Russell Investments, believes multi-asset is open to all. “The average investor is multi-asset at heart. They want someone to move these assets around for them and add value,” he says. “They have been scarred by a series of crises – from the dotcom crash to the recession. People have school fees to pay. They don’t want negative growth. It’s about getting a little bit of the upside and none of the downside.” He believes the 2013 Retail Distribution Review (RDR), where advisers have to choose the most suitable products for all their customers, not just the ones paying the most commission, was another key driver. “RDR gave us a better way of doing things. More multi-asset funds were pushed to investors and they have then bred like rabbits,” he explains. Paul Garrard, Investment Manager for the Guernsey-based Saffery Champness Specialist Fixed Income Investment Team, feels the move towards multi-asset strategies has been more gradual than sudden. “It’s been more the case of how much fund managers have moved towards it. The downturn wasn’t necessarily that big a driver. There were a number of multi-asset funds before the crisis,” he says. He agrees that risk lies at the centre of an investor’s decision to go multi-asset, but it’s also about returns. “The main benefit cited of multiasset investing is increased diversification, which benefits from the
November/December 2014 businesslife.co 35
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Investing
reduced correlation of the different asset classes and improves the risk/ reward efficiency,” he says. “The expectation is that an investor will get higher returns for the same level of risk, or the same return for a reduced level of risk – in other words, more bang for your buck.” He says this makes multi-asset funds appear, at first sight, a no-brainer for the logical investor. “Ninety-nine per cent of investors want the most efficient risk/return profile possible – why would anyone want to risk more than they need to? Multi-asset strategies, by definition, aren’t reliant solely on the volatile equity index, and the increased diversification helps reduce the volatility. A sharp fall in equities should therefore have a reduced impact on your portfolio.” And there are other benefits. “If your fund manager is limited purely to equity investment, he can’t take advantage of opportunities in, say, the commodity sector to add value to your portfolio,” Garrard explains.
Mix and match Mixing asset classes, however, can introduce other risks – there is liquidity risk, for instance, which can have a significant effect on an investor. By way of example, Garrard points to the many hedge funds that locked up during the crisis with investors unable to redeem their holdings. Other alternative asset classes, such as property, can also have long redemption periods. “And while access to property can be gained via equity strategies such as REITs [real estate investment trusts] in an attempt to improve liquidity, these strategies are much more highly correlated to the equity market, markedly reducing the claimed diversification benefit of your portfolio,” Garrard says. What of the global nature of these funds including emerging market equities? “If you just sit in the UK you’re probably missing a trick elsewhere in the world,” says David Vickers. “Anyway, do you really think the FTSE 100 has anything to do with the British economy with all those mining firms? Your manager will increase equities when right and decrease when wrong.” Despite this, multi-asset funds do have their own risk/reward ratings, primarily because they vary so greatly in asset allocation
“The average investor is multi-asset at heart. They want someone to move these assets around for them and add value”
Not without risk Multi-asset funds are essentially there to help investors diversify asset classes and reduce risk. They cushion an investor from the volatility of investing in just one asset class. But they aren’t as simple as adding bonds and cash to a sprinkling of equities. There are a vast number of multi-asset funds available, each one differing in its composition and risk profile. If, say, you’re choosing a fund from the Fidelity website, you will be confronted with a host of funds, each with their own risk/reward profile. These operate on a scoring range of one to seven – one for a fund with lower risk and potentially lower reward, up to seven for higher risk and potentially higher reward. The Aberdeen Multi-Asset Fund is a growth fund. It has a risk rating of five – so higher risk – mainly because its portfolio includes 71 per cent equities, 19 per cent bonds, one per cent property, five per cent cash and four per cent others. The geographical split of equities is dominated by the UK with 42 per cent, with a fairly even spread throughout the rest of the globe including Latin America at 2.6 per cent. The Architas MA Passive is described as ‘defensive’ with a risk/ reward rating of four – and the balance is clearly different. It has 57.3 per cent bonds, 29 per cent equities, nine per cent cash, some other low risk assets, and no property. It has a diverse geographical split, but as a passive fund is primarily invested in trackers. FP Russell ICVC International Growth Assets Fund is higher risk at a six. It has 91 per cent equities with the rest cash and others. US equities take up 50 per cent with 17.34 per cent Eurozone and just 4.72 per cent UK, with an even spread among the rest, including emerging Asian nations. This diversity means it’s imperative, even when investing in multi-asset funds, that you know, or can get your adviser to calculate, your risk profile, so you can find the exact fund that suits your personality and financial requirements. Take time to research the funds and assess the strengths and weaknesses of each.
and exposure to UK or global equities and bonds. Like all investment, it’s not a risk-free zone (see box above). Multi-asset has long appealed to those who have more funds to invest. “Investors with larger sums will be able to have bespoke strategies created for them,” says Garrard. “An investor with £50,000 is limited to the range of funds on offer. However, if you have £10 million, a manager can create a bespoke cost-effective strategy.” Institutional investors such as pension funds are also more interested in multi-asset funds, particularly going bespoke. Hanson urges caution. “A group of trustees running a large pension fund may be knowledgeable, but may not have the skill set to put together a basket of assets. A multiasset fund manager may be better placed to do that,” he explains. He suggests the best advice for investors of all sizes looking at multi-asset is to do their homework on the proposed manager and their strategy, and, if you are investing large amounts, to give clear preferences you wish to be taken into account. “Assess each fund on a case-by-case basis. Some will be highly leveraged or take more equity risk and some will be more vanilla. Dig around,” he says. n David Craik is a freelance financial writer
36 businesslife.co November/December 2014
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November/December 2014 businesslife.co 37
A trusting relationship
38  businesslife.co November/December 2014
Trusts
The relationship between a trustee and the individual or company investing the trust’s assets is undeniably crucial. David Burrows looks at the responsibilities of both parties and the best way to find a perfect match
T
he guiding principle of a trust is to protect and preserve assets and wealth for future generations – be that a family, a charity or some other organisation. To ensure this happens, third parties – or trustees – are given the considerable responsibility of taking those assets and investing them on behalf of beneficiaries. A trustee may take on the investment management role in addition to their main responsibility of ensuring the trust’s assets are safe and that all accounting and records associated with the trust are in order. To a large degree this depends on the rules of the specific trust and the qualifications of the trustee. As Claire Roberts, Associate at law firm Maurice Turnor Gardner, explains, most modern trusts will contain an express investment clause allowing the trustees to invest in a wide range of investments. If there is no such clause, or the powers the clause provides are inadequate, the Trustee Act 2000 (England and Wales) provides a wide statutory power of investment enabling trustees to make any kind of investment that they could make if they were absolutely entitled to the assets of the trust. This is subject to restrictions or exclusions imposed by the trust itself. Trustees aren’t obliged to take outside investment advice if they can demonstrate they have the expertise in-house themselves to undertake investment powers. But as Adrian Kemp, Senior Investment Manager at DPZ Capital stresses, this places a significant amount of responsibility on the trustees and one that they may feel ill-equipped to take on. “Trustees generally have a duty to obtain and consider proper advice as stipulated, for example, in the Trustee Act,” he explains. “This means taking advice from an appropriate expert. In the case of the
set-up of the trust, this most likely would be a solicitor. The tax treatment might be assessed by an accountant or tax adviser. In the case of trustee investments this could be an investment manager.” Angus Taylor, Group Director at JTC Group, recognises that trustees aren’t always keen or qualified to take on a dual role, even in the instances where the trustee does have investment expertise. He points out that there are important benefits from splitting the trustee and investment responsibilities and bringing in a third party as an investment manager. “At JTC we don’t provide investment management services, so we’re always independent from the investment manager. When looking at things from a client perspective, the independence of trustees is an important factor. It’s interesting to note that several bank groups divested their trustee business, which could remove perceived conflict.” Roberts agrees that the role of trustees in relation to investments can be extremely onerous, particularly in light of the everincreasing complexity of financial markets. “It’s not surprising trustees often wish to use the services of discretionary fund managers to enable full advantage to be taken of investment opportunities,” she says.
Selection process The outsourcing of investment services, however, adds an extra level of responsibility and complexity to what can already be quite a complex structure. So, just what is the interrelationship between trusts and investment managers and how best to go about finding the right investment manager? Taylor says it’s increasingly common and, indeed, good practice for a trustee to employ a specialist investment monitoring firm to assist in the selection process of the investment manager and then monitor subsequent performance once that manager is in place. “Typically we would develop a shortlist of advisers,” he explains. “The next step is to assess the investment managers on the list, look at the companies, how they are
November/December 2014 businesslife.co 39
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Trusts
structured and governed, their investment style and process, track record in their area, and their ability to report clearly. We would use a specialist investment monitoring service to help with the due diligence.” Taylor adds that the benefits of using a monitoring service are two-fold. Firstly they are investment specialists, which the trustees may not be, so when it comes to selecting the investment manager and then establishing the investment parameters for the trust, their input is invaluable. The other benefit is that a trustee might have a number of different portfolios, so the investment monitoring firm can bring a degree of standardisation and focus to performance supervision. Roberts adds that trustees’ duties when exercising a power of delegation would include an investment management agreement in writing, as well as a policy statement. “The investment manager must confirm that they will comply with the policy statement. The policy statement will typically include guidance on matters such as liquidity, risk and the balance between capital growth and income yield.”
It’s good practice for a trustee to employ a specialist investment monitoring firm to assist in the selection of the investment manager of restrictions and can provide the necessary reporting information.” The investment manager in turn has specific responsibilities in performance, as Adrian Kemp outlines. “The investment manager should constantly assess the mandate and restrictions and keep in mind that the investments remain suitable and they stay within the mandate given. They should
Clear mandates Clarity within the policy statement is crucial to the effective management of the trust. All parties concerned – trustee, investment manager and investment monitoring specialist (if there is one) should totally understand the mandate the investment manager is instructed to follow. Delegating to an investment manager and employing an investment monitor brings in expertise, but it doesn’t in any way allow the trustee to take their eye of the ball. While they may not be the sole investment gatekeeper, the trustee must understand risk appetite, time horizons, suitability and diversification and ensure the policy reflects that. The trustees are obliged to regularly review the investments and the investment manager as part of their mandate. Trustees also have to be aware of investment restrictions on the portfolio, as Jessica Crane, Associate Director at London & Capital, points out. “We’ve come across a number of trusts with US reporting requirements – due to a US settlor or beneficiary who has received a withdrawal – and so these portfolios would need to be managed in a US-compliant way – avoiding Passive Foreign Investment Companies (PFICs) and other ‘US toxic’ assets,” she explains. “It’s the trustees’ responsibility that the trust reports the correct information to the US authorities, so they would need to ensure the investment manager is aware
40 businesslife.co November/December 2014
When things go wrong If an investment manager performs badly, whether or not the trustees have a claim against them will depend on the circumstances. Questions to be asked, as Siobhan Riley, Private Client Partner at Carey Olsen, says, are: has there been a loss to the trust, and if so what are the reasons? If a fund has underperformed, is it for an acceptable reason? Also, what do the terms of the agreement between the parties set out in such circumstances as to who should be liable? And was there any negligence on the part of the investment manager, which caused the loss? If so, is the investment manager liable under the terms of the agreement to make good that loss? Riley adds: “As a matter of Jersey law, the trustees will not be liable, providing they can show they acted in good faith and without neglect in appointing the investment manager and allowing the appointment to continue. There is Jersey case law where claims have been brought against investment managers for various reasons, either by trustees or investors. As with all cases, each turns on its own facts.” Investment managers are on thin ice if they deviate from the trust’s investment parameters. Other key points the courts will consider include the level of experience or expertise the investment manager has told the trustees it has when securing a mandate. Investment managers therefore need to be careful with the way they promote and advertise their services as this can be used in evidence against them.
keep reporting clear and understandable, provide sufficient communication and remember who the client is – it’s the trustee and not the settlor or the beneficiaries.”
Performance review Monitoring of performance is crucial to ensuring the trust is managed competently and to brief. Again the importance of establishing a clear investment mandate alongside performance targets shouldn’t be understated. It’s common, therefore, for the agreement between the parties to provide for regular meetings to review performance. “The frequency of investment monitoring is a key factor,” says Taylor. “A clearly defined and written investment policy is a must. It’s often a good idea to have a benchmark performance agreed at the outset by all parties (trustee, investment monitor and investment manager). In the event that the manager’s performance compares unfavourably with the benchmark, they could lose the mandate.” The replacement of the manager in such an instance would be based purely on targets being missed, not due to the manager investing in a security outside the mandate which could be deemed negligent and lead to a legal claim (see box). With the sums involved in some trusts, investment managers may have access to funds that would otherwise be off limits. It might also be the case that a fund will cap the amount of money it will take in and select and approach preferred investment managers themselves rather than the other way round. There are instances in which a private fund is created for a trust. However, as Siobhan Riley, Private Client Partner at Carey Olsen, explains, these instances are few. “Commonly, trustees invest with other parties, so the costs and risks are spread. While there are occasions where trust assets may be ring-fenced for a particular reason, it’s rare for a private fund to be created for a trust, although it may be possible depending on the powers in the trust instrument and the investment strategy. It would also be subject to any legal and tax issues.” n David Burrows is a freelance financial writer
Advertising feature
Dan Edmunds from Rossborough Insurance Brokers, and Tim Bilborough from its parent group Arthur J Gallagher & Co, look at the importance of directors and officers insurance for offshore funds and fund managers
protecting fund managers from changing regulation
A
s specialists in the structuring and arrangement of insurance solutions for offshore financial institutions, one of the most significant after-effects of the credit crunch we’ve observed is the increased influence of regulators, and their propensity to take action against individuals. The list of new and enhanced regulatory and statutory requirements our clients are managing has grown and reads like a veritable alphabet soup, with AML, AIFMD, CASS and FATCA to name but a few. We’ve also identified an increased likelihood that claims brought by investors will, at some stage, involve a regulatory investigation, if not be brought as a result of regulatory influence. Individuals in positions of influence within funds and at fund managers are now more likely to be specifically named by a regulator as part of an informal or formal investigation. As a natural consequence, they are turning to their insurance broker for reassurance that their directors and officers (D&O) insurance is able to respond effectively when needed, as the costs involved can be significant.
D&O insurance provides valuable assistance to directors at a time of great stress, and ultimately protects hard-won personal assets. To remain most effective, however, time and effort needs to be applied to ensure that the policy wording is drafted to reflect and manage modern exposures. Many existing policies only provide limited coverage for regulatory matters and often contain a significantly reduced inner limit for this type of cover that doesn’t reflect the level of coverage the client intended to purchase. Rather than relying on potentially outdated and restricted wordings supplied by insurers, Rossborough and Arthur J Gallagher & Co avoid these issues by utilising our own policy wordings, which we continually update to reflect these changes in exposure. In addition, our policies generally offer much wider cover than a standard insurer-written wording. Some of the most common areas of improvement we regularly secure are: ● A ring-fenced limit from other insurances, leaving directors with dedicated protection in the event of, for example, a professional indemnity claim under a ‘blended’ investment managers’ insurance policy;
About Rossborough Rossborough was established in 1936 and provides insurance solutions to companies in all industry sectors through its offices in Guernsey, Jersey and the Isle of Man. Our qualified and experienced team offer superior cover, and specialise in solutions for complex requirements involving multiple jurisdictions. Rossborough, Jersey’s only Chartered Insurance Broker, is part of leading global broker Arthur J Gallagher & Co, one of the largest, most successful insurance brokerage and risk management companies in the world, employing more than 17,000 people and providing services in more than 140 countries. To discuss your requirements, please contact John Lowery on +44 1534 500539 or jlowery@rossboroughgroup.co.uk, or Martin Fallaize on +44 1481 241508 or mfallaize@rossboroughgroup.co.uk
● Broadest possible investigation coverage, ensuring coverage commences at the earliest stage of a regulatory interaction; ● Fullest coverage available for claims involving allegations of failure to manage, for example, anti-money laundering procedures. In addition, we are ever aware that the most common reason for insurers declining claims is alleged non-disclosure, and there are a number of contractual protections that can be put in place to minimise this risk. Both Rossborough and Arthur J Gallagher & Co have a proven track record of assisting in prompt and successful claims payment. n Dan Edmunds is Account Executive at Rossborough Insurance Brokers, and Tim Bilborough is Divisional Director, Financial and Professional Risk, at Arthur J Gallagher & Co
November/December 2014 businesslife.co 41
A
private
affair
For individuals and groups looking for an investment they can’t get through the mainstream, private fund structures are providing a viable alternative, as Dave Waller discovers
42  businesslife.co November/December 2014
Private fund structures
I
nvestors come in all shapes and sizes, from ultra-high-net-worth individuals and pension funds to actual pensioners seeking an alternative to a cash-stuffed mattress. For any of the former group looking for a cost-effective and unregulated structure, the private fund structures being domiciled in the Channel Islands have proven highly popular. Because of who these funds are targeting and how they are put together, they’re able to exist beyond the scope of regulation – and thus deliver a whole heap of benefits to more seasoned pros. “People are generally ‘tapped up’ for a private fund in a very institutional space,” says Ben Morgan, a Partner in the Corporate and Finance Group at Carey Olsen, discussing the type of private fund typical of Guernsey. “They don’t put ads in papers or pound pavements knocking on grannies’ doors. It’s something where very big investment banks or private equity houses reach out to mega-wealthy individuals, institutions and pension funds and say: ‘We’re doing this, and we’re only interested in lumps of £5 million to £10 million. Are you interested in getting involved?’” The term ‘private fund’ may be applied to a range of vehicles, but these will typically be created with a specific project in mind, and target a group of investors who quite often know each other going in. The fund will then be structured in a way that best suits everyone involved. The asset and investors come first, and the form follows. Private funds vary in form. While Guernsey doesn’t offer a formalised version, Jersey has established its Very Private Fund, a versatile vehicle subject to only minimal regulatory supervision. The strict constraints are that it must have no more than 15 investors, with a minimum investment of £250,000 each, making a minimum total of £3.75 million. The logic is that if you’re the type to invest with only a handful of other investors, and with that kind of money, you’ll be able to look after yourself. “We get a lot of enquiries about Very Private Funds,” says Graham Paton, Head of Funds at Minerva in Jersey. “They’re cost-effective, flexible and easy to set up, but they’re for appropriate, sophisticated professional investors only. They’ll be closed-ended funds, and typically with a five- to seven-year life.”
Unburdened by regulation The technicalities may differ between the islands, but the private funds in both are fuelled by the same logic. They’re generally used to access institutional money for a range of complicated, esoteric or illiquid assets – think property,
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November/December 2014 businesslife.co 43
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Private fund structures
A funds launch pad Everyone has to start somewhere. Lewis Hamilton caught the eye of McLaren go-karting, while many great directors launched their careers with adverts or music videos. New entrants to fund management also need a foot in, and operating private investment vehicles for a few selected clients, for direct investment into particular assets, is proving a very popular way to get it. It wasn’t so long ago that someone starting out could go to market with a large fund straight off the bat – raising the money first, blind, and then looking for suitable investments. These days, however, investment management isn’t an easy field to get in to. Money isn’t exactly flowing, and attempting to raise pools of blind funds doesn’t work without that track record. Take, then, a manager splitting out of an established financial institution in real estate or private equity funds – a property developer, say. They’re likely to know two or three investors who’ve invested in previous property projects, and will thus be able to get a little club together to invest in a new venture. With a private fund they’ll find the investment, show these potential investors what they’re moving into, and put the vehicle together in a way that suits them all. The best thing about the private fund vehicle? It’s cheap and easy to establish, and just like Lewis Hamilton’s early vehicles, no one’s going to get too hurt if the wheels fall off.
