BL Magazine Issue 65 November 2019 - January 2020

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BUSINESSLIFE The Funds Edition 2019 • Start-up funds • Private equity • Climate change benchmarks • Alternatives • Private capital • Specialist funds


Time to change

The funds sector shapes up for a more ethical era of investing

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A new era for funds Welcome to our annual look at the funds industry. As we approach the end of the year, fund managers and administrators will be reflecting on a busy 12 months. The pressures on them have been plentiful: deliver higher returns through alternatives, be more ethically aware, skill up for a new type of investor, use technology to work smarter. Two big influences really stand out, however, and are recurring themes throughout this issue – a demand for alternatives and a new era of ethical investing. IN SEARCH OF ALTERNATIVES Continued disappointment with returns from conventional asset classes has pushed investors into areas such as private equity, leaving this sector with incredible amounts of dry powder – an estimated $2.4trn by mid-2019 – and record valuation levels (page 70). Industry watchers predict a bubble but the good news is that PE as a whole has learnt the lessons of the past. The market is bigger, deal sizes are smaller and less leveraged, and institutional investors – now more experienced in the sector – have greater staying power. PE fund managers are also more thorough in their pre-deal analysis, despite the pressure to deploy funds, and are focusing on their core skills of adding real value to businesses they invest in, rather than taking the financial engineering short cut. Specialist funds is another area investors are turning to in search of returns. On page 64, we look at some of the niche funds the Channel Islands have been involved in launching recently, giving investors a stake in, among other things, commercial ships, the back catalogues of pop royalty and even an Airbus A380. If nothing else, these funds are adding some flavour to vanilla equity and bond portfolios. PRIVATE CAPITAL ON THE RISE Private investors are an ideal target market for specialist fund managers. Private capital is on the rise, with Boston Consulting Group estimating that it is likely to grow by 5.7% a year between 2018 and 2023 (page 76). Here, too, clients are choosing long-term reliability over short-term volatility in their investment choices. The Channel Islands’ private fund regimes have been particularly good at catering for this market, offering, as they do, ease of set-up, lighttouch regulation and significant flexibility. In 2018, 50% of all funds set up in Guernsey were set up under the Private Investment Fund regime, while that figure was 59% in Jersey. The regimes are a classic example, say experts,

of the ability of the islands, as self-governing bodies, to react to the interests of the market and develop products to suit. They are also proving to be a strong pull for start-up funds that have traditionally based themselves in Caribbean jurisdictions but are now in search of gold standard international finance centres, driven by wealthy private clients who want better governance in the wake of Panama Papers-style scandals (page 36). While setting up may be relatively easy, startup fund managers are finding it harder to secure administration services in a market that has traditionally catered for larger funds. An opportunity exists for smaller, independent administrators with a focus on governance to increase the islands’ capacity to service more start-up funds, establishing Jersey and Guernsey as an EMEA hub for this part of the funds sector. ESG INFLUENCE GROWS ESG investing, the subject of our cover story (page 42), is another interest that continues to develop among private investors. According to UBS, more than a third of family offices around the world are now engaged in sustainable investments, while a quarter are involved in impact investments. This is beginning to influence not only what fund managers invest in, but how they communicate with clients, develop staff and even run their own operations. Guernsey and Jersey have a strong record in environmentally sound and socially responsible investing – one that has been well documented in this magazine. But the islands cannot rest on their laurels. The scrutiny of law makers and regulators will only increase in this area as concerns about ‘greenwashing’ grow. The European Union’s climate change benchmarks (page 50) are the latest public policy effort to ensure investors don’t get the wool pulled over their eyes. Fund managers will need to focus on developing robust ESG frameworks that give them a competitive advantage in this new era of ethical investing.

clients are choosing long-term reliability over shortterm volatility in their investment choices

TAKING A BREAK At this time of year, the BL team would usually be preparing to bring you a New Year edition of Businesslife, but we’re taking a break this year and will be returning in February with our first issue of 2020. So, early as it may appear, we wish you all a very happy Christmas and New Year and look forward to seeing you the other side of the festivities. n Eila Madden is Editor-in-Chief of Businesslife

November 2019 -January 2020 3



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14 Regulation watch


Collas Crill on lessons learnt from a recent fund finance case


Businesslife is published six times a year by Chameleon Group +44 1534 615886


76 6 News

42 esg

70 private equity

Business updates from across the islands

Funds businesses face a juggling act in an increasingly ethical era of investing

Alternative asset managers should avoid past mistakes, as record levels of dry powder push valuations ever higher

10 Appointments A round-up of senior job moves around Jersey and Guernsey

28 Interview Jersey Financial Services Commission Director General Martin Moloney gets smart with regulation

36 start-up funds These represent a big opportunity area for corporate services firms – but they need to make the most of it now

50 sustainaBILITY Two new climate change benchmarks from the European Union

56 interview IQ-EQ Group CEO Mark Pesco looks ahead after a busy first year establishing the business

76 private capital Guernsey’s and Jersey’s private fund regimes are proving their worth among private investors seeking new solutions

80 alternatives Why alternative fund managers must take a fresh approach to technology, talent and fees to stay ahead

64 specialist funds

98 20 questions

A look into what’s been grabbing the interest of specialist investors

Tim Pearce of Bedell Cristin sings the praises of the Famous Five

16 Comment Regulatory compliance, corporate governance and Guernsey Harbours


The knowledge Football in numbers, employee bonuses, management guru Charles Handy and much more

contributors The BL Global Discussion Forum


Follow us @blglobalnews Office: Meadowlands, La Rue a la Dame, St Saviour, Jersey 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.

Richard kicks off the funds sector coverage in our features section with a look at why start-up funds are looking to Jersey and Guernsey for a home and why the islands are well placed to grasp the opportunity.


In the first of two features dedicated to ethical investing, Desné explores how fund managers are building robust ESG frameworks to cater for investors’ increasing desire to make a difference.


David follows up Desné’s cover story with a closer look at two new climate change benchmarks from the EU, designed to help investors spot greenwashing. How will they work and will they