The term ‘private fund’ may be applied to a range of vehicles, but these will typically be created with a specific project in mind, and target a group of investors
private equity, infrastructure and cleantech. And they’ll usually be aimed at a sole specific investment: buying, say, one business to turn it around, or a single piece of real estate to develop. Paton recently encountered a fund for investing in a wind farm, for example, and another in a luxury safari lodge in Masai Mara, Africa. “A single asset doesn’t count as a fund in the eyes of the regulator as there’s no spread of risk,” explains Sam Shires, Group Partner at AO Hall. “These private fund structures are closed, and so resemble private equity or real estate structures more than hedge funds, where you can put in a request to get your money out every quarter. Hence it’s usually private equity managers and real estate managers we see using them.” Similar vehicles are available in Luxembourg, Dublin or any sophisticated financial centre that’s keen to deliver the enticing benefits of private structures. Primarily that’s the cost saving in set-up and operation you get from avoiding regulation. Meanwhile they are still administered by a regulated body – in the Channel Islands a JFSC or GFSC licensee – thus providing a degree of protection and a level of comfort to investors as to the integrity of the vehicle. And that sense of security runs both ways. “By privately placing, a manager can control the environment for the fund, because they’ll have a sense of the investors they’ve let in,” says Morgan. “You’ve probably got a bunch of people who, even if the fund doesn’t end up doing what it says on tin, have gone in with their eyes open. They know the deal – that they could get their investment back with interest, or get nothing.”
All for one As for who’s using them, it tends to be institutional or pension fund money, or super wealthy individuals who know each other, as indicated earlier. This could be an investment club or a family where there are potential inheritance issues. “A portfolio of land or art is difficult to divide evenly,” says Wayne Atkinson, Senior Associate at Collas Crill. “If you put it all in as assets of a fund then each family member winds up with, for example, a third of the fund, rather than the rather more fiddly third of a painting. While managers in a larger private equity fund will take money from anywhere to put into a ‘blind’ pool, these investors like to have a closer, more direct relationship with the fund manager, and thus more influence over the investment.” In terms of how popular they are, Paton explains that levels of enquiry are generally much higher than other funds, while Shires says that Guernsey’s equivalent vehicles are gaining popularity all the time – especially for one-off real estate and private equity investments. Private funds are also proving a popular vehicle for start-up managers wanting to build a track record (see box), while larger fund managers may use an unregulated private vehicle as a sidecar fund alongside the main fund. Under the traditional private equity model, the fund manager would go out and raise pool and then find investments for it. But the standard now is to offer certain key investors parallel investments alongside the main fund on special terms. “We’ll be seeing more of private funds,” says Atkinson. “We’ll see more friends and family structures. But we’ll also see some existing private funds growing into something more substantial too – if the current private group of investors comes out happy, the next structure they launch will be larger and no longer private.” As long as it remains hard to raise funds, as it has now for several years, private structures should remain popular. Anything that’s quick and easy to set up, with lower costs, and which gives a greater voice to investors is likely to succeed. n Dave Waller is a freelance financial writer
44 businesslife.co November/December 2014
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Elian looks to the
future Following the recent rebrand of Ogier Fiduciary Services to Elian, CEO Paul Willing outlines how the company plans to move forward while building on its strong history
I
n June this year, the partners of Ogier Fiduciary Services completed a management buyout (MBO) from the Ogier Group. The deal, which was backed by Electra Private Equity, was valued at £180 million, making it the largest deal of its kind in the offshore world. Led by Chief Executive Paul Willing, the company has since gone on to launch a new brand and identity – Elian. Elian has a clear, uncompromising vision – to continually deliver more value by raising the standard for excellence in administration services. Here, Paul Willing looks at what the buyout and subsequent rebrand means for the company, its employees and clients.
It’s been a year of change for Elian – how are things from a business point of view? We’re having another very successful year, and I’m pleased to say we’re ahead of budget and on track to deliver our 15th consecutive year of growth. I believe that is an incredible achievement, especially given the severity of the recent recession that hit financial services particularly hard. We’ve also recently reached another milestone in that we now employ 500 people. I think that’s impressive when you consider the company was only started in 1999. Now that we’ve completed the MBO, we’re firmly focused on the future. The additional funding provided by Electra will allow us to
46 businesslife.co November/December 2014
continue investing in our key systems and infrastructure, enabling us to provide even higher levels of client service. It will also support our ambitious growth plans and ensure we can realise our goal of creating a business that’s able to compete successfully against the very best in our field on an international stage. Our growth plan was the key reason that attracted Electra to support our MBO.
It all seems to be going really well – why did you decide on a new brand now? As a completely separate business from Ogier, we have the opportunity to develop our own corporate identity – stressing what we stand for, what differentiates us from the competition and why clients and intermediaries should instruct us. The new brand also gives us the opportunity to refresh and restate our values – these are the core principles by which we want to run our business and define the culture of our firm. We wanted to launch our new brand as soon as possible following the MBO to harness the excitement and momentum created by the deal. We also wanted to get off to a strong start and build on an already strong year financially. Our new brand will also help convey why prospective employees should join Elian, and the exciting career they can look forward to when they do.
Advertising feature employees are also regularly recognised by industry bodies as leading individuals in their field. Right throughout the MBO and our subsequent rebranding, we’ve stressed to our clients that the business will continue to be led by myself and the existing management team, and that there won’t be any change to our clients’ existing relationship teams. We feel this is critically important given the level of trust clients place in us and the very long-term nature of relationships in our business.
What expansion plans does Elian have in new and existing markets and services? We currently operate across 10 jurisdictions – Jersey, Guernsey, Bahrain, British Virgin Islands, Cayman Islands, Dublin, Hong Kong, London, Luxembourg and Tokyo – and we are always looking for new opportunities. Our strategy at Elian is based on profitable growth, and one of the major advantages presented by the MBO and the additional investment we’ve acquired is that we can now respond very quickly to new market opportunities as they arise. We have a comprehensive strategy in place for growing our business organically, consolidating our position in core markets and building our presence in more recent offices, such as Luxembourg. Another part of our organic growth strategy is that we have a number of new services in development, such as our online company incorporation service, which allows clients to order a new company 24/7, 365 days years from their computer, tablet or phone. Our ambitions, however, go much further – we now have an acquisition strategy designed to further accelerate our growth and give us access to important new markets, and we’re currently looking at a number of interesting opportunities.
Ogier Fiduciary Services saw rapid growth from its inception in 1999. What does the future hold for Elian? Why the name Elian? We always felt it would be great if one of our employees came up with the new name, so we ran a competition, which generated over 800 suggestions – so we had plenty to choose from! Janice Lau, an employee in our Hong Kong office, thought of the name Elian – her rationale was that it is a combination of ‘elite’, in that we provide an elite level of client service, and ‘guardian’ in that we are guardians and protectors of our clients’ assets and interests.
How do you combat any fears clients may have about an existing and highly successful brand going through this sort of change? The launch of Elian will allow us to build on our strong heritage as Ogier Fiduciary Services. We already provide extremely high levels of client service in our industry, but we are determined to raise the bar even higher, and firmly believe we can do that with the additional backing we now have. We’ve been running an independent client service survey for several years now, and the feedback is fantastic. Of the clients we’ve interviewed, 93 per cent would re-instruct us and 97 per cent would recommend us to a colleague. Those are figures to be proud of. Clients also consistently single out employees who do a fantastic job and I’m pleased to say a number of our service line teams and
The launch of Elian has really harnessed the excitement and enthusiasm we all feel about our future here. We’re confident in our ambitious growth plans, which are supported by our relentless drive to provide the very highest levels of client service in our industry. n
About Elian Specialists in corporate services, fund services, private wealth and capital services, Elian has a clear, uncompromising vision – to continually deliver more value by raising the bar in administration services. We work with multinational corporations, financial institutions, high-net-worth individuals, family offices and fund managers, and believe that the best can always be better. With 500 professionals working across a network of 10 international offices, covering key time zones and financial centres, we’re able to handle large, demanding and complex engagements, but we’re always looking to set new industry standards by challenging standard practice. From technical skills and market understanding to client service and expert advice, we are relentless in our pursuit of excellence. www.elian.com
November/December 2014 businesslife.co 47
managers on the
move
As investor confidence returned after the recession, so it seemed did fund managers’ willingness to jump ship or start up on their own. David Craik looks at what happens to their funds when they do
I
n recent years, UK fund management has bizarrely resembled football’s Premier League, with star managers spectacularly quitting their roles, leaving supporters – or in this case investors – in dismay. Their names may not be as recognisable as Sir Alex Ferguson’s, but they still resonate strongly with thousands of people. Neil Woodford, who left Invesco Perpetual this April after 25 years to start his own business, is probably the stand-out name. He ran around £25bn-worth of savers’ money in his Income and High Income funds, which alone notched up year-on-year returns of over 13 per cent. Richard Buxton, who ran over £2bn for the Schroders UK Alpha Plus Fund, jumped ship in June 2013 after 11 years, to join rival Old Mutual. His fund had returned an enormous 254.4 per cent over the decade to 31 January 2013. And there are plenty of others who have gone in recent times, such as Jupiter’s Philip Gibbs and Liontrust’s Jeremy Lang. So is this usual for the industry, or part of the aftermath of the financial crisis? And what happens to the funds
48 businesslife.co November/December 2014
Fund managers
when the star man leaves? What is the fallout for the ordinary investor? Jason Hollands, Managing Director, Business Development and Communications at financial services group Bestinvest, says the turnover of top managers hasn’t been altogether surprising given that the industry typically has a reasonably high turnover rate. “We estimate that retail funds change manager every five years, that’s slightly less than your average post-war UK economic cycle,” he says. “It’s a reflection of the fact that this is a competitive industry, where the rewards can be high for the most successful managers and therefore a degree of poaching is inevitable. Other managers crash and burn and are dispensed with.” He adds, however, that cyclical factors can also lead to patterns in the level of manager moves. “There can be a tendency for managers to launch their own firms when times are good, or disappear into the hedge fund world where the rewards are higher,” he explains. “M&A in the industry can also lead to turnover as staff are culled and funds are merged. The emergence of new boutiques dried up during the height of the credit crisis, but we’ve started to see some signs of life again.” He points to the launch of Sanditon Asset Management by ex-Cazenove Capital Managers Chris Rice and Tim Russell, and, of course, Woodford Asset Management, as prime examples of this. “There does appear to be an uptick in manager moves. There’s certainly been a raft of high-profile departures over the last couple of years,” Hollands continues. “We know about Woodford, but there are also some firms who have very clearly been in the buy-and-build mode of late. Among the smaller players, Miton, Mirabaud and Polar Capital have been actively attracting new teams. There has also been quite a bit of turnover resulting from some big M&A deals this year with Aberdeen Asset Management acquiring SWIP and Standard Life buying Ignis.”
Follow the star Whatever the catalyst for change, the fallout for investors can be huge. Woodford actually announced his departure last October, and between then and March an incredible £3.6bn of savers’ money, or outflows, left the funds as investors fretted over continued success. Indeed the tremors continue. In August, Skandia said it was pulling £640 million out of the old funds and transferring it to Woodford’s new Equity Income Fund. At the time, the company announced the move had been made on the back of investor feedback and was in their clients’ best interests. “Customers will continue to benefit from the proven investment expertise of Neil Woodford,” it said. Elsewhere, after Buxton left Schroders, its hoard of £2bn-worth of investors funds dwindled rather quickly
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Fund managers
to around £1.3bn. Indeed almost immediately after Buxton announced he was leaving in March 2013, broker Charles Stanley stated it was removing the fund from its buy list until a successor was named. Going further back in time to when Anthony Bolton left his Special Situations Fund in 2007 after 28 years, around £1.4bn was pulled out by savers from the £6.5bn fund – so this is not an entirely new phenomenon. Emma Parr, Senior Associate at law firm Collas Crill, has worked for fund management firms coping with the loss of a key man. “Some act naively. They don’t realise that a lot of the clients aren’t following the fund, they’re following the manager. When he or she goes, they go too,” she says. Hollands agrees: “Individual fund managers can have very strong personal followings. Woodford was the extreme example. Invesco Perpetual really haemorrhaged significant funds following news of his departure, despite the strong track record of his replacement, Mark Barnett.” Nick Dixon, Investment Director at Aegon, picks up on this point and urges investors to stay calm when a fund manager leaves, because in the long run it’s likely they won’t end up out of pocket. “Resist the urge to jump ship,” he says. “Investors should feel comfortable sticking with a fund because those who remove their money from high-performing funds purely because their celebrated manager has departed, could be missing out on benchmark-beating returns.”
Stick or twist?
“This is a competitive industry, where the rewards can be high for the most successful managers and therefore a degree of poaching is inevitable” 50 businesslife.co November/December 2014
Indeed, according to research from Aegon, nine out of 11 funds have continued to beat their benchmark following a star’s departure. As a first example, let’s take Bolton’s Fidelity Special Situations. He achieved annual growth of more than five per cent above benchmark, helped in large part by not joining the dotcom party in the late 1990s. Replacement managers Sanjeev Shah and Alex Wright have seen 1.9 per cent growth above benchmark since 2008. Buxton’s UK Alpha Plus notched up an annualised 4.1 per cent growth above benchmark. His replacement, Philip Matthews, has led 2.8 per cent benchmark-beating growth since July 2013. Liontrust UK Growth lost star man Jeremy Lang in 2009. His benchmark beater was 1.8 per cent, which has actually been trumped by replacements Anthony Cross and Julian Fosh, who achieved 2.6 per cent. But as the Aegon report showed, it’s not all success stories – Jupiter Financial
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Understanding your local Channel Islands’ business landscape. It’s in our nature. The qualities you need in a local law firm come naturally to us. We provide a broad range of integrated pan-island legal services, with a pragmatic, commercial approach, and we are focused on delivering outstanding client service. To find out how we can assist your business, please contact: Jersey Jonathan Hughes T +44 1534 504336 E jonathan.hughes@ogier.com
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Fund managers
Opportunities, which lost Phillip Gibbs in October 2011 has seen negative growth under new boy Robert Mumby. “Funds that consistently outperform their benchmark are few and far between, and those managers who develop a proven track record of success deserve their strong personal reputations,” says Dixon. “However, our analysis should be a wake-up call for investors – most funds continue to outperform benchmarks even after the star has departed. So-called star managers frequently rely on the ideas and technical analyses of their wider team, who will have been mentored and developed by the star to continue their legacy and investment process after their departure.” But take another look at those performances by the fabled star players. Even Dixon’s survey shows they still largely outstrip the performance of their successors. The lure of a star player can be difficult to resist. Investors will surely still be tempted to follow their favourite – their ‘money maker’ – to pastures new. So how can fund management firms best protect themselves from such a departure? Parr says more are using gardening leave restrictions and restrictive covenants, which puts certain limits on future employment such as taking existing clients (see box). Hollands says fund management firms also have to look at their operating and training practices as well. “Some fund companies are more resilient to these changes because they operate more team-based approaches rather than rely on a star player,” he states. “Others emphasise the role of analysts in stock selection and this can make them less vulnerable to knee-jerk outflows when a manager leaves.” Dixon adds that young talent must also be mentored by current fund managers. As for investors themselves, Hollands says: “We believe that when a fund has a change in manager you need to calmly reassess the case for holding it, starting with detailed scrutiny of the track record of the new incumbent. There’s rarely a case of a quick fire sale of the fund – any deterioration in performance as a result of a new manager being installed will take time to filter through. Few managers will completely recreate a portfolio they have inherited overnight.” Indeed, how many Manchester United fans swapped teams or stopped supporting when Sir Alex retired two years ago? The ties of football loyalty are no doubt stronger than that of investing – a gritty nil-nil away game at Stoke won’t stop you paying your private school bill for this term, but a misplaced asset will. But the principle should remain the same. Take a rational rather than emotional response to a fund manager leaving – give it time and fully assess the ramifications. Who knows? The next generation may be even better than the last. n
The lure of a star player can be difficult to resist. Investors will be tempted to follow their favourite to pastures new
David Craik is a freelance financial writer
52 businesslife.co November/December 2014
Dealing with departure Corinne Staves, Partner at law firm Maurice Turnor Gardner, says firms should use the ‘carrot and stick’ approach with their managers. The carrot is ensuring that the star is happy – making sure he has all the top clients and that the overall business is trading strongly. The stick is usually restrictive covenants placed in his employment contract. These can prohibit an employee from competing with his employer – a non-competition clause – or from dealing with the firm’s clients for a certain period of time after they have left the business – known as non-solicitation. For these to stick in court, however, an employer must show they’re compelled to protect a legitimate business interest, such as client connections or confidential information. The clauses must be ‘sufficiently narrow’, meaning that any geographic restrictions imposed on an ex-employee finding work or the length of time the covenants will last for – usually between six and 12 months – have to be reasonable and justified. “You want to control behaviour and mitigate damage,” says Staves. “You can’t just say ‘you’ll never work in this industry again’!” Emma Parr, Senior Associate at law firm Collas Crill, says more fund management firms are putting these clauses in contracts despite employees refusing to take them seriously. “Some employees say restrictive covenants aren’t worth the paper they’re written on,” Parr says. “Some say they’re unenforceable, but if they are put in a contract for a legitimate business reason then they are enforceable. Employers aren’t adequately protecting themselves against star managers leaving and taking their clients with them. It’s not a very pleasant thing to do, but it can keep them out of the game for a while and make them less attractive to potential employers.” Gardening leave, where employees are asked to stay at home and sit out their notice period, is also common. “Businesses want their departing employee not to see any sensitive information before they leave. Most employees accept that they may have to do gardening leave,” she states. Staggered release of invested shares may also be a tactic used by employers to tempt departing employees to ‘behave themselves’. Staves urges employers to think rationally. “We are all human, but emotional reactions to a key colleague leaving are not helpful. Try and take the emotion out of the equation.”
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At the frontline of funds technology Using the right technology can streamline processes and deliver efficiencies, but turning that into bespoke solutions is where the real advantage lies, as Jon Trigg at Moore Management explains
T
echnology is as integral to financial services as wings are to planes – you can have one without the other, but only if you’re planning on standing still while others speed past. The ability of financial software to deliver measurable differences is massive and continuously evolving, which is why fund administrator Moore works hard to ensure the technology it chooses is the best available to deliver what its clients want. And this is happening across its entire funds base as the industry enjoys a strong period of growth. One area in which the Moore team has seen demand rise for its services is that of private equity (PE). In recent years the asset class has gone from strength to strength with global sentiment in the markets rising steadily, with over €54bn raised in European PE funds during 2013. The legacy of the financial crisis may not be entirely forgotten, but this return to favour with investors has cemented the industry as a viable alternative to traditional retail funds.
54 businesslife.co November/December 2014
With it, the demand for fund services is thriving, particularly in offshore jurisdictions where advantageous tax regimes and a proven track record of expertise offer an attractive environment from which fund managers can benefit. Offshore fund administration can involve the provision of many different services, including: acting as company secretary; cash and treasury management; providing registered offices and directorships; acting as custodian; and offering compliance services and accountancy (including the preparation of audited financial statements) for funds and fund managers from around the world. Providers are also taking advantage of opportunities to offer a broader scope of services as the introduction of international regulation and legislative changes take effect. It’s a niche yet lucrative business, if managed well. And it’s fair to say business is booming. The Jersey Funds Association recently announced that there is over £200bn in funds
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under administration in the island. This is up £5bn in the previous quarter alone, and shows a return to previous form.
The right stuff This increase in the volume of funds under administration in Jersey is in no small part due to advancements in the technology and software available to administrators. Indeed, technology forms the backbone for the provision and management of all funds services. Complete integrated platforms with advanced reporting capabilities, which suit cross-jurisdictional structures, for instance, have had a dramatic impact on the competition, improving the quality of services provided to investment managers and investors within this challenging marketplace. The efficiencies created by database systems such as eFront’s FrontInvest and Sunguard’s Investran have made them the two largest players in this space. They provide a complete solution for administrators and managers and offer a level of comfort to regulators and managers looking for a trusted provider. These systems are capable of performing full partnership accounting – from complex allocation methods and inter-company dealing, to process management through workflows and internal controls to ensure procedures are maintained. They also relieve the regulatory burden of directives such as FATCA and AIFMD, which can be costly and time-consuming if dealt with separately or outsourced. Another leap forward has been the level of reporting that is now available. Custom-built reporting modules and data warehousing features allow for financial and non-financial data to be extracted easily and turned into valuable information for investors and regulators alike. Automated capital statements, detailed portfolio analysis and complete valuation histories can be produced at the touch of a button, reducing complexity and improving efficiency. It is for these and numerous other reasons that Moore has chosen to use these systems – as they deliver operating efficiencies and advantages that translate into clear benefits for our clients. However, this is not simply an ‘off-the-shelf ’ solution.
Delivering results As a practical example, Robert Palazzini, Moore’s in-house systems specialist, is able to use these systems to create complex reports and extract any information that a client may need. His depth of experience means clients don’t have to wait for messages to be relayed to and from the software developers before taking action – he can adapt systems and create in-depth reports as required. The Moore team has a strong relationship with the developers at software company eFront, and the constant communication between the two teams allows them to work together to find solutions as soon as a problem arises. The speed at which technology is advancing can’t be overestimated, and the latest cutting-edge software solutions provided by eFront demonstrate how far they have progressed since their original solution first rolled out to Jersey providers six years ago. The most recent upgrade to eFront is a big step-up from the previous version. One of Moore’s biggest clients, a large PE house, has already benefited from the upgrade, with all their information now accessible from one touchpoint rather than the several disparate systems used previously. It’s the ideal set-up from both a risk management and an efficiency perspective. Some fund administrators customise programmes from the main developers, but there’s a danger that important software upgrades
A specially tailored report created recently for one client has cut a procedure that took hours each month down to just a few seconds and patches are skipped or delayed. Instead, Moore uses the ‘vanilla’ product and the team writes the reports outside of this, thus ensuring clients always benefit from the very latest software while still receiving quality, bespoke reports. As another example of the benefits this brings, a specially tailored report created recently for one client has cut a procedure that took hours each month down to just a few seconds. Online portals are another new technology that’s been embraced by the industry. Investor servicing systems such as Investment Café from eFront – which is used by Moore – offer investors the ability to easily access their portfolio information, track all correspondence and legal documentation and improve communication channels with the administrators, strengthening relationships and keeping them up to date with prospective deals and any upcoming activity. That Moore is at the frontline in the use of funds technology was made clear recently when it was chosen as the fund administrator for Global Advisors Bitcoin Investment Fund, the world’s first fully regulated Bitcoin expert fund [for more on this, see our interview on page 28]. An innovative and tailored solution was needed to overcome the significant technological and regulatory challenges faced in making this unique fund a reality, and it was something that Moore’s highly experienced team relished delivering. Administrators need to be constantly innovating to anticipate customers’ needs and exceed their expectations. These new services are yet another example of Moore understanding that while anyone can offer off-the-shelf software, to offer clever, game-changing solutions requires in-depth knowledge, boundless creativity and a desire to be leading the advance in financial technology. n Jon Trigg is Head of European Fund Services at Moore Management
About Moore Moore Management is a provider of independent fund services for institutional and corporate clients, ranging from major investment banks to boutique alternative asset managers located in the major financial centres. In January 2013, First Names Group, a trust and corporate services provider, acquired our business and integrated its entire fund administration offering under the Moore brand. For more information about the services we provide and how they could benefit you, please contact Jon Trigg at jon.trigg@mooregroupltd.com or visit mooremanagement.com Moore Management is regulated by the Jersey Financial Services Commission.
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56  businesslife.co November/December 2014
The
Private equity
bigger
picture Private equity’s recovery over the last year has resulted in larger funds being raised and bigger deals being done. But what does this mean for the Channel Islands? And is any of the capital raised making its way over here? Vicky Meek investigates
A
fter a difficult few years, private equity activity and fundraising is picking up. That’s great news for the players themselves and to businesses looking for private equity funding. Yet so far the recovery is uneven, as deals are concentrated at the larger end of the fund-size spectrum. Indeed, the first half of this year saw a total of $159.4bn invested globally by private equity across 1,476 deals, according to data provider Preqin – an average deal size of $108 million. Compare this to full-year averages of $95 million in 2013 and $79m in 2012. While these averages may not sound high, they include deals in emerging markets, which are typically smaller, as well as acquisitions made by private equity-backed companies, which also tend to be rather smaller than original buyouts. Increased deal size is a trend that looks set to continue, with larger, more established firms having the most success at fundraising. According to Preqin, quarterly aggregate fund
closes exceeded $100bn for four consecutive quarters by Q2 2014, with funds such as Ardian’s latest $9bn secondary fund, its sixth, boosting the overall figures. “The larger funds continue to be successful at fundraising,” says Ben Morgan, Partner in the Corporate and Finance Group at Carey Olsen. “Yet for smaller managers that might have got away with a shorter track record pre-crisis, it’s much harder.” Indeed, first-time funds accounted for just seven per cent of the capital raised in Q2 2014. And this may well have an impact on private equity-related business in the Channel Islands. “While fundraising figures have improved, the fact is that it’s mainly the established private equity players that are successfully raising funds,” says Andrew Whittaker, Managing Director at Ipes. “That means there are fewer new managers coming through and therefore less new business to attract.” Figures for funds under management and administration in Guernsey have remained relatively stable over recent
November/December 2014 businesslife.co 57
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Private equity
times, though the most recent numbers available – for the second quarter of 2014 – show a decline of 1.3 per cent, or £1.8bn, in closed-ended funds over the year since 30 June 2013, and a decline of 4.4 per cent or, £1.9bn, in open-ended funds. In Jersey, the total under management has risen slightly over the year to just over £120bn for closed-ended funds from £119.4bn, and decreased for open-ended funds from £73.9bn to £72.9bn.
Guernsey vs Jersey: a draw?
Moving out These declines may well be the result of jurisdictional choice. “One of the issues the Channel Islands are facing is that some managers are choosing to go elsewhere, and that means work for administrators is being lost to other centres, such as Luxembourg,” explains Whittaker. “The push factor is largely political – Luxembourg’s tax advantages are on par – but some funds perceive an EU domicile as an easier sell to investors.” Tom Amy, Managing Director at Elian Fund Services in Guernsey, also reports that some are opting for UK-based structures over the Channel Islands because they are seeking to be domiciled onshore and they’re largely based in London. Yet despite a degree of competitive pressure from other locations, private equity activity in the Channel Islands suggests that investors believe in the potential of the financial services sector here, particularly in services related to private equity, other alternative investments and trusts. “We are seeing some deals here,” says Darren Bacon, Partner at Mourant Ozannes. “Many administration firms, for example, have gone to private equity, and the sector remains a target for investment.” The summer’s £180 million management buyout of Ogier Fiduciary Services (now Elian Fund Services) by Electra Partners was, as with activity globally, towards the larger end of the deal spectrum for the islands. By comparison, last year’s acquisition by Silverfleet Capital of Ipes was valued at around £50 million, and AnaCap’s deal to buy IFG Trust and Corporate Group (now First Names Group) was £70 million. The attractions of this type of business to private equity are high. “Financial services businesses are on most private equity firms’ wish lists now,” says Morgan. “Experience has shown that, with a little extra effort and know-how, it’s possible to make good, relatively quick returns in the Channel Islands.” In addition, business is sticky – administrators, for example, rarely lose existing fund work because the effort of switching providers is too great. The gradual implementation of the Alternative Investment Fund Managers Directive (AIFMD) is another reason for investing. With private equity firms now required to hire depositary services (see page 24), the administrators have a new line of business to grow into. In addition, private equity sees the opportunity for consolidation of players in the market. Part of this is to do with regulatory change requiring scale and global reach among financial services businesses in the Channel Islands, but also the increasingly global nature of fund registration, administration and related services. Since receiving private equity backing in 2012, First Names Group has acquired Moore Group, Basel Group, Citadel (based in Luxembourg), Temmes Management Services, Mercator, and, most recently, Seymour Trust Company. Meanwhile, JTC Group, which
“While fundraising figures have improved, the fact is that it’s mainly the established private equity players that are successfully raising funds”
58 businesslife.co November/December 2014
Guernsey may historically have been considered the Channel Island of choice for private equity fund registrations, and Jersey for real estate and funds of funds, yet there are signs this may be changing. Those in Guernsey point to expertise built up over years. “Guernsey has specialist teams based on the island,” says Darren Bacon, Partner at Mourant Ozannes. “The private equity fund administration teams, for example, are here, and so the work is not outsourced to teams in Luxembourg or Ireland.” He also points to Better Capital and Terra Firma putting people on the ground in Guernsey. “Guernsey is more mature and has a deeper talent pool than Jersey,” says Ben Morgan, Partner at Carey Olsen. “We are the go-to jurisdiction for private equity fund formation.” Yet there is a move towards unregulated structures among some private equity funds, and it’s driving a portion of business to Jersey. “There’s more activity in so-called unregulated funds and, because Guernsey doesn’t currently have an unregulated fund regime, we’ve seen several new funds consider both islands and ultimately choose Jersey,” says Andrew Whittaker, Managing Director at Ipes. And some believe the lines between the two are blurring in terms of perception. “While Guernsey may have a reputation for private equity and Jersey for real estate, this distinction is weakening,” says Tom Amy, Managing Director at Elian Fund Services in Guernsey. “The fact is that both islands can do both and that is starting to be recognised. I’m seeing more interest here in Guernsey for real estate corporate and fund structures, for example.”
received investment from CBPE Capital in 2012, acquired Guernsey’s Anson Group late last year. “Many private equity-backed groups in the Channel Islands have grown through acquisition,” says Amy. “There’s been a real consolidation story in part because of the range of services financial services businesses here now need to offer. There will be more scope for consolidation in the future as more new entrants are coming into the market. However, firms are being increasingly selective. The list of company names and the clients they service is very visible – for the strategy to work, you have to make sure you’re buying compatible businesses.” Most believe Channel Islands’ investment activity will therefore remain at a steady rather than a brisk pace, and, for many, private equity’s investment, in addition to the business it brings to the islands, is welcomed with open arms. “The beauty of private equity investment is that the firm is there to support management and help implement strategy,” says Amy. “Not only is private equity providing finance for growth, it works in partnership so firms can achieve it.” n Vicky Meek is a freelance business and finance journalist
Moore Stephens Fund Administration An offshore, specialist, bespoke service. Providing fund accounting and administration services across a range of asset classes for both private and institutional clients. We have long standing relationships with investors from multiple jurisdictions, delivering high quality reporting that can be created to suit client needs and requirements. For further information please email: fundadmin@moorestephens-jersey.com or telephone: +44(0)1534 880088
www.msfundadmin.com Regulated by the Jersey Financial Services Commission
PRECISE. PROVEN. PERFORMANCE.
60  businesslife.co November/December 2014
FATCA
FATCA ticks on
It feels like FATCA has been around for years already, yet some companies are still coming to terms with its implications. However, as Kirsten Morel explains, impending deadlines are now creating a real sense of urgency
I
t’s four years since US Congress enacted the Foreign Account Tax Compliance Act (FATCA), enabling US Treasury authorities to see into the accounts of its citizens around the world. Since then, the UK has joined in with its own similar legislation, and the OECD is set to announce new global reporting standards which are very much in the same vein. Seeing the potential threat to their position as international finance centres of high repute, the Channel Islands have sought to deal with FATCA head on, but how are they doing, and will companies in the islands be as ready as they need to be as the FATCA clock continues to tick? When FATCA was announced, the initial reaction from the Channel Islands was to play down its potential effects and move the focus onto other jurisdictions. However, the reality has turned out to be somewhat more involving for Channel Island businesses. As Karen Haith, Operations Director at fund administrator, Ipes explains: “You have to comply with FATCA even if you know you don’t have US investors.” FATCA’s all-encompassing regulations put the onus on firms to prove they don’t fall within its remit, and this means almost all Channel Island financial services businesses have had to get to grips with it. This entails
looking back through client files to identify those who are or may be identified as US residents, and putting in place processes (on-boarding procedures) to ensure new clients are identified and classified properly. These processes for identifying new clients had to be in place by 1 July this year according to the US FATCA implementation timetable. While this is a serious deadline, it’s not as critical as the 1 January 2015 deadline for those firms that need to apply for a Global Identification Number (GIN) from the IRS, because failure to do so could result in penalties, including the levying of a 30 per cent withholding tax. “1 July was, in many respects, the least burdensome bit,” says Tony Mancini, Executive Director at KPMG in the Channel Islands. “It was about having one or two extra questions when you take on clients.”
Reporting issues Still, the signs are that companies haven’t been consistent meeting it. “Channel Island businesses are in a really mixed state. Some are fairly well advanced and some have barely started thinking about it,” explains Wendy Martin, Executive Director, Tax at EY in the Channel Islands. Quite why some firms have ‘barely started thinking about it’ is puzzling, considering
how long FATCA has been around, but Martin is clear that it isn’t too late to get started. “There is time, but time is running out,” she says. “Channel Island financial institutions have until December to register, and they will have a lot of work to do in classifying entities.” “1 July was a milestone, but at this point people are realising that there’s still plenty to be done,” agrees Daniel Dzenkowski, Tax Director at PwC in London. “It’s like running a marathon. You need to keep the right pace and reach the end.” Indeed, there are plenty more deadlines to be met after the GIN applications, including reporting deadlines of 1 March 2015 for some businesses and 1 July for others. Reporting is the ultimate aim of FATCA and getting it wrong could lead to consequences beyond those levied by the IRS. “Now people need to work out how they report. They have to make sure they can collect the appropriate data and ensure it’s right. It’s a reputational risk, so getting it right, along with efficiency and costeffectiveness, is important,” says Mancini. It’s easy to understand why the general view is that the real work starts now. But reporting is not just a matter of sending the appropriate information to a single authority – companies have to work out where they
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FATCA have to report. For instance, a fund administered in Guernsey may be domiciled in Cayman, so reporting will have to be via the Caribbean jurisdiction, meaning firms need to know each jurisdiction’s guidelines. Along with the idiosyncratic reporting regimes, companies also need to appoint a responsible officer who will lead the FATCA reporting and compliance process. There have been fears that responsible officers could be subject to US prosecution if something was amiss, but such fears seem unfounded as Channel Island governments have signed a Model 1 intergovernmental agreement with the US. This means Guernsey and Jersey courts will have jurisdiction with regard to FATCA, as opposed to jurisdictions such as Bermuda and Switzerland where FATCA reporting forms will be signed under penalty of perjury under US law.
Getting the people in Registering, working out where each client entity has to report, and actually reporting all mean that FATCA demands appropriate resources be dedicated to it. Exactly how much depends on the company in question. Karen Haith points out that Ipes has a small team for FATCA because the fund administrator is looking after clients’ responsibilities as well as the firm’s own, but this isn’t the norm in her experience. “From what we’ve seen, we’ve not been aware of people increasing resource,” she says. While the islands may be prepared for FATCA, in the sense that they’re used to dealing with strong regulation, businesses aren’t clear about where FATCA should fit in with the organisation. “There’s debate and discussion right now about where FATCA should sit, which is why we’re seeing a discussion about whether a FATCA resource is necessary,” Dzenkowski says. Tony Mancini agrees, explaining that the information required for FATCA compliance is better sourced via relationship managers. “Companies have often had one or two people as a core [FATCA] team but it quickly gets pushed out to client-facing teams.” Channel Island businesses may be in a mixed state when it comes to FATCA compliance, but they can’t complain about the effort made by the islands’ governments and the industry as a whole. One of the key pieces of literature produced on the new regime is the Crown Dependencies’ guidance notes, which are a collaboration between the Channel Islands and Isle of Man, and an attempt to help the sector deal with FATCA. The result has been impressive enough that, as Mancini points out: “other islands, particularly those in the Caribbean, are using
Reporting is not just a matter of sending the appropriate information to a single authority, companies have to work out where they have to report
62 businesslife.co November/December 2014
our notes.” Although still in draft form, the notes have given clarity where there was little, and will likely have the effect of helping the islands not only with FATCA but also the OECD’s Common Reporting Standard (CRS), which will, Mancini believes, ultimately lead to a global standard, but not before it has caused some frustration first (see box below). “Forty-two countries have said they will be early adopters of the CRS, but 12 EU countries haven’t,” Mancini says. “Until all EU countries adopt CRS, there is a need for the EUSD [EU Savings Directive, which gives guidance on the taxation of savings]. This adds up to four similar but different reporting systems, which will be frustrating and expensive for business. Will it increase tax revenues? I don’t know.” Whether FATCA and its like will raise more revenue for government coffers remains to be seen. For finance companies, however, there is no FATCA without pain – but if the end result is a world in which the Channel Islands are seen as fully transparent and compliant, and no longer as dark corners of the global financial system, then that hurt may just be worth it. n Kirsten Morel is a freelance financial writer
Because FATCA isn’t enough The introduction of FATCA made other jurisdictions sit up. The UK’s adoption of a similar regime is clear evidence of the start of a trend, and now the OECD is getting in on the act with the introduction of the Common Reporting Standard (CRS). Though modelled on US FATCA, the CRS, which aims to automate the exchange of tax information between jurisdictions, is likely to require different data, and possibly more reporting than FATCA. The upshot of all this is that Channel Island financial services firms have more than just FATCA to comply with. “CRS and FATCA are 90 to 95 per cent similar,” says Tony Mancini, Executive Director at KPMG in the Channel Islands. “But [CRS]
will add cost and frustration for our clients.” CRS may be the latecomer to the international reporting party, but there’s an impatience to get the regime in place. More than 40 jurisdictions have signed up to be early adopters, and the feeling in the industry is that ultimately CRS will become the global standard. The key to CRS is the automation of the transfer. It requires financial institutions to automatically report the details of their overseas clients to their national tax authority or an otherwise designated competent authority. These then periodically transfer the data in bulk to other competent authorities in partner jurisdictions. “For Channel Island businesses, it makes sense
to use as much as they can from their FATCA experience,” says Wendy Martin, Executive Director, Tax at EY in the Channel Islands. “Thankfully, the OECD standard is similar to the US and UK IGAs [intergovernmental agreements], so it’s worth trying to incorporate the OECD’s CRS as firms deal with FATCA.” US and UK FATCA and the OECD’s CRS have all placed a significant burden on financial firms. However, the beauty of the CRS is that it should stop the emergence of individual national schemes. So, once this period is over, it can only be hoped that Channel Island businesses won’t have to deal with implementing such onerous compliance schemes again.
Advertising feature
Solving the
funds tax residence maze
Changes to UK tax residence rules offer greater flexibility for offshore fund structures and their managers, as Jo Huxtable and Adam Hart from Deloitte in Guernsey explain
T
he UK has recently enacted legislation that exempts certain non-UK incorporated alternative investment funds (AIFs) from being tax resident in the UK, even if the central management and control of the fund is carried out in the UK. For Guernsey and Jersey (and the Isle of Man) to satisfy the exemption, the following conditions apply: ● The fund must be a corporate entity; ● The fund must not be incorporated in the UK; ● The fund must be treated as resident in its foreign state for the purposes of any tax imposed on income; and ● The fund must be UCITS-authorised in a foreign state, an AIF that is authorised or registered in a foreign state, or not authorised or registered but with its registered office in a foreign state. Certain types of fund are excluded: ● Unit trust schemes, the trustees of which are UK resident; ● UK investment trusts; and ● UK REITs (or members of a UK REIT group). The ‘tax imposed on income’ condition might appear to exclude tax-exempt funds from the legislation, but this is not the case. The UK tax authorities have confirmed that, where there is a tax on income in the foreign state, those funds would fall within the definition even if they were tax exempt, so this would include funds located in the Crown Dependencies. However, funds located in jurisdictions with no tax on income, such as the Cayman Islands, do not meet the exemption.
In conclusion
Tax impact on funds and their managers Funds that are tax transparent, such as limited partnerships, won’t be affected, and their corporate partners, including general partners, won’t fall within the terms of the exemption. Many funds in the islands take the form of corporate AIFs and may have (or may like to have) some form of ‘footprint’ in the UK, such as a director or manager. Accordingly, many corporate AIFs may now wish to consider the impact of the exemption, but residence is not the only tax matter to consider. Others include: ● Fund domicile. The exemption is unlikely to reduce the number of funds that are domiciled offshore. The reasons for establishing a fund vehicle offshore – such as tax neutrality, an advantageous regulatory regime, flexible company law, specialist service providers and cost efficiencies – remain as relevant as ever. ● Board of the fund. While the exemption may result in an increased presence of UK directors on the boards of offshore funds, this will not be appropriate in many cases. A broad range of potential UK tax issues could arise from management activities being carried out in the UK – in particular the creation of a VAT establishment of the fund – and having appropriate offshore substance remains critical to the tax efficiency of offshore-based fund structures. ●F und managers. The exemption only applies to funds, so fund managers who want to remain offshore must continue to be aware of tax residence risks. Onshore fund managers will need to be wary of creating tax exposures for their funds, such as a permanent establishment for corporation tax purposes or a VAT establishment. Any change to the activity of an onshore fund manager will also require consideration from a transfer pricing perspective.
Certain funds may have been established in the UK rather than offshore because they couldn’t easily or efficiently maintain non-UK tax residence, such as funds with unusual asset classes, start-up managers and actively managed funds. The exemption may lead managers to domicile new funds in the islands, when this previously may not have been a realistic option. Alternatively, some funds with a UK connection may redomicile from non-tax jurisdictions, such as the Cayman Islands, to fall within the exemption. The exemption will be relevant to many funds in the islands looking to manage their UK tax residence position. It should give funds greater flexibility in how they operate and provide the islands with a competitive advantage over jurisdictions with no tax on income. However, any change to the operation of fund structures carries risk, and offshore funds should always seek tax and legal advice if they are considering any such changes. n Jo Huxtable is Partner and Adam Hart is Senior Manager at Deloitte Guernsey About Deloitte Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Contact Jo Huxtable or Adam Hart on +44 1481 724011, or jhuxtable@deloitte.co.uk or adhart@deloitte.co.uk www.deloitte.com
November/December 2014 businesslife.co 63
Japan
Once a global star performer, Japan has endured years of economic strife – but has Abenomics brought about a return to prosperity and opportunities for investors? David Burrows investigates
The fall
and rise of
64  businesslife.co November/December 2014
Japan
F
or most of the last decade, if not even before that, the Japanese economy has been regarded as a basket case, with the Nikkei something of a dog and economic growth nowhere to be seen. That has changed in recent years – in 2012 the Nikkei was up 26 per cent, and 52 per cent in 2013. In 2014 the market has been more volatile, but as Michael Paul, Japan and Asia Equity Analyst at Brewin Dolphin, argues, there is good reason to be positive on Japan. “The market has seen more volatility this year, but that has largely been due to the VAT hike introduced in April 2014,” he explains. “A lot of purchases were brought forward to the first quarter, prior to the VAT rise, which meant a weaker second quarter. Also a lot of big macro funds took money out of Japan at the start of the year, not only on the basis that they had performed well, but also because of the uncertainty over VAT.” Paul insists the underlying story remains intact, however, and that the reforms introduced by Japanese Prime Minister Shinzo Abe – monetary, fiscal and structural – are working and making Japan a more attractive place to invest (see box on page 66). A more bullish sentiment towards Japan is certainly reflected in the flows of money into Japanese funds since Abe was elected in 2012. Net retail sales figures from the Investment Managers Association show that while there were outflows of £40.6 million from Japanese funds in 2012, for 2013, post-election and following the implementation of Abenomics, there were inflows of £636 million. The move into Japanese equities has been justified in performance numbers too. According to Morningstar, the average two-year return from funds in the Japan sector to 31 August 2014 was 17.01 per cent. Andrew Pittom, Director at Moore Management, also believes there remains good reason for investor optimism towards Japan. “The Nikkei performed well at the end of 2013 – it has slipped into negative territory since then, but it remains a good story and things are still moving in the right direction.” Echoing Brewin
Dolphin’s Paul, he says: “Money was withdrawn at the start of 2014, but this was largely profit realisation rather than the start of any downturn – Japan funds are still selling well.”
Credit for Abe So, just how much does Japan’s recovery owe to the impact of Abenomics? Well, a great deal, according to Ian Heslop, Head of Global Equities at Old Mutual. “I would say the recovery is indeed on the back of Abenomics. In 2012 we saw a change in government, a change in fiscal and monetary policy and a change in risk appetite from Japanese investors. Valuations of Japanese equities aren’t massively expensive and there’s still growth potential. Core inflation is going in the right direction. The Japanese economy has come a long way in 18 months.” Heslop concedes there’s no shortage of challenges ahead – not least the earning and spending power of Japanese workers. “We’ve yet to see much in the way of wage inflation. We’ve seen some in large cap companies, but that’s mainly on the back of bonuses rather than fixed costs. There’s been no noticeable wage inflation among smaller companies. But if revenues continue to improve, we should see wage inflation.” A more affluent consumer would prove an added boost to Japanese manufacturers and retailers focused on the domestic market. Abenomics also succeeded in intentionally weakening the yen. But has Japan enjoyed increased export business as a consequence? And, if so, has the growth been in specific sectors? “There has been a growth in exports in automotive and tech companies due in some part to the weaker yen, but exports in general aren’t seeing a major pick up,” Pittom says. His view is echoed by Paul. “Export growth expectations have had to be revised. We’ve seen roughly a 25 per cent weakening in the yen – this has meant companies have been able to cut costs. They’ve maintained rather than increased their market share, but have become more profitable.” He adds that the Japanese export story has changed markedly over the last decade. “Exports aren’t such a big part of corporate Japan anymore. A lot of manufacturers are building their products close to where they’re selling in overseas
November/December 2014 businesslife.co 65
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Abenomics and the ‘three arrows’ ‘Abenomics’ is the name given to the economic polices introduced by Japanese Prime Minister Shinzo Abe after his 2012 election win. Abe faced a significant challenge in that Japan’s economy was in a state of malaise, suffering from a combination of low growth, deflation and weak consumer spending. Abenomics is centred around the ‘three arrows’ of monetary, fiscal and structural policy. The objective of the three arrows is to increase annual GDP growth, raise inflation to two per cent via quantitative easing, and improve labour markets and build up trade partnerships through structural reforms.
Monetary
Fiscal
Structural
The fiscal package is designed to revive growth in the short term through a major investment in public works – notably infrastructure projects, including major roads, tunnels and bridges. The package is also designed to encourage private investment, particularly in the area of clean energy. The theory is that increased government spending allied to a rise in private investment will increase GDP, revitalise local economies and improve employment levels.
66 businesslife.co November/December 2014
The central bank of Japan set an inflation target of two per cent in January 2013, which it pledged to achieve through quantitative easing. The easing of monetary policy was designed to push down exchange rates, helping to make Japanese companies more competitive globally. The yen has fallen significantly since the end of 2012, providing a healthier environment for Japanese manufacturers who are able to more easily control costs and increase profits. If corporate earnings continue to improve, there’s scope for higher wages, and if there’s more money in people’s pockets, consumer spending should rise. Japanese companies should benefit from a confident consumer, so stock prices should climb, making Japanese equity markets an attractive place to invest.
Planned structural reforms focus on industry deregulation, labour market reforms – such as increasing opportunities for women in the work place – corporate tax cuts and the opening up of trade to international competition.
markets. There’s much more international businesses now, which means there is the opportunity for earnings overseas to be brought back into Japan at a more beneficial exchange rate.” Japan was once the world leader in the technology sector, but fell behind. While it’s still ahead of the pack in certain areas, like robotics, other countries, particularly in Asia, have either overtaken or closed the gap on their neighbour. Pittom believes Japan remains competitive, but agrees that other countries are constantly raising the bar. “Japan must continually look to improve price and product, with countries like Korea competing hard,” he explains. “However, I think Japan has the advantage in brands and quality. In the automotive and tech sectors, there’s still strong growth, and companies in those sectors are increasing margins.”
A good time to invest? It’s been a good two years for investors in Japan, but is now a good time to either enter or increase exposure to that stock market? Heslop thinks it’s reasonable to say the easy money has been made in Japan now. Going forward, the prospects for listed Japanese companies will depend on whether the structural reforms promised by the government materialise – particularly in relation to moving tariffs, improving corporate governance and focusing on shareholder value. “Japan is a ‘seen it before’ story,” says Heslop. “People who have made allocation shifts into Japan in the past have been disappointed.” For an economy that has been stagnant for so long, there’s understandable scepticism about any long-term recovery. Heslop, however, thinks if the progress seen since 2012 continues, there’s likely to be a more sustained move into Japanese equities. Paul suggests that while valuations of Japanese shares still look attractive from a global perspective, the shrewd investor will access the country via a collective fund rather than individual shares, and possibly in a broader Asian or global fund. “Broker coverage in Japan is quite low, so a good fund management team can find some interesting stories and uncover companies that are attractive but largely overlooked.” As for the outlook over the next two years, major tests lie ahead for Abe. While his monetary and fiscal policy has produced tangible results, he has yet to make any significant headway in structural reform. Historically, Japan is an enclosed economy – it’s not a very open or liquid market. There are many large family-owned businesses in
Japan
Japan, and there has traditionally been a reluctance from Japanese companies to focus on shareholder value. What’s more, many Japanese businesses aren’t open to the idea of partnering with foreign companies, or comfortable with foreign financing. Improving international trade associations is part of Abe’s structural reforms, but, as Pittom says, unlike the monetary and fiscal policies, which have more immediate impact, this is a longerterm objective that will require something of a cultural shift. “The Japanese ambassador came to Jersey last year and there was much talk about business zones and opening up the market in Japan. The business zones in Tokyo are designated areas where it’s much easier for western companies to set up and work,” Pittom explains. “We know from experience that setting up an office in Tokyo can be quite problematic, so at least this is progress.” Pittom’s cautious optimism is shared by Paul, particularly in relation to corporate Japan. “Corporate governance in Japan has historically been a problem, but it’s improving,” he says. “I think the new Nikkei
400 Index is a step forward as it forces companies to focus on transparency and returns to shareholders – companies listed must satisfy global investment standards. It’s often referred to as the ‘shame index’ on the grounds that there’s shame if you aren’t on it.” For Heslop, further positive momentum from Abenomics in the future depends on the level of opposition the Prime Minister faces on structural reform. “It will take a lot of political bravery to see his reforms through, particularly the restructuring of the healthcare and agricultural sectors, which have been very protected by current policies – with huge tariffs on rice into Japan, for example.” Heslop believes Abe has a once-in-ageneration opportunity to introduce radical structural changes, and the success of his monetary and fiscal policy means he has some measure of support for what comes next, but his popularity rating will take a hit as this tough medicine is swallowed. He has a mandate to govern for another two years, which gives him time to implement changes – the question is: how far will he go? n
There were outflows of £40.6 million from Japanese funds in 2012. In 2013, after the implementation of Abenomics, there were inflows of £636 million
David Burrows is a freelance financial writer
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November/December 2014 businesslife.co 67
Advertising feature
Why Guernsey
should look
East
With funds focused on Europe in recent years, Steve Bougourd at LouvreFund says we shouldn’t lose sight of opportunities in Asia
T
he Chinese economic growth story, the rise in the region’s emerging markets, and the ‘tiger economies’ are no longer front-page news, and while it’s not a case of ‘out of sight, out of mind’, the question is: are we doing enough to exploit the obvious potential? As investor confidence has returned, there’s no doubt Guernsey has seen its share of new business. However, as an international finance centre and a fund domicile of high repute, we can’t afford to allow complacency, lack of foresight and budgets to stand in the way of developing new markets. It was only a couple of years ago we were all dreading the introduction of the Alternative Investment Fund Managers Directive (AIFMD) and the adverse effect it could have on our fund industry. Of particular concern was the possible impact on the island’s traditional fund base – funds investing in the EU and funds targeting EU investors. There was a growing consensus the gravy train might grind to a halt, and that, if we didn’t find new opportunities, our existing markets would slowly dry up and we would die a ‘death by a thousand cuts’. During that time, boardrooms began to look east, but once the immediate threat
of AIFMD was alleviated, such talk became consigned to ‘any other business’. But that threat is as real today as it was in 2011 when the Directive was approved. Guernsey will always be hostage to perilous external forces, so we must plan accordingly. Slower market growth at home and changes to China’s overseas investment regulatory framework suggest now is the time to put Asia back at the top of the agenda. While Cayman continues to enjoy firstmover advantage as the preferred domicile for Asian fund managers and advisors, Guernsey can still show its expertise by administering non-Guernsey funds. It stands to reason that, in the longer term, Guernsey’s more rigorous regulation will win through, as ultimately it provides investors with greater security. The island also offers a dual opt-in AIFMD regime, whereas Cayman and BVI do not. Asia often gets filed in the ‘too difficult, too expensive, too late or too early’ box. Due to Guernsey’s geographical distance and lower profile in the region it can be hard to argue the case for Guernsey funds, but the potential reward is compelling. This is best illustrated by looking at the increasing numbers of high-net-worth individuals (HNWIs) in Asia, which has shadowed North America over the last three years, and is very likely to surpass
68 businesslife.co November/December 2014
them in the immediate future. More HNWIs will also mean a rising middle class, a more affluent society and wider prosperity. As Asia works through the growth curve that we experienced in Europe during the 1980s, there will be an increasing demand for financial services, including pension and insurance provision, which will focus on regulated funds grounded in strong corporate governance. As Guernsey enjoys an enviable track record in all these disciplines, we’re well placed to meet this demand as both a fund domicile and as a centre of excellence for fund administration. n Steve Bougourd is Head of Business Development at LouvreFund
About LouvreFund LouvreFund is an independent, ownermanaged fund administrator with offices in nine locations, including Guernsey, Singapore and Hong Kong. The company administers both openand closed-ended funds and has strong expertise in alternative asset classes. To find out more, please contact Steve Bougourd on +44 1481 748955 or at steve.bougourd@louvrefund.com
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November/December 2014 businesslife.co   69
Where’s the
70  businesslife.co November/December 2014
Fund jurisdictions
competition? Funds comprise a major part of the Channel Islands’ finance industries, but other jurisdictions are constantly striving to steal their own piece of the action. Dave Waller scans the competitive landscape
I
slands are often used as a metaphor for isolation. ‘No man is an island’, as one famous saying goes. “I am a rock, I am an island,” sang Simon and Garfunkel, woefully. Yet even islands aren’t alone, and the Channel Islands should remember that being surrounded by water is hardly the same as existing in a vacuum. When it comes to funds work, Jersey and Guernsey may have staked out their space, but they’d be wise to beware the other landmasses and the threat they pose. But who exactly are these rival jurisdictions, and which is the greatest threat? Is it, for example, Luxembourg? Net assets under management in Luxembourg investment funds hit almost €3 trillion at the end of July, according to the Association of the Luxembourg Fund Industry – easily dwarfing the total in the Channel Islands combined. “Probably half of international funds in Europe are set up in Luxembourg,” says Francois Pfister, Practice Partner at Ogier’s Luxembourg office. Pfister points out that Luxembourg hardly counts the Channel Islands as a significant rival – it’s too busy keeping a very keen eye on Dublin, as both jurisdictions traditionally move at a similarly grand scale in the EU-based UCITs space. According to the Irish Funds Industry Association, Ireland UCITs account for over 75 per cent of assets of Irish-domiciled funds. It’s also the largest hedge fund administration centre on the planet, servicing a massive 40 per cent of the world’s hedge funds, while exchange-traded funds domiciled in Ireland manage assets in excess of €140bn – that’s over 30 percent of the European market. But while Europe’s big boys aren’t obsessively checking their rear-view mirrors for any moves by the Channel Islands, the threat is being felt another way. With the introduction of AIFMD, the EU’s new regulation of alternative investments, Luxembourg is expanding further into an area the Channel Islands likes to call home. “We’ve found that AIFMD is enabling Luxembourg to diversify
November/December 2014 businesslife.co 71
➔
Fund jurisdictions
Georgetown waterfront, Cayman Islands
asset classes while providing the same level of service,” says Pfister. Indeed, many private equity funds are now domiciling in Luxembourg while using lawyers based in places like Paris, thanks to Luxembourg’s EU status. Similarly, it can be easier to persuade the board of, say, a French pension fund to use Luxembourg rather than the Channel Islands. “A lot of investment managers going out to market in the EU will be concerned that the Channel Islands’ non-EU status will be an issue, even though that rarely turns out to be the case,” says Andrew Whittaker, a member of the Guernsey Investment Funds Association’s executive committee.
The one jurisdiction that poses the greatest threat to the Channel Islands lies outside the EU – the Cayman Islands
“It’s a perception problem, but it’s enough for Luxembourg to benefit.”
Island threats Then there are the EU’s island jurisdictions. Malta has a young financial services industry, which may be able to boost its market share with the introduction of AIFMD, potentially offering fund managers a cheaper route into Europe than either Luxembourg or Dublin. The same goes for Gibraltar. Yet neither has the range of services or the proven track record offered by the Channel Islands – and they’re both after a slightly different type of business anyway. “We don’t consider ourselves a threat to the Channel Islands, nor them to us,” says Philip Canessa, Senior Executive at Gibraltar Finance. “The big difference is that Gibraltar is part of the EU and the Channel Islands aren’t. We reckon we’ve got more mileage because of that. Though obviously if we weren’t in the EU we’d be competing directly with the Channel Islands.” Indeed it seems the one jurisdiction that poses the greatest threat to the Channel Islands lies outside the EU – the Cayman Islands. Cayman has a strong track record in hedge funds, where it’s traditionally made a bigger splash than Guernsey or Jersey – particularly for managers based in the US and Asia. Not only does it lie offshore and outside the EU like the Channel Islands – meaning it offers similar advantages – but its looser regulatory framework is likely to be cheaper and more malleable. “They’ll come out with a workaround to whatever’s happening at the time, reinventing their fund structures to make sure they comply with new rules,” says Whittaker. Ben Robins, Chairman of the Jersey Funds Association, is only too aware of the potential Cayman threat. “Cayman is the only real challenge to the Channel Islands in professional investor funds,” he says. “If you go to the Asian market, to Singapore or Hong Kong, the Cayman product is already well
72 businesslife.co November/December 2014
known. The Channel Islands are looking to set up a slightly different school at a higher regulatory level there, but that comes at a higher cost.” What about Singapore and Hong Kong themselves? Are there products domestic to those jurisdictions that will threaten those of the Channel Islands? “I’m not sure that’s happening yet,” Robins says. “But it’s something to watch.”
Happy coexistence? While each jurisdiction is jostling for its share of funds work, it doesn’t follow that any one is necessarily struggling. Each jurisdiction will have those fund managers who favour it for a range of reasons – whether that’s the time zone, the regulatory environment or simple force of habit. For certain funds, with asset managers based in London and the US, offshore jurisdictions like Cayman have always been natural hubs. Some groups prefer to put fund managers in the Channel Islands, or to stay in London or Paris – others may see fit to have a fund vehicle offshore and a fund manager onshore. It seems there’s plenty of work – as long as your regulatory frameworks are up to scratch. “There are various strategies and it’s possible for them to coexist, at least in the near future,” says Pfister. “It’s the ‘second string’ jurisdictions that are losing out. Bermuda’s not as popular as it has been in the past, for example.” Indeed, as befits robust jurisdictions with a strong reputation, current trends seem to suit the Channel Islands. While Cayman may have more experience of hedge funds, and Luxembourg and Ireland are processing vast amounts of European business, the Channel Islands take much of the work aimed at the UK. Jersey is building an enviable presence in real estate, tapping into a commercial real estate sector that’s been resurgent over the past 12 months – real estate funds were up nearly 20 per cent during the second quarter of 2014. It’s also seen the launch of several huge private equity funds recently, by the
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Fund jurisdictions
likes of Triton, Nordic Capital and Ardent. “The challenge for us is recruiting enough people to handle all the work,” says Robins. “Which is a good indicator of how buoyant things are here.” Guernsey, meanwhile, continues to make strides with hedge funds and listed funds, and has seen a 45 per cent growth in the net asset value of investment funds under management and administration since 2008. “From a listed funds perspective, Guernsey is streets ahead of the competition,” says Whittaker. “It’s a well-trodden path, investors are very comfortable, and we have the right skills.” Whittaker goes on to describe Luxembourg as being “way behind” in private equity, while Robins says that Luxembourg doesn’t have the pedigree of the Channel Islands, despite “aggressively touting for business in the private equity space”. And once AIFMD is fully in place, it will even have lost its political advantage. “By 2016, there may well be parity in the structures, meaning no political problems in investing money into Europe via the Channel Islands,” says Robins. Then there are those funds sectors that are still emerging – everything from debt funds to renewables funds to South American funds requires knowledge that may not yet be available in some of these other jurisdictions. And thanks to the regulatory changes, even Cayman’s position is getting weaker, which may see the Channel Islands scooping up some of its business. “Cayman is finding it difficult to market into the EU,” says Whittaker. “With Guernsey having such a good reputation with the likes of the OECD in terms of regulation, lots of Americans are looking to come through Guernsey structures to market into Europe. So it’s essentially a case of a changing the investor base – we’re losing French and German investors to Luxembourg and gaining Americans.” Four years ago, the Channel Islands had one eye on their rivals and the other on AIFMD as it loomed over the horizon. But with AIFMD now here and clearly bringing some positives to the Channel Islands [see page 24], and sovereign wealth and pension funds from the Far and Middle East also cottoning on to the islands’ products, it seems Guernsey and Jersey look pretty robust for the time being. n
The key funds jurisdictions (all figures are the latest available)
Guernsey
Jersey
Total funds under management:
Net asset value of funds under administration:
(end June 2014) Key areas: hedge funds, private equity, listed funds
(end June 2014) Key areas: real estate, private equity
£261.3 billion
£200.4 billion
Cayman
Gibraltar
Hong Kong
Total funds under management:
Total funds under management:
Total funds under management:
[£1.2 trillion] (2012) Key areas: hedge funds, private equity
(end March 2014) Key areas: securities, funds of funds, real estate
[£1.3 trillion] (end 2013) Key areas: mutual funds, exchangetraded funds
US$1.96 trillion
£7.7 billion
HK$16 trillion
Ireland
Luxembourg
Malta
Total domiciled funds:
Net assets under management:
Total funds under management:
[£2.27 trillion] (end July 2014) Key areas: UCITs, hedge funds, specialised investment funds
[£8 billion] (Sept 2014) Key areas: hedge funds, collective investment schemes
€1.2 trillion
[£941 billion] (July 2014) Key areas: UCITs, hedge funds, exchange-traded funds
€2.9 trillion
€10.3 billion
Singapore
Switzerland
UK
Total funds under management:
Total funds under management:
Total authorised funds under management:
[£886 billion] (end 2013) Key areas: hedge funds, private equity
[£1.87 trillion] Key areas: CHF bonds, long-only equities, CHF caution allocation, large-cap blend equities, real estate
S$1.82 trillion
Dave Waller is a freelance financial writer
74 businesslife.co November/December 2014
CHF2.884 £823 billion billion
(end Aug 2014) Key areas: pension funds, insurance, hedge funds, real estate
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Nedbank Private Wealth is a registered trade name of Nedbank Private Wealth Limited. Nedbank Private Wealth Limited is licensed by the Isle of Man Financial Supervision Commission. Registered office: St Mary’s Court 20 Hill Street Douglas Isle of Man. The Jersey branch of Nedbank Private Wealth Limited is regulated by the Jersey Financial Services Commission. The Jersey branch registered address is: 31 The Esplanade St Helier Jersey. Nedgroup Trust (Jersey) Limited is regulated by the Jersey Financial Services Commission. * Client quote and results from a client satisfaction survey undertaken in 2013 by The Leadership Factor, the UK’s leading customer survey specialist.
November/December 2014 businesslife.co 75
property on the up The impact of the financial crisis largely persuaded investment funds to stay away from property, but a surge in prices and hopes of a wider economic recovery has funds wading back in, as Orlando Crowcroft explains
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Real estate
I
t’s little surprise that investment funds have avoided Britain’s property sector over the past few years, given the devastating impact of the financial crisis. But a look at the headlines in London in recent months suggests confidence is returning, and even that property prices are getting out of hand as the UK economic recovery gathers speed. The price of a home in London has risen as much as 20 per cent in the last year alone, and buyers are scrambling to get on the ladder. Earlier this year, insurance giant Aviva, which is invested heavily in commercial property in the UK, said it expects doubledigit growth in the sector in both 2014 and 2015. While warning the peak of that rise will come this year, with prices easing off in 2015, it expects growth in commercial property alone to average 15 per cent per annum. Meanwhile, in the growing student property sector, real estate agent Knight
Frank boasted of annual returns of 7.8 per cent in September 2013, and told the Financial Times it expected similar results this year. While analysts caution such stellar growth is limited to London, property looks like a good bet at the moment, and funds hit hard by the recession are starting to wade back in. “We have seen a return to property in the last six months, generally – it’s really picked up speed,” says Paul Wilkes, Head of the funds investment team at Collas Crill in Guernsey. “There’s been a definite upswing of investment in the UK market. Not as much residential – although there is some of that in major centres, primarily London – but more in commercial real estate.”
The long game Property investment funds strategy differs markedly from that of retail investors, seeking long-term, reliable and stable sources of income. Hence commercial property is preferred to residential, which can be erratic in terms of pricing. Equally, funds that are
effectively operating as landlords can expect long leases from large commercial firms, which are preferred to high-maintenance and demanding residential tenants. Philip Hendy, Director at JTC Real Estate Services in Jersey, cites shopping centres and supermarkets as good examples of preferred commercial tenants, as both involve a financial commitment on the part of the tenant, who will have to fit out and stock the property. Other good examples of preferred tenants are facilities such as cinemas and leisure centres, which require a significant start-up cost on the part of the tenant. “The longevity of the lease is one of the key attractions,” he explains. “Committing to a 20- to 25-year lease is like buying a bond, but there’s a physical asset backing it up as well. People like to invest in property because there’s a tangibility about it that you don’t get with other kinds of investment.” At the same time, as we gain more distance from the financial crisis, some less cautious funds are stepping back into the market,
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Real estate looking at slightly riskier investments in the hope of generating higher returns. “During the recession there was a flight towards income generation in properties that were top quality in rents and lease lengths,” says Mike Newton, Managing Director at State Street in Jersey. “We’ve seen a shift in the marketplace during the last 12 months with the launch of some opportunistic funds, which I think reflects a change in mentality among investors. However, the industry is still in recovery mode and there is still a way to go before the return to prosperity.”
Studying hard
Building a network The news that Marks & Spencer had pulled out of developing a brand new 900,000 sqm distribution hub in England in May was widely seen as evidence of further struggles at the British retail giant. But M&S shrugged off speculation, arguing it was instead looking to redevelop its existing four smaller distribution hubs, saving itself over £130 million. More importantly, Chief Executive Marc Bolland argued, it reflected a change in consumer demands towards home delivery. Like a swathe of other UK retailers, M&S is looking at more locally focused operations, where distribution centres are smaller and there’s more of them, allowing quicker delivery to an increasingly demanding online customer base. Others have gone further, going as far as using lockers to allow customers to ‘click-and-collect’, bypassing delivery altogether. This trend not only marks a change in UK retailing, say experts, but it presents an opportunity for property investment funds. Instead of looking at major distribution centres, the opportunity has arisen to look at smaller retail parks that may have fallen out of favour in recent years. “With all retailers revisiting their online offering and their delivery options, it should mean good news for industrial real estate funds, and potentially for retail funds – particularly those holding well-located retail parks as underlying assets, “ explains Philip Hendy, Director at JTC Real Estate Services in Jersey.
The preference for stable and regular commercial investments has seen a surge in demand for student housing from investment funds over the past two years – predating the upswing in demand for commercial property generally by some six months. A number of funds specifically focused on student housing have performed well in recent years, including that of UNITE Student Housing and Bahraini bank Oasis Capital (OCB), whose fund is 20 per cent owned by Goldman Sachs. “Even in difficult times, student housing funds posted good results all the way through – even when property was decimated by the crisis. There is a body of students coming in every year and there is a longevity of income, and because these funds have a large number of assets it reduces risk,” explains Hendy. Student housing giant UNITE owns properties on some 120 campuses, so the risk is spread over multiple cities. And initial fears in the UK that the hike in tuition fees would lead to a slash in student numbers have proved unfounded – Knight Frank in its latest research into the sector found the student housing market is undersupplied in all of the UK’s core university cities.
Supply and demand Property funds tend to take a very specific form in structure, namely because, unlike equities, property is by its nature an illiquid asset. Funds will tend to be closed-ended, meaning investors can’t withdraw their money until an agreed deadline. This was cemented following the recession, when more relaxed open-ended funds were hit with clients panicking and demanding their cash as the downturn hit. “A number of players got their fingers burned when the market turned and a fund had all these illiquid assets. People have generally learned their lesson, and funds are almost exclusively closed-ended structures now,” confirms Collas Crill’s Wilkes. With growing investment in UK property through offshore funds listed in jurisdictions such as Jersey and Guernsey, there’s always
78 businesslife.co November/December 2014
The preference for stable and regular commercial investments has seen a surge in demand for student housing from investment funds potential for controversy over the buying up of British property by overseas investors while millions of people in the country struggle to get a foot on the property ladder. But industry experts aren’t convinced that this will lead to a crackdown on the part of the British government on property investment funds – or indeed foreign investment in UK property. “What the UK needs as UK plc is to be able to attract investors from around the world, and at the moment there’s a large number of people who want to invest, and they are providing and supporting infrastructure that the UK can’t afford to match,” says Hendy. “If you look at the redevelopment of central London, it’s all coming from outside the UK. The benefit of using somewhere like Jersey is that people can invest in a taxneutral way. They are spending all that money in the UK – on materials, on construction, on labour – all that money is going into the country. But investors are chasing the best deal, and if someone else has a more efficient way, then they’ll go there.” Wilkes agrees. Private investment in property in the UK, particularly in the commercial space, is critical in a time of austerity when the British government is not in a position to put an equivalent amount of funds into the sector. In many ways, property investment funds make development possible. “I understand the sentiment at the grassroots political level, but I have trouble seeing the UK government making it difficult for people to invest in the UK,” Wilkes says. “It’s more of a political issue than it is an economic issue. The fact that people are investing in the UK is a good thing.” “The use of offshore generally is more of an issue in the private space, where people are perceived to be avoiding tax, but an investment fund isn’t about minimising tax, it’s about having a vehicle for investors to put their money with an expert. When they get that money back they’re going to be paying tax wherever they are.” n Orlando Crowcroft is a freelance business writer
Advertising feature
When trust companies assume the role of landlord, they enter a complicated world of ever-changing legislation. As Ian Long from LSL Property Services explains, it makes sense to hand over the property management to a company that understands every nuance
Helping trusts navigate
W
the landlord minefield
ith the increasing propensity for property to be placed into trust, the number of trusts and trustees adopting the position of legal landlord is high. Ensuring full compliance with all statutory demands isn’t just required to fulfil fiduciary duty, it’s entirely necessary to avoid falling foul of the law. Once legal responsibility has been assumed for a property, there are numerous areas of statutory compliance that must be adhered to, such as gas safety, fire safety, carbon monoxide poisoning and the Tenancy Deposit Scheme. There are severe penalties for non-compliance to this legislation. To make the landlord’s situation even more perilous, the legal landscape is constantly changing, with new legislation and addenda to existing statutory regulations being a regular occurrence. Here are just some of the upcoming changes and new regulations that will directly impact landlords that they may not even be aware of.
Launch of the Private Rented Sector (PRS) Code of Practice Landlords will increasingly be targeted in a new drive to stop people being exploited when renting. The package of ‘best practice’ proposals, published by the Royal Institute of Chartered Surveyors in September this year, is designed to ensure England’s nine million private tenants: ● Avoid hidden fees from unscrupulous letting agents; ● Get proper protection from rogue landlords; ● Feel confident to demand better standards and management of their property by landlords. The Code also lays out what a landlord/ agent ‘must’ and ‘should’ do – so compliance with existing legislation is a ‘must’, whereas a ‘should’ is in accordance with best practice.
Immigration Act The Immigration Act 2014 imposes obligations on landlords to check the status of prospective tenants or face a fine of up to £3,000. This is a pilot immigration scheme that comes into effect on 1 December 2014 in the Greater Birmingham area. Landlords will be prevented from letting residential premises to individuals if they are ‘disqualified’ due to their immigration status. This will include leases, tenancies and lodgers where rent is paid to the landlord. A person is ‘disqualified’ if they are not a British Citizen, EEA national or Swiss national, and require leave to enter or remain in the UK and do not have it. Landlords are not expected to have expert immigration knowledge, but ignorance of the new rules will not be a defence.
Compulsory redress schemes for agents In April of this year, the Department for Communities and Local Government (DCLG) revealed the three approved redress schemes that all letting and property management agents will be required to join. This took effect on 1 October 2014, and so letting agents representing landlords must be registered by now. The three schemes are: the Property Ombudsman; the Ombudsman Services: Property; and the Property Redress Scheme.
the changes. Thankfully, this is what LSL Property Services specialises in. LSL’s Corporate Client Department (CCD), which manages corporate property, was created to offer a comprehensive centralised solution for all property types, whether that be residential, commercial, mixed use or beneficiary-owned. In the case of trusts, CCD provides help in streamlining administration, protecting wealth and driving the investment of all property holdings. n Ian long is Business Development Director at LSL Property Services
Find out more If you want to find out more about the property services provided by LSL’s Corporate Client Department, simply contact the dedicated trust team on +44 1392 316885; Ian Long (Jersey) on +44 7767 656023 or at ian.long@lslps.co.uk; or Jeremy Ogborne (Guernsey) on +44 7794 086420 or at jeremy.ogborne@lslps.co.uk
How LSL can help landlords These are just a small sample of the potential legal pitfalls that await landlords, and in the time that has elapsed between writing and publishing, it’s likely there have been numerous other changes, proposals and addenda to landlord legislation. If you are a trustee acting as a landlord, it’s possible you’re struggling to keep up to speed with
November/December 2014 businesslife.co 79
Business
The networker
There are some people who can make your professional (and personal) life a living hell. Jeff Haden identifies nine ‘types’ that you need to get rid of today
Nine people you need to avoid
interested and need to go. Stick with people who want to go places and be part of something bigger than just themselves.
My card
The Roadblock Some people have the uncanny ability to list numerous possible potential barriers and problems. Granted, no one wants to make a mistake that could have been avoided, but when someone always counters every idea with vague reasons that it just won’t work, that person needs to go. Hang on to people who can tell you, objectively and rationally, why something won’t work and what might work instead.
The Gossip
The Needy
We’re all tempted by gossip. It can be compelling, but it’s also often wrong and sometimes incredibly harmful. Plus the person who gives you the inside scoop on others is also giving other people the inside scoop on you. And gossiping, even casually, can destroy your credibility as a leader and any respect other people have for you. Get rid of gossips and hang on to people who are only willing to share the inside scoop on their personal thoughts or feelings – because that’s not gossip, that’s just truth.
These are the people who constantly feel you aren’t paying enough attention to them, no matter how hard you try. Healthy professional relationships are based on only one kind of need. The people you truly want close to you are there when you really need them, just like you are for them. Hang on to the people who are secure enough not to fret if you don’t check in for a while.
The G ossip Your report was perfect
The Subversive Some people try to look good by making others look bad. Some try to get ahead by making others fall behind. Some will throw you under the bus instead of taking your side. Get rid of them. Stand by people who have your back – and make sure you always have theirs.
The Naysayer Devil’s advocacy is sometimes helpful, but people who constantly take a contrary position are more concerned with The promoting their own ego. It’s often just the voice of someone who tried and failed (or never tried at all) and thinks no one else can or should succeed. Get rid of those who forecast doom and gloom. Hang on to people who ask smart questions, share lessons learned and are glad to help if a problem does occur.
hant Sycop
The Sycophant On the other end of the spectrum is the person who thinks your every thought and deed is astounding. Unconditional praise is fun but rarely helpful – no one is perfect. It’s easy to tell someone he or she is great, but hype is the enemy of improvement. Hang on to people willing to tell you that you can do better, and willing to help you do better.
The Networker Building connections is important, but networking isn’t a game of numbers. There’s no way to build meaningful connections with dozens, much less hundreds, of people. Plus, making a connection is never an end – it’s just the beginning. Hang on to the people who genuinely want to connect for a reason that’s beneficial to both of you.
I’m telling you now – it’ll never work…
Some people drift, wandering aimlessly from task to task, day to day and year to year, with no real plan or goal. They wait for something to happen for them, instead of making their own things happen. Hang on to people who have ambition. Even if their goals differ from yours, you will definitely feed off their energy just like they will feed off yours. n
The Selfie Some people have an astonishing ability to turn any subject into being about them. They see themselves as central to every story, every issue and every event. These people are self-
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The Floater
The Roadblock
Jeff Haden is a bestselling business author. This article originally appeared on www.inc.com
The Skills Accelerator grant has helped me to attend courses in the UK and enabled me to continue my professional development and expand my chiropractic skills and knowledge. I have been able to apply the treatment methods I have learnt at these courses to effectively treat my patients and help alleviate their pain. Gemma Weston | GW Chiropractic
Employees. Employers. Grants up to £4,000 still available for skills training. Skills Accelerator grants provide support to employees of local businesses (SMEs) to access training that will make a difference to the viability or diversification of their employer’s business. Grants could support personal development, vocational or specialist training, and training for employees looking to progress to a new role.
To be eligible for a grant, applicants must be able to demonstrate their residential status, and businesses must have been trading for a minimum of six months. For further information about the Skills Accelerator and how to apply visit: gov.je/Skillup
Successful applicants are offered a grant of up to 75% of the total balance of their training costs, up to ÂŁ4,000. Launched by Skills Jersey in September 2013, the grant has now received more than 225 applications.
A Skills Jersey Initiative
Boosting Skills. Growing Business.
The next thing?
big
With European legislation affecting the industry, and managers looking for talent and tax efficiencies, could hedge funds start relocating to the Channel Islands in their droves? Orlando Crowcroft investigates
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Hedge funds
E
ver since Jersey and Guernsey began to actively seek diversification in their respective financial services industries, attracting a portion of the multi-billion-dollar hedge fund sector to the islands has been on the agenda. And they have undoubtedly had some success. Guernsey’s BlueCrest is Europe’s second-largest, closely held hedge fund firm, and Jersey’s Brevan Howard Asset Management recently came in third in a world ranking of 100 hedge funds. The Jersey Financial Services Commission said in June 2014 that around £45bn of hedge
fund business is serviced in Jersey – around a fifth of the island’s total value of funds business. Guernsey too relies on hedge funds for 20 per cent of its total funds business, with five per cent funds and 15 per cent funds of hedge funds. “Alongside the increase in the value of hedge fund business being done in Jersey, we’re also seeing a rise in the number of managers considering establishing a presence here,” says Richard Corrigan, Deputy CEO of Jersey Finance. He explains that a number of major alternative fund houses have either moved to or expanded their presence in Jersey in recent months, including Brevan Howard and Apex Fund Services (Jersey) Limited, which join a well-established community of hedge fund managers including houses such as Altis Partners. The numbers, however, are not huge right now, and Jersey and Guernsey are hoping the trickle of hedge funds into the islands will only increase as regulation becomes more onerous in Europe and the US. The latest piece of legislation from Brussels, the Alternative Investment Fund Managers Directive (AIFMD), has prompted a number of European-based fund managers to look not only at moving their funds offshore, but their businesses and themselves, experts say. They look to the Channel Islands’ lauded, fully AIFMD-compliant regime, which means once the AIFMD ‘passport’ system is introduced – which Jersey and Guernsey both expect to qualify for in 2015 – fund managers based here will be able to operate in Europe. But equally, many will prefer to avoid Europe altogether, focusing on Asia, the US or the Middle East, from the islands. In its effort to more closely regulate the actions of hedge funds and their responsibility to investors, the AIFMD
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Hedge funds
has been unwelcome to many hedge funds managers, who feel that their clients – often large institutional investors, pension funds or extremely experienced individuals – want neither more regulation nor the inevitable rise in management fees that come with the cost of compliance. “They’re saying we don’t need to have compliance with AIFMD because that isn’t necessarily what our investors want. These are sophisticated investors at the end of the day, they aren’t retail investors,” says Debbie Payne, Tax Director at PwC Channel Islands. “I’m aware of at least two major hedge funds that have taken a very conscious decision that they didn’t want their manager to be in a country within the EU, they wanted them outside. As soon as you start to look outside the EU, Jersey and Guernsey are the first candidates that start to pop up.”
Cost efficiencies Given the varying size and scale of hedge funds in the island, it’s difficult to put a figure on potential savings, but Wayne Atkinson, Senior Associate in the funds department at Collas Crill in Guernsey, cites an example of a Luxembourg fund compared to a Guernsey fund where the latter’s savings “were in the millions of pounds”. An added advantage of moving a manager offshore, he says, is that it substantially minimises that individual’s tax liability too. But it’s not only geography and reduced tax liability that make the islands attractive to hedge funds looking to reduce their presence in the EU. Those looking to move managers and other staff to Jersey and Guernsey take other factors into account, such as their time
zone, which is far more convenient for investors used to dealing with offices in European hubs. And there are other things to consider too. “With the OECD initiatives, what you really have to think about now is where your people are. You have to look at it holistically: where do I see the talent located? Where do I want to recruit and where can I get a sensible level of tax efficiency?” says PwC’s Payne. “And that’s where the Channel Islands is effective, because if you don’t want your main people or your manager in London, you can set up over here with a reasonable amount of people and you take a slice of tax out of your business. Your people are genuinely here and you have a talent pool here as well.” That talent pool, Payne says, is a key concern for hedge funds when looking at where to relocate. She says that a current unnamed client – one of Europe’s top five hedge funds that is seriously thinking of relocating to Jersey – is considering a scheme whereby they track and recruit Channel Island graduates, employing them first in onshore hubs before moving them back to the island to take up senior roles. Payne says she is personally aware of a further six major players in the hedge fund industry that are considering moving to the island, and that such an influx could be exactly what Jersey needs to secure a sizable chunk of hedge fund business – something that, but for a couple of high-profile aforementioned examples, has been lacking in recent years
Jersey and Guernsey are hoping the trickle of hedge funds into the islands will only increase as regulation becomes more onerous in Europe and the US despite efforts from both islands to bring in more. “The thing with hedge funds is once a group of them find a particular location attractive, it tends to attract more,” she says. Atkinson doesn’t expect huge numbers to flood into the islands in the next few years, but, like Payne, he thinks the impact on the local labour force will be positive. He also expects the bulk of operations to remain elsewhere, with a small management hub in the islands. “I don’t think we’ll see people setting up trading desks in Guernsey with hundreds of people,” he says. “We’re more likely to see a management operation that’s relatively small feeding back to other people in the world.” However the business transpires, it seems the time is right for the Channel Islands to capitalise on the perfect storm created by European legislation. n Orlando Crowcroft is a freelance business writer
Courting controversy Hedge funds were, for a long time, seen as the black sheep of the investment world, known for using their financial muscle to make or break (more often the latter) companies and for their often bombastic celebrity managers. Even if that reputation’s diminished in a more regulated and less freewheeling post-financial crisis world, hedge funds are still known for their reluctance to assent to government control, their high-risk strategies and considerable financial muscle.
In light of that reputation, some may wonder whether, reputationally, Jersey and Guernsey should want to provide some sort of Mecca for those managers looking for somewhere to ply their trade outside of the clutches of Brussels. Others, however, point out that things are a little more complicated than that. “There are a lot of stereotypes about hedge fund managers, just like there are about lawyers like myself – or used car salesmen – and… while there’s always an
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example that fits the stereotype there will always be one that rebuts it,” says Wayne Atkinson, Senior Associate in the funds department at Collas Crill in Guernsey. “Of course it’s not a great thing for the reputation of the island if you do have a ‘vulture fund’ scenario – where you’re hearing about a fund taking predatory action – but that’s a matter for the law of the jurisdiction where it’s taking place. It’s very easy to criticise these things in the abstract, but the reality is a little bit greyer.”
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The
Atlantic
From brash Americans to reserved Brits, there’s a perception that the two nations are very different when it comes to doing business. But are the stereotypes correct? Dr Liz Alexander, a Brit living in the US, investigates
86 businesslife.co November/December 2014
T
he Persuaders was an early 1970s TV series starring British actor Roger Moore (pre-James Bond) and American movie star Tony Curtis. Both played the roles of playboy millionaires – but there the similarity ended. Moore’s character was a Harrow- and Oxfordeducated aristocrat, while Curtis played a ‘rough diamond’ from Brooklyn who’d served in the US Navy then made his fortune in the oil business. Even the Persuaders’ names – Lord Brett Sinclair and Danny Wilde – conjured up stereotypes that today, over 40 years later, are still associated with Brits (discreet and reserved), and Americans (brash and overconfident). In some cases, such enduring perceptions are warranted – but not always. Knowing Americans think we’re all well-bred is presumably advantageous to the million or so Brits who, according to the British Consulate General in New York, work in the US for British companies (the same number of Americans work in the UK for US companies). When Fiona Czerniawska, Co-Founder of London-based Source for
Business culture
divide Consulting, was speaking with one of the US companies her firm provides research for, she was delighted to hear them say how helpful she’d been. She thought they were praising her insights, until they added: “Yes, it was like spending half an hour in Downton Abbey.”
Ups and downs In some industries such a reaction can be especially beneficial, as Paul Mower, Director of JTC Group’s New York office, found. Hailing from the UK appears to afford him a greater level of trust when it comes to selling his company’s offshore trusts and corporate services. As Mower explains: “I deal with attorneys in New York, a few of whom have told me I’m an easier sell to their high-net-worth clients because we’re providing solutions traditionally associated with offshore jurisdictions governed by the British. As such we have an advantage over, say, someone from Argentina selling the same product.” George Bernard Shaw once pointed out that England and America are two countries separated by a common language. Yet there’s more
to this than our accents – and that’s why challenges around cultural expectations often occur. When Paul Mower arrived in New York in 2008, he was surprised to find that business socialising was not what he’d been used to in Jersey, or in Switzerland with fellow expats. “In both, going for a drink at lunch or after work was common, but that just doesn’t happen in New York,” he says, adding that New Yorkers appeared less friendly as a result. It’s different from an American perspective. BJ Richards, originally from West Virginia, relocated when her scientist husband was offered a post at University College London – she works for Source for Consulting as a Senior Analyst. As she explains: “My husband struggles to nurse a pint over the course of a few hours while people talk business, because he’s not used to drinking alcohol during the day.” She adds that just as much socialising with co-workers takes place in the US, but it’s less about going out for drinks and more about inviting couples for dinner. The way you convey business information can also be fraught with cultural missteps. When Richards gave her first presentation to an
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Business culture
audience in London, in which she shared some “not-so-good findings”, she realised in retrospect that she’d “acted like a big golden retriever puppy – very eager, loud and gregarious. That was such an American thing to do it didn’t seem odd to me, but I was told next time I should look more serious and not smile as much.” Independent communications consultant Corie Madden Pryce, who is married to a career British diplomat and has lived in various parts of the US and Europe serving clients on both sides of the Atlantic, has also been branded an overconfident, loud American, but prefers to think of it this way: “Americans have an amazing energy to move forward, progress, and create. There are more than 300 million of us – a diverse mix of cultures from all over the planet. If you want to stand out in the crowd in the US, you have to be loud!”
Culture shock Loud or ‘brash’ should never mean being discourteous, however. Certainly not for Brits looking to build trust, inspire respect and develop long-lasting business relationships on the other side of the pond, according to Intercultural Consultant and Founder of Protocol & Etiquette Worldwide, Sharon Schweitzer. Indeed, many things taken for
Different strokes
Many things taken for granted in UK workplaces are uncomfortable, even offensive, to Americans, including swearing, sarcasm, exchanging insults and criticism granted in UK workplaces are uncomfortable, even offensive, to Americans, she says, including swearing, sarcasm, exchanging insults, outspoken dissent and criticism. Fiona Czerniawska recalls an interactive seminar in New York in which one American made a point to which she responded: “No, I don’t think I agree with that…” and found herself having to turn things around quickly in light of the distress such directness appeared to cause many of her US attendees. As Schweitzer advises: “You have to know the topics and behaviours that require
“Forewarned is forearmed,” says Dr George F Simons of interactive educational game diversophy, when it comes to heading off the resentment that can stem from the different ways managers from both sides of the Atlantic interpret situations, each relying on their own perceptions
sensitivity in each country. In the US, it’s essential to be polite and courteous and not put individuals on the spot. For the most part, people in the US don’t want acrimony and aren’t interested in arguments or debates. In the professional realm we also avoid discussions or jokes involving sex, religion and politics. But anything to do with general current affairs or popular culture, such as the US Open, the World Cup, Olympics, Golden Globes or music awards, is enjoyable and can be a great way for people from different cultures to bond.” As business becomes ever more globalised, are we likely to find – at least with respect to the US and UK – far greater cultural coalescing than is currently the case? “As demographics are rapidly changing, the US will be more diverse than ever before, with less and less Anglo-heritage,” says Corie Pryce. “I think we were probably more alike 50 years ago, and for the two centuries before that.” In the meantime, both sides are well advised to be more aware of each other’s idiosyncratic ways of conducting business affairs (see box below). Or, as the French would say: Vive la difference! n Dr Liz Alexander is an author, educator, business strategist, and Founder of business consultancy Leading Thought
of what is effective or ineffective thinking and behaviour. The following chart is adapted from a ‘broad brush’ schema Dr Simons wrote, entitled ‘21 Ways Europeans and US Americans can misunderstand each other’, used to prompt discussions between both sides.
Topic
The American Way
The British Way
Trust
Being willing to trust others is constructive
Trusting too readily is naive and childish
Spontaneity
Part and parcel of freedom and creativity
It’s responsible and mature to behave logically and rationally
Thinking out loud/brainstorming
The more ideas, the better
Prepare in advance so you can be held accountable
Act now, review later if needed
How we get things done
How you make mistakes
Results vs process
Results are what matter
How you do things is what matters
Male and female roles
Avoid focusing on differences in order to be fair and egalitarian
Celebrate how males and females contribute something different and valuable
Mistakes
Should be forgiven – initiative is what matters
To be avoided where possible, as missteps are often irreparable
Mixing business and pleasure
Intertwined – life is a continuum
Separated – everything has its own time and place
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Chalets Bighorn Lodge, Revelstoke, British Columbia, Canada
For those with bulging wallets who enjoy taking to the slopes, good news! Chalets are becoming increasingly more exclusive and opulent, and here Sharon Gethings takes a look at the serious luxury on offer for the right price…
T
here are rock paintings showing that people, probably hunters and trappers, were using skis at least 5,000 years ago. After a hard day’s schussing, these pioneers would have had a warm cave or hut to look forward to. Today’s recreational snow lovers expect a little more. And the super-wealthy want a degree of luxury that allows them and their guests to feel right at home. And when we say luxury, we mean luxury. The demands of the mega-rich are creating a new market in chalets that would leave most of us mere mortals gobsmacked in disbelief (or envy). Andy Castle, Managing Director of Ultimate Luxury Chalets, has years of experience in the luxury ski chalet market, so he understands the incredibly high expectations of his clients. His website features no more than 100 chalets at any time to maintain the highest standards.
He or a member of his team personally visits each chalet before recommending it, and he says it’s sometimes hard to believe guests will want to venture out on to the slopes once they reach their lodgings. “These chalets are the dream vacation homes of multi-millionaires,” he explains. “Facilities go from crazy to crazier each and every season, with truly top-end chalets nowadays featuring indoor and outdoor swimming pools, indoor climbing walls, vast spa and wellness areas, in-chalet nightclubs, and much more.” But it’s not just the facilities. “It’s also about the first-class service standards and exceptional gastronomic cuisine,” adds Castle. “Each chalet strives to be the best of the best and many come with a ratio of at least one member of staff per two guests.” Oliver Corkhill, Director of Alpine Guru, set up his luxury chalet business after six seasons as a ski instructor in Verbier, having skied
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Chalets Chalet Lottie, Lauenen, Gstaad, Switzerland Chalet Edelweiss, Courchevel 1850, France
Chalet Marco Polo, Val d’Isere, France
“Truly top-end chalets nowadays feature indoor and outdoor swimming pools, indoor climbing walls, vast spa and wellness areas, and in-chalet nightclubs” Bentley’s House, Zurs, Austria
everywhere from Argentina to Bulgaria. He agrees that great service ranks high on clients’ wish lists. “It varies enormously from property to property. Many will offer a 24/7 driver, breakfast, afternoon tea, multi-course gourmet evening meals on six nights plus housekeeping, a chalet team and a concierge. Some will offer the chalet only or just with housekeeping so guests can bring their own staff – many travel with their own private chef.”
Avalanche of luxury As the luxury benchmark keeps rising, any competitive behaviour between guests on the slopes is matched by the property owners. “It’s all about unique facilities – properties are constantly vying for position as number one,” says Corkhill. “It used to be that a swimming pool and cinema room would make a property stand out, but now these are the norm for the ultra-exclusive pads. We see things like private helipads and even underground private nightclubs.” One thing that seems to remain a constant is location. Perhaps it’s the lingering glamour of those early jet-set days or the fact that there’s an established infrastructure of exclusive shopping, fine dining and socialising, but Europe is still the place to ski. “The number one destination is, and is always likely to be, Courchevel 1850,” says Castle. This is unsurprising as the resort
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has one of the longest ski seasons and the best snow cover in the whole of the Alps, and has headed skiers’ lists of prestige resorts for many years. “The fact that 21 of our 100 chalets are in Courchevel says it all. Other key destinations for absolute top-end chalets include Verbier, Gstaad, Zermatt, Lech, Meribel and Val d’Isère.” “Of course there’s a social element, and many people are drawn to alpine resorts for the glamour, nightlife, fine dining and so on,” adds Corkhill. “But there’s at least an equal number who love to ski and will be out on the slopes all day. In fact, the most requested feature is ski-in/ ski-out. There are properties out in beautiful and quiet settings, but most people want to be in the popular areas, or at least within walking or quick driving distance of the ski lifts and resort centre.”
Money talks The cost of these chalets for a short break may seem eye-watering, but a rental makes good sense if you’re only there for a short time each year. “These homes are often valued in excess of £20 million,” explains Castle. “So a weekly outlay of, say, £50,000 represents a good opportunity for guests to experience these once-in-a-lifetime chalets without the huge commitment required to buy one outright.” Corkhill agrees that a rental makes good business sense for his clients. “Most of our clients tend to be high-flying business people
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Chalets
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from around the world. Many will have second or third homes but the capital outlay and ongoing costs for a property that you use for one to three weeks a year makes it more hassle than it’s worth. Even for very wealthy people, tying up such a large amount of capital just doesn’t make sense – top chalets can cost £10 to £50 million.” Also, people don’t want to be tied down to one destination each season. “Renting provides a huge amount of flexibility, not to mention choice,” says Corkhill. “It means the clients can try a different property or service each year.” So who are the lucky few who slide their feet into pre-warmed ski boots after a gourmet breakfast and early-morning swim in a choice of pools? “We get requests from all kinds of clients, be it famous faces to very wealthy CEOs,” says Castle. “The exciting thing about this industry is you never know who will come knocking next. It’s a mix of socialisers and serious snow fans. Most of our clients are avid skiers, but there are many who look to ‘wow’ friends, family and business acquaintances too.” If this has whetted your appetite for a once-in-a-lifetime ski break but your budget doesn’t quite cut it, perhaps it’s time to canvass your winter-sport-loving friends. £100,000 a week sounds a bit more manageable when you split it a dozen ways… n Sharon Gethings is a freelance travel writer
The Lodge Verbier, Switzerland. Virgin Limited Edition Seven nights in March 2015: £100,660 What they say: “Sir Richard Branson’s stunning mountain retreat, perched high in the Swiss Alps in Verbier, is a perfect year-round escape. The team of friendly and experienced staff includes a general manager, spa therapist, Michelin-starred chef and Pebbles, the chalet dog.” What you get: Sleeps 18; breakfast, afternoon tea and dinner; all drinks, including a top-quality wine list and house champagne; a dedicated team of 15, including 24-hour driver service within Verbier; indoor heated pool; indoor and outdoor Jacuzzis; wine cellar; gym; steam room; party room with large plasma screen, game consoles, DVDs, a pool table and its own bar.
Useful websites Bighorn Lodge, Revelstoke, British Columbia, Canada
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www.ultimateluxurychalets.com www.alpineguru.com www.oxfordski.com www.thelodge.virgin.com
Photos by kind permission of: www.ultimateluxurychalets.com and www.alpineguru.com
Chalet Edelweiss, Courchevel 1850, France
Chalet Edelweiss Courchevel 1850, France The Luxury Chalet Collection from The Oxford Ski Company Seven nights from 15 February 2015: £230,600 What they say: “This is officially the largest and most luxurious chalet in Courchevel. It has been perfectly designed and the internal, spiral, ascending staircase [is] absolutely breathtaking – a clear focal point for the chalet, along with the waterfall swimming pool, multi-aspect rooms and faultless staff of course!” What you get: Sleeps 16; ski-in/ski-out access; indoor swimming pool; indoor hot tub; sauna; two massage rooms; steam room/hammam; elevator; private gym; private nightclub; bar; library; private cinema; underground garage; two chefs; two butlers; chauffeur; housekeeping staff, concierge; massage therapist; ski instructor.
the AGENDA The Agenda is compiled by businesslife.co’s Fashion and Lifestyle Editor, Thom O’Dwyer, with additional material by Danny Cobbs, and Jeffrey Chinn of Hettich Jewellers in St Helier.
Image: Mana Photo / Shutterstock.com
1. Surf’s up
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If you want to get away from grim old Blighty as the weather closes in, head for Oahu, the third largest of the Hawaiian islands, where the Vans Triple Crown of Surfing takes place from 12 November to 20 December. It’s the world premier series of surfing events, featuring the world’s top-ranked surfers. There are three Association of Surfing Professionals (ASP) events that offer over $700,000 in prize money, and the whole thing culminates with the world champion’s crowning. The extended period of the competitions is to allow for days of small surf or poor conditions. On the ‘surf-off’ days – or for a bit of pre-Christmas cheer – Honolulu and its fabulous month-long City of Lights Christmas Celebration is just 25 minutes away by car. The annual event has been going since 1987, and it kicks off on 6 December with a massive parade, the arrival of Santa, the tree lighting, and the turning on of the corridor of lights. It’s all, in a word, spectacular. www.vanstriplecrownofsurfing.com, www.honolulucityoflights.org
Inside The Agenda: Fashion, Perfume, Accessories, Watches, Events, Interiors, Cars
Everything you need for a more stylish life.
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the Agenda 2. Blazer glory At this season’s menswear shows, printed suits – dubbed ‘crazy suits’ by style-hungry fashionistas – were all the rage. And now that it’s seasonal party time, a guy can afford to wear something that will make a real fashion statement – there’s nothing wrong with putting yourself in the style spotlight and standing out from the crowd every now and again… This black-and-white graphic, marbledsplatter print, stretch wool-blend blazer by Alexander McQueen is the perfect piece for a style pick-me-up. It has a low-placed one-button closing, notched lapels and flap pockets. There are also coordinating straightleg wool-blend trousers in a similar print. This is another massive new style direction, by the way – most of the top designers are now designing ‘suits’ as jacket and trouser combos sold as separate items. Makes perfect sense. And it’s even starting to hit the high street, so keep an eye out… £2,040, www.farfetch.com
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3. Wild, wild west Founded in 1997 by Yaskuko Furuta, a former costume designer and stylist, Japanese fashion brand Toga Pulla is the label on every super-cool girl’s wish list – it’s one of those labels that can take a woman’s wardrobe from penny stock to blue chip. And Toga Archives is one of the most covetable lines in the Toga family, combining elements of contemporary western style with traditional Japanese design. This season’s ‘Detachable Harness Calfskin and Suede Cowboy Booties’ combine a sharp Wild West-inspired look with quirky rock-chick glamour. The ingenious ‘bootie’ design features a peekaboo of red suede set against smooth black leather and zebra-print calfskin with a glimmer of ornately carved silver buckles and that detachable ankle harness. Toe-tappingly gorgeous! £470, www.lanecrawford.com
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4. Drop-dead gorgeous Self-proclaimed creative renegade, jewellery designer extraordinaire Tom Binns first burst on to the fashion scene in 1983 when he made fluorescent rubber jewellery for Vivienne Westwood and Malcolm McLaren’s ‘Punkature’ collection. Three decades later he’s still going strong, and has become one of the most prolific, unpredictable, imaginative and in-demand jewellery designers on the planet. Binns’ creations have adorned everyone from Princess Diana and Michelle Obama to superstars like Cate Blanchett, Sarah Jessica Parker, Julia Roberts, Beyoncé and Rihanna. Wear this extraordinary pair of chandelier earrings, which feature a drop tassel of hand-painted multi-coloured Swarovski black crystals, to make a dramatic entrance at any party. £364, www.farfetch.com
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5. Selfie indulgence If you visited any European tourist hotspots this summer, you would’ve been surrounded by people carrying their smartphones on the end of a stick. OK, that’s a bit un-technical, but telescopic ‘monopods’ are taking the selfie to the next level. Take a look at this iStabilizer Monopod – this easy-to-carry telescopic gizmo expands to a full three feet and it’s spring loaded for quick access. That’s right – spring loaded. £22.50, www.amazon.co.uk
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6. Cool cork
Over the festive season, why not serve your favourite fizz in this super-cool cork champagne cooler? It’s sure to get the party started and the party people talking… Totally cute, amazingly quirky, utterly ironic, and 100 per cent waterproof, this funny little curiosity is made from sustainable Portuguese cork, so it’s not only strong, it’s also eco-friendly. Perfect. Fizz, anyone? £69, www.design55online.co.uk
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the Agenda 7. The future is now Appearing as if it’s been transported back from the future, the new BMW i8 is all set to challenge the way the world views sports coupes, writes Danny Cobbs. The lightweight bodywork is a masterclass in automotive design, and achingly stunning from any angle. Open the doors and they fall forward and upward, like butterfly wings, to reveal an interior that is as revolutionary as the exterior. Many elements from BMW’s current range have been carried over, yet the addition of twin screens, naked industrial-spec carbon fibre and a multi-surfaced dashboard makes the driver-focused cockpit seem like something from George Lucas’s imagination. Underneath the i8’s bodywork sits a complex and innovative drivetrain. It’s driven by two motors, an electric one up front and a turbo-charged threecylinder 1.5-litre unit in the back. Combined, they offer 363bhp of power and drive all four wheels. It has a top speed of 155mph, with a 0-62mph time of 4.4 seconds – that’s Audi R8 V8 and Porsche 911 4S territory. Not only is it fast, it’s green too. BMW claims 134.5mpg with just 49g/km of CO2 emissions. The batteries give the electric motor a top speed of 75mph and a range of 22 miles. Thereafter, it automatically engages its hybrid mode, switching between the two power sources, harnessing kinetic energy and recharging the batteries as it does so. The i8 is more than just a whimsical design concept, it’s available right now. It costs just under £100,000, with first orders due for delivery in January 2015. £99,895, www.bmw.co.uk
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8. Improving on perfection Revered by the industry as well as collectors and connoisseurs, the perpetual calendar chronograph from Patek Philippe is more than a classic, it’s an icon of watchmaking finesse, writes Jeffrey Chinn. Featuring what many consider to be the perfect combination of complications, this highly collectible timepiece has just been updated with two new dials including a gorgeous blue sunburst dial option. With its completely in-house designed and manufactured perpetual chronograph, the 5270G is the quintessential Patek Philippe timepiece. The movement features a beautifully designed day/night indicator, a perpetual calendar and a moon-phase indicator, all finished with typical Patek perfection. Produced with a sapphire case back window as well as a solid white gold case back that can be personally engraved, could this be the perfect heirloom watch? We think so. Price on application, www.hettich.co.uk
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the Agenda
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10. Stand out Toronto native and New York-based fashion entrepreneur Aurora James established Brother Vellies with the goal of introducing the world to her favourite indigenous African footwear while also creating long-term artisanal jobs. Using techniques refined over generations, all the shoes are handmade in South Africa, Kenya and Namibia at open artisan workshops. Their most popular style, the traditional ‘velskoen’ – pronounced ‘fell-skoon’ and known colloquially as ‘vellies’ – is the forerunner of the ever-popular, modern-day desert boot. This jazzy little number is the Springbok Eronga. Native and abundant in Namibia, the springbok is often used to make clothing worn on special occasions. Don these bad boys for a night out on the town and you’ll certainly stand out from the crowd… $380, www.brothervellies.com
10 9. Print’s charming At this season’s catwalk shows, designers let their imaginations run riot with embellishments, appliqués, embroidery, baroque brocades, opulent damask-style prints and heavy medieval motifs in a wild explosion of Gothic fairytale fantasy. Dolce & Gabbana based their entire collection around romantic fairytale fantasies calling it ‘Once Upon a Time in Sicily’. The show was a major talking point during Milan Fashion Week, and the silk brocade Gothic floral print A-line round-neck dress pictured here was one of the most applauded pieces in their show. It’s the ultimate in chic statement style. £1,860, www.dolcegabbana.com
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11. Gold rush Exclusive to Selfridges, the limited edition ‘Oud Gold’ by Robert Piguet is a sensual, seductive, new men’s fragrance that reeks of elegant sophistication. The new scent weaves an opulent tapestry of oud resin with other precious aromatics. Due to its rarity, down to the difficulty of harvesting the oud resin from the tropical Aquilaria tree, the oil is the most expensive in the world, at 1.5 times the value of gold. Added to this exotic brew, saffron and myrrh inject a masculine, leathery warmth, while the dark earthiness of patchouli lends a rich complexity. A sumptuous backdrop of smoky incense-scented Guaiac wood adds further richness, and the end result is a mysterious, intoxicating, patrician fragrance perfect for the switched-on cosmopolitan man. £160 for 100ml, www.selfridges.com
12. Nailed it
Shelley Thomas trained as a silversmith and jeweller in the 1980s, but eventually found her feet making unique, amazing, otherworldly pieces of iron furniture. Her unusually decorative collections include grandiose throne-like chairs; stunning fantasy, fairytale beds; amazing idiosyncratic tables; and architectural installations in steel – all produced for both corporate and private clients. The artist-designer says that although she loves minimalism, the baroque comes more naturally to her. And what could be more baroque and downright enigmatic than her blockbuster Rancho Stag Chair, pictured here. The framework is steel with rabbit-fur upholstery and Scottishsourced antlers that come decorated with garnets and gold. This is what you might call the ultimate in stylish statement seating. £5,600 (made to order), www.sableandox.co.uk
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Shoe designer extraordinaire Christian Louboutin – he of the famous red soles – has launched an exclusive, smoulderingly decadent collection of high-gloss, chip-resistant nail varnishes that come in 30 beautiful shades. The packaging is based on the famous Crazy Horse cabaret in Paris, where Mr Louboutin and his buddy David Lynch – who, amazingly, directed the brand’s ad – are known to hang out. The covetable faceted bottle with a special patented brush is topped with a dramatic eight-inch ‘high heel’ top that reaches the same height as the designer’s notorious ‘Bellerina Ultima’ shoe. This season’s on-trend colour is a very British hue of deep racing green, or on Louboutin’s shade chart ‘Noirs Zermadame’. Very ‘Sally Bowles’ indeed. But if you want your nail varnish to match the soles of your Louboutin stilettos, ‘Pops Miss Loubi’ is the one for you. Utterly gorgeous. £36, www.selfridges.com
Photo by Ian Macauley
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13. Goth metal
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the Agenda
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14. Arty party Art Basel 2014 takes place in Miami from 4 to 7 December. The favourite winter meeting place for the international art world, this prestigious event presents artwork from across the globe, with more than 250 of the world’s leading galleries taking part, and last year more than 75,000 international visitors attended. With miles of sandy beaches dotted with classic art deco architecture, world-class art museums and a glittering nightlife, Miami Beach ranks among America’s most iconic cities, and during Art Basel it embraces the art world with special exhibitions at museums and galleries across the city, transforming the week into a dense and dynamic cultural event. Paintings, sculptures, installations, photography, films and other works of the highest quality are displayed in the main exhibition hall, while ambitious artworks and performance art become part of the landscape at nearby beaches. Who’d have thought that culture could be such fun? And you can get a tan at the same time – perfect. www.artbasel.com
15. Knit pick For men, stripes are trending again big-time. But this season, designers have taken a slightly different approach, bringing timeless pieces up-to-date for the current market. Now stripes are bigger, bolder, and come in a wild array of eye-popping colours. Bold, vibrant block and variegated stripes offer a fresh new take, and will breathe life into your cold-weather wardrobe. This season, British knitwear design company Chinti and Parker has produced some of the most covetable striped luxury men’s knitwear around. The label has won legions of avid fans, both men and women, for their beautiful, ethically-made garments in high-quality natural materials. Like this funky striped crewneck in pure cashmere. By the way, horizontal stripes visually broaden a man’s frame, making him look like he’s been hitting the gym hard (whether he has or not) – what more reason do you need? £385, www.chintiandparker.com
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16. Scents of style Diana Vreeland Parfums is a new fragrance and beauty collection that embodies every aspect of the legendary Mrs Vreeland’s style and personality – wildly theatrical, colourful, confident, flamboyant, exotic, intelligent and fun. Created by her grandson, Alexander Vreeland, all these traits are intertwined in the fragrances’ DNA. Everything from the vibrant fragrances and the product names, to the elegant 1920s-style crystal bottles and the packaging pays homage to the iconic woman who changed the face of fashion in the 20th century. ‘Extravagance Russe’ is a seductive blend of rich amber essence and rare resins; ‘Perfectly Marvelous’ is an intoxicating elixir of jasmine, spice and Kashmiri wood; and ‘Absolutely Vital’ is an unforgettable composition of precious wood and rose absolute. The collection is exclusive to Selfridges, and more beauty products will be added in 2015. From £133, www.selfridges.com
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17. Sweet designs
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Salted caramel, marshmallows, even doughnuts are soooo last year. And the ‘cronut’ – that doughnut/croissant Frankenstein hybrid that took the Big Apple by storm – never got to first base here. Even the sweet little technicolour cupcake has lost its teatime zeitgeist glamour. As for macarons, those sweet, sickly coloured morsels, they’ve died from mass over-exposure. Enter the camp, revamped designer éclair. Chic Parisian patisseries are now offering up to 10 or more new exotic flavours, as well as seasonal and temporary specials. On this side of the Channel, Harrods is doing a roaring business with their très chic savoury éclairs. (The one stuffed with goat’s cheese and cream, glazed with balsamic vinegar and topped with caramelised walnuts is a winner.) And one enterprising master patissier named Sylvain is selling a wide array of addictive sweet éclairs with exotic fillings, like passion fruit and coconut, and raspberry and pistachio, with equally exotic toppings, at his affectionately named pastry kitchen, Little French Cakes. Trouble is, you’ll have to go to Exeter to buy them. But fear not – we suspect they’ll soon be everywhere. www.sylvainslittlefrenchcakes.co.uk
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Training that improves business performance The tools we use everyday are the ones that we need to know best, which is why ALX Training delivers Microsoft Office classes to a wide range of businesses across the Channel Islands. Designed to meet the needs of your business, our courses improve efficiency by helping your staff get the most from Microsoft Excel, Word, Outlook PowerPoint, Project and Visio. Enabling them to work confidently and productively with these powerful tools as well as learning clever tips and tricks that save both time and effort. We make it easy for you by coming to your offices and using our own laptops for the sessions, alternatively, training can take place at our offices above Liberation Station on the Esplanade. If your organisation is planning to upgrade to Office 2010 or Windows 7 then ALX Training is the perfect partner. We’ll ensure that your colleagues will be able to use these new applications from the first moment they sit down to use them. For more information and a copy of our latest catalogue please call Alex Morel on 01534 710925 email alex@alxtraining.com www.alxtraining.com
Appleby is the leading provider of offshore, legal, fiduciary and administration services. Uniquely positioned in the key offshore jurisdictions of Bermuda, BVI, the Cayman Islands, Guernsey, Isle of Man, Jersey, Mauritius and the Seychelles, as well as the international financial centres of London, Hong Kong, Shanghai and Zurich. We are also the only firm to have offices in all three British Crown Dependencies. Active in Jersey’s Finance industry sector since its inception, the Jersey office has an excellent reputation for corporate & commercial, litigation, property and financial services as well as private client and corporate trust work.
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We are an independent trust company fully regulated and licensed by the Jersey Financial Services Commission in the conduct of trust company business. We provide a full range of management services to our domestic and international private clients. Join us. Our team has many years of experience dealing with a wide range of clients in different countries. We look to provide good corporate governance to achieve your aim. Try us. Family office- bespoke assurance Wealth management -your strategy Fiduciary services - impartiality with vision Corporate services - attention to detail Good governance - a helpful eye We aim to assist in the provision of personal service to meet your requirements, being vigilant and proactive in the face of a fast changing legal, economic and fiscal landscape. We can provide the focus to your solution. Contact us. Mrs Áine O’Reilly, ACCA – Client Director aoreilly@baccata.co.je Nigel Bentley, Solicitor, TEP – Consultant nbentley@baccata.co.je Mrs Ann Williams, TEP – Client Director awilliams@baccata.co.je Nicholas Falla, TEP – Managing Director nfalla@baccata.co.je Tel: +44 (0)1534 870670
At the C5 Alliance Group we work as a trusted partner with a range of different sized organisations in the Channel Islands, helping them to change and run their businesses, to increase revenue and reduce costs. Now with a team of over 150 experts, we have both an IT Services Division (managed services/outsourcing) and a Business Solutions Division (professional services). C5 is a Microsoft Partner with multiple gold and silver accreditations achieved. The services and support we provide includes: Business Solutions Division l Business Growth & System Innovation l Business Intelligence & Management Information l Business Process Management & Project Delivery l Client Relationship Management (CRM) l Infrastructure Design & Platform Implementation l Compliance & Corporate Governance l Information Sharing & Collaboration (SharePoint) l Product/Service Innovation l Customised IT Training IT Services Division l 24x7x365 Managed Services & Support l Full Service Desk including First Fix Time l Incident & Problem Management l Server Patching l End of Day Check Lists l Hands on 1st & 2nd Line Support l Cloud Services l Business Continuity l Dedicated Facilities & Hosting – ISAE 3402 accredited Please contact us to discuss how we can help your organisation gain competitive advantage through technology. Tel: Jersey (0)1534 785400 / Guernsey (0)1481 722575 Email: info@c5alliance.com Website: www.c5alliance.com
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Deloitte LLP Deloitte LLP offers professional services to the UK and European market. The company has the broadest and deepest range of skills of any business advisory organisation and employs over 14,400 exceptional people in 28 offices in the UK and Switzerland. We provide professional services and advice to many leading businesses, government departments and public sector bodies and publish many influential studies and thought leadership pieces. Deloitte LLP employs 160 professionals across the Jersey, Guernsey and the Isle of Man offices. It is the UK member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its global network of 150 member firms, each of which is a legally separate and independent entity. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. Deloitte brings worldclass capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. For further information please do not hesitate to contact: John Clacy, Partner, Guernsey Email:jclacy@deloitte.co.uk Phone +44 (0) 1481 724011 Greg Branch, Partner, Jersey Email: gbranch@deloitte.co.uk Phone: +44(0)1534 824325 www.deloitte.com
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Equiom is an independent trust and corporate service provider with offices in Jersey, the Isle of Man and Malta. We are a thriving business with plans to continue to extend our jurisdictional reach and product range in order to provide increased planning opportunities for existing and potential clients. Our clients benefit from receiving the most appropriate trust or corporate service that can preserve and enhance various underlying asset classes and ensuring peace of mind both now and in the future. Our experienced team has gained the required knowledge and qualifications in Wealth Protection, Corporate Management, Foundations, Yachting Services, Aviation Services, Crewing and Property Structuring to furnish clients with professional and value-added services. Developing lasting relationships with clients and intermediaries who appreciate our approach and integrity which, when combined with the regulated environments in which we operate, enables us to provide a bespoke and tailored service designed around the needs of our clients. For more information please contact: Equiom (Jersey) Limited One The Esplanade St Helier Jersey JE2 3QA Tel: 01534 760100 enquiries@equiom.je www.equiom.je Equiom (Jersey) Limited is regulated by the Jersey Financial Services Commission.
About EY EY is a global leader in assurance, tax, transactions and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
Grant Thornton Limited is a leading Channel Islands accountancy and consultancy practice with offices in Guernsey and Jersey. We are the Channel Islands member of Grant Thornton International, one of the world’s leading organisations of independently owned and managed accounting and consulting firms. We provide a range of services in the Channel Islands that include: l Audit l Accounting services
Our strong network has enabled us to build close working relationships with our colleagues in EMEIA and across the world. This allows us to respond quickly to our CI clients’ needs, drawing upon our industry experience across all our services lines.
l Insolvency, Recovery and Reorganisation, and
Liquidation services l Out-sourced Accounting and Payroll services l Private Client services l Tax services l Business Risk services
To discuss how we can support your business, please contact one of our partners below: Mike Bane, Partner, Assurance and TAS E: mbane@uk.ey.com T: 01481 717435 Andrew Dann, Managing Partner, Assurance E: adann@uk.ey.com T: 01534 288655 Geraint Davies, Partner, Assurance E: gdavies11@uk.ey.com T: 01534 288639
For more information please contact:
Chris Matthews, Partner, Assurance E: cmatthews@uk.ey.com T: 01534 288610 David Moore, Partner, Assurance and Advisory E: dmoore@uk.ey.com T: 01534 288697 Peter Willey, CI Head of Tax E: pwilley@uk.ey.com T: 01534 288 212 Wendy Martin, Executive Director, Tax E: wmartin1@uk.ey.com T: 01534 288 298 David White, Head of Tax, Guernsey E: dwhite1@uk.ey.com T: 01481 717 445
We offer practical and strategic advice to a range of businesses from the Financial Services sector including Funds, Fiduciaries, Insurance and Banking. Our Business Advisory team provides a full range of services to independent businesses throughout the Channel Islands, covering the retail, manufacturing, agricultural, horticultural, hotel, leisure and service sectors.
Grant Thornton Guernsey Office PO Box 313, Lefebvre House Lefebvre Street, St Peter Port Guernsey GY1 3TF T +44 (0)1481 753400 F +44 (0)1481 753401 Grant Thornton Jersey Office Kensington Chambers 46/50 Kensington Place St Helier, Jersey JE1 1ET T +44 (0)1534 885885 F +44 (0)1534 885775 www.gt-ci.com
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Directory For more information about the directory contact Carl Methven on +44 (0)1534 615886 or carl.methven@businesslife.co
Greenlight is a business transformation specialist. We work with businesses in the Channel Islands and across Europe, helping them to realise their potential through improved corporate performance and increased enterprise value. Greenlight consultants are multi-sector change management experts holding a variety of formal qualifications; from MBAs, PMO, PRINCE 2, Six Sigma Black Belt to P3O Practitioner. We live your business, applying our expertise within your corporate culture to steer the organisation successfully through:
Delivering a fresh approach, Ipes is a multiple award winning independent specialist provider of private equity fund services. Ipes is a people business and the relationships our teams build with our clients are at the heart of our success to date. Every one of our people owns part of our business and our clients tell us this makes a difference to the service they receive. Our 150 professionals administers more than $53bn assets for over 90 clients from full service offices in London, Luxembourg, Jersey and Guernsey. On average our senior client facing team have 18 years experience.
Kendrick Rose is an executive recruitment, resourcing and HR solutions company dedicated to providing a first class service delivered with the utmost professionalism. Our clients choose us because we are different. We have held senior in-house HR positions before becoming consultants and recruiters, we are able to apply a highly practical approach to recruitment and HR projects and we can implement solutions for our clients that really work and deliver results in the workplace. We provide a range of services covering every aspect of the recruitment and selection processes, we offer advice on resourcing strategy and have a deep understanding of HR services.
l Business Analysis - The first step in corporate
evolution
Our services include:
l Project Management - Bridging the gap between
great ideas and best practise
l Fund administration
l Programme Management - Transforming
l Outsourcing
theoretical business strategies into real business benefits with a series of large-scale projects l Change management - Providing a clear route through the entire process of significant transformation
l Depositary services
Is your business the best it can be?
l Listed funds l Mezzanine
Ipes in now ranked 6th globally based on AuM (Custody Risk Survey 2012) and 2nd in Guernsey by Monterey Fund Survey. Ipes is ISAE 3402 and AAF 01/06 accredited.
www.greenlightci.com Jersey Office:12/13 Caledonia Place, St Helier, Jersey JE2 3NG Phone: +44 1534 715400 Guernsey Office:Hadsley House Lefebvre Street, St Peter Port, Guernsey GY1 2JP Phone: +44 1481 712200 Eliot.Lincoln@LiveTheBusiness.com
For more information visit our website: www.ipes.com Andrew Whittaker Managing Director, Ipes Guernsey Tel: +44 1481 735850 Email: andrew.whittaker@ipes.com Nigel Strachan Managing Director, Ipes Jersey Tel: +44 1534 712501 Email: nigel.strachan@ipes.com
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We meticulously focus on matching an individual’s competency, goals and aspirations with an organisation’s culture and ethos. We are passionately dedicated to resourcing excellence – from the people we place with our clients to the processes we initiate with them, to the solutions we develop for them. For a confidential discussion please contact; Shelley Kendrick Director Kendrick Rose Limited Lister House Chambers, 1st Floor, 35 The Parade. St Helier. Jersey. JE2 3QQ T: +44 (0) 1534 715150 E: info@kendrickrose.com www.kendrickrose.com
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A leading accountancy practice, with offices based in Jersey and Guernsey, KPMG in the Channel Islands provide audit, tax and financial advisory services. KPMG’s global network enables us to draw on our international resources and skills to meet our clients’ needs. We address complex business challenges with methodologies and processes spanning markets and national boundaries. Fundamental to KPMG’s approach is our focus on industry sectors. Our vision is simple, to turn knowledge into value for the benefit of our clients, people and capital markets. For further information please contact: Heather MacCallum Executive Director, Audit hmaccallum@kpmg.jersey.je Rob Hutchinson Executive Director, Audit rahutchinson@kpmg.guernsey.gg John Riva Head of Tax jriva@kpmg.jersey.je Tony Mancini Executive Director, Tax amancini@kpmg.guernsey.gg Ashley Paxton Head of Advisory ashleypaxton@kpmg.guernsey.gg Robert Kirkby Director, Advisory rkirkby@kpmg.jersey.je www.kpmg.com/channelislands
Minerva is a family owned business that has been in existence in Jersey for over 35 years. As a leading independent provider of trust, corporate and fund administration services, we focus on internationally active clients located in sub Saharan Africa, India, the GCC and Europe. We firmly believe in the value of personal relationships and are familiar with how our clients and professional intermediaries operate from a cultural and business perspective within these regions. In addition to Jersey, we provide services from a number of offices based in key jurisdictions including London, Geneva, Mauritius, Dubai, Singapore and Amsterdam, as well as affiliate offices in Kenya, India and New Zealand. For further information, please contact: John Wood Managing Director Minerva Trust & Corporate Services Limited PO Box 218 43/45 La Motte Street St Helier Jersey JE4 8SD Channel Islands T +(0)1534 702930 E john.wood@minerva-trust.com www.minerva-trust.com
Specialty: Bespoke IT Development & Business Consultancy Our Products PureClient is a new pioneering client data management platform that will maintain client records for any entity or relationship. Built with an integrated customer due diligence and risk assessment tool, PureClient has 4-eyes control throughout that will ensure your business can trust the data within it. Designed to support FATCA, PureClient provides the necessary transparency to enable “look-through reporting” that is needed to manage sophisticated structures and automatically identify U.S. or other high risk entities and relationships. PureClient will automatically manage new, outstanding and renewable KYC and ensure entity documentation is stored and quickly retrievable on the integrated document management platform. PureFunds is a powerful and intuitive investment administration platform supporting Hedge Fund, Mutual Fund, Private Equity and Real Estate businesses within a single application. PureFunds multi-currency transfer agency platform brings a new and dynamic approach to dealing and administrative activities ensuring that all client, fund and company registers are automatically updated. The flexible straight- through batch processing functionality will automatically process, file and email all client correspondence. This functionality will minimise business risk and deliver many efficiencies without compromising control, integrity or security. To find out more how Puritas can help your business. Contact Mike Feighan Head of Business Development T: +44 (0) 1534 874100 E: mike.feighan@puritas.co.uk
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Directory For more information about the directory contact Carl Methven on +44 (0)1534 615886 or carl.methven@businesslife.co
Understanding reputational tax risk In the current tough economic climate, tax authorities are under pressure to maximise revenues and prevent tax leakage, and attitudes to offshore financial centres are hardening, fuelled by coverage in the press. Users of offshore centres not only need to ensure their tax structuring is robust, but also that it stands up to public scrutiny. Have you considered the reputational risk buried in your client base? We can help you: l Review your client portfolio and identify risk areas. l Develop client take-on procedures that evaluate the business risk associated with tax structuring. l Review tax risks including substance and management and control in practice. l Assist your clients in dealing with tax enquiries and investigations. The goal posts are moving; make sure you and your clients are not caught out. Contact Jersey – 01534 838200 wendy.dorman@je.pwc.com garry.bell@je.pwc.com Contact Guernsey – 01481 752000 david.x.waldron@gg.pwc.com
Rathbone Investment Management International is part of the award winning Rathbone Brothers PLC (“Rathbones”), which was established in 1742. Rathbones is a leading provider of discretionary investment management services for private investors, charities and trustees.
Any accountant can produce a set of accounts but not all have the ability to contribute added value to your business. At Rosscot we go beyond what is conventionally expected and provide innovative solutions in an industry traditionally governed by textbook answers.
We enjoy the stability afforded by being a FTSE-250 listed company with significant critical mass (£20 billion of funds under management as at 31 March 2013).
We’ve been dynamically growing over the past 40 years, so we can offer you experience you can trust combined with the innovation of our team delivering a fresh and energetic approach.
We offer a range of tailored investment options: l Bespoke portfolio management l Multi-manager portfolios l Unitised portfolios (the RIMI Strategies Funds) Our services are delivered by a team of innovative and experienced offshore professionals based on an understanding of a client’s specific investment and risk objectives, backed-up by the performance-driven Rathbone investment process and encompass the full universe of assets. For further information please do not hesitate to contact: Jonathan Giles, Managing Director Jonathan.giles@rathbones.com Phil Bain, Director Phil.bain@rathbones.com Vaughan Rimeur, Director Vaughan.rimeur@rathbones.com + 44 (0) 1534 740550 www.rathboneimi.com Rathbone Investment Management International Limited is regulated by the Jersey Financial Services Commission
Choosing the right accountancy service is paramount to business success. Making the wrong choice will cost you money, time and resources. Make sure you are partnering with the right people. Make sure you partner with Rosscot. Our Services include: l Accounts Preparation l Management Accounts l Audit & Assurance l Taxation Services l Bookkeeping & Administrative Services l Payroll services l Business Start-Up Advice l Company Secretarial Services* l Accounting Software Installation & Support l Outsourced Accountancy Support l Business Valuation l Forensic Accounting For more information visit our website: www.rosscot.com Sean O’Flaherty, Director Tel: 01534 785200 Fax: 01534 785299 Email: sean@rosscot.com
*Rosscot Secretaries Limited is regulated by the Jersey Financial Services Commission
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Rowlands has been actively supporting businesses in Jersey for almost 40 years. With a wealth of experience, in-depth market knowledge and a genuine enthusiasm for people, careers and resourcing we are well positioned to help you make the most of your recruitment opportunities and to secure the best possible people for your business. Our performance is based on honest, effective personal relationships and it is our aim to provide you with a long term, valuable resource that will help to improve your business. The services we provide have developed through client demand; building a reputation for professionalism and confidentiality. Our services include: l Permanent Recruitment – all levels l Executive Placements l Temporary/Flexible Solutions l Contract Recruitment
Security & Simplicity Shared We provide exceptionally secure online access systems for sending and sharing highly confidential information. Safelink’s virtual data rooms are perfect for M&A due diligence, allowing documents to be released to potential acquirers in a tightly controlled online “room” with the ability to restrict downloading and printing. Excellent local support, a simple but sophisticated interface and powerful page-level reporting make Safelink ideal for onshore and offshore transactions. Our secure extranet service is used by trust, legal and accountancy firms to provide 24x7 access for peers, clients and intermediaries through a fully branded portal. You can share documents and send encrypted messages while retaining complete control.
l Graduate Services l Pre Employment Screening l Outplacement Services l Psychometric Testing
For further information, a no-obligation demonstration or to discuss your specific requirements please contact:
At Santander Corporate Banking, we believe in building long-term relationships by placing you, the customer, at the heart of all we do. We’ll strive to become your partner, not just a finance provider and we’ll take the time to listen to you and understand your business needs. We’re setting a new benchmark in corporate banking with a team of experienced Relationship Directors based within a Corporate Business Centre in Jersey. Every business and organisation is different which is why we’ve assembled a range of products and services, together with tailor-made solutions in day to day banking, deposit taking, treasury and lending. We are consistent in all we do; a true relationship bank that has earned the trust of our customers by doing what we say, when we say. To start working with us today, contact our team on 01534 767750. Wil Beaumont wil.beaumont@Santander.co.uk
l Remuneration Survey
Karl.Anderson@safelinkdatarooms.com For more information on these services and how we could support you and your resourcing strategy please contact: Jeralie Pallot Managing Director Rowlands Recruitment, Trinity House, Bath Street, St Helier, Jersey JE2 4ST
Safelink Data Rooms Suite 15, 4 Wharf Street St Helier, Jersey, JE2 3NR T: 020 8798 3140 E: hello@safelinkdatarooms.com W: www.safelinkdatarooms.com
Steve O’Brien Stephen.o’brien@santander.co.uk Richard Le Breton Richard.lebreton@santander.co.uk Jane Bond-Webster jane.bond-webster@santander.co.uk
T: +44 (0)1534 626722 E: Jeralie@rowlands.co.uk www.rowlands.co.uk
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In this final outing for the Last Word, we head to the City and let Christopher Good put forward his opinion on changes now taking place in fund management, and those that are coming
After a grim few years, the numbers look good Total net assets for the European fund industry were €10,661bn at the end of July 2014, compared to a global figure of €27,434bn. Private funds have had a busy summer. Deals are getting done as sellers take a more realistic view of prices, and investors are getting liquidity, which gives them the confidence to commit to new funds. On the macro side, there’s a long-term global demographic trend that suggests we’re an older, growing population with more assets to manage and an inclination to pay for that service. So much for the Pollyannas – here’s what the Eeyores say. Investors now require more love and attention, both when you market to them and when they’re in your fund and you’re reporting to them (often on a bespoke basis). There’s downward pressure on management fees everywhere. The SEC ‘sunshine’ report into private equity in the US and the Retail Distribution Review in the UK have reminded investors of the layers of fees involved in fund products. Investors understandably want value for money.
If the phone isn’t an investor, it’s probably a regulator Previously, the perceived wisdom was that ‘widows and orphans’ needed the regulator’s protection, and institutional investors who invested all the time did not. The EU’s new funds legislation assumes institutional investors are prone to the same weaknesses and mistakes as widows and orphans, so they’re now getting similar levels of regulatory protection. There are still jurisdictions that try to run a ‘lighter touch’ regime, but the political will on this means the bar’s going up everywhere. The regulators have also been quick to flex their muscles – they want more detail on what managers are up to and what they’re being paid. The SEC’s report reignited the debate on manager compensation and charging fees to investee companies. The new EU rules require compensation disclosure and prescribe remuneration arrangements. Whether you manage a regulated or unregulated fund, wherever you run it, it won’t be long before you bump up against a regulator. And of course there are also chronic tax changes in the background… I’m a Pollyanna. I meet lots of smart, hard-working managers who know their beans and do a sterling job for their investors. But
the day job is more complicated than it was even five years ago and that’s the direction of travel. Managers need to get big, get specialised, or get going Competition and transparency will flush out those who can’t produce the goods. Recent fundraisings indicate a bifurcated market – those who close investors quickly, and those who face protracted battles to win new mandates. As the strong managers shout their successes, those who have failed to raise or are losing AUM will be conspicuous by their silence. The extra regulation, tax changes and additional reporting
About Christopher Good Christopher is a Partner in the investment management group at law firm Macfarlanes, where he advises fund sponsors on product structuring and investor negotiations, spin-out arrangements and incentive structures, together with primary and secondary fund transactions. He also advises institutional investors on their investment programmes.
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mean fixed costs are rising. Most managers will respond by scaling up their businesses and AUM, and there will be opportunities to swallow up the businesses of those managers who aren’t cutting it. Those managers who can’t or won’t scale up will need to charge higher fees. They can only do that if they offer something their competitors don’t. This will favour teams who are specialised, with deep knowledge of a sector or a geographic region (or even both). Generalists (or, more likely, generalists trying to pretend they are specialists) need not apply – those longer due diligence meetings with investors will find you out. And investors won’t sit back – they will constantly check managers are running a disciplined investment programme to back up their story. n
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Issue 36: January/February 2015
Find out what the next 12 months could bring for funds, banking, tourism, technology, trusts, insurance and the Channel Islands’ economies
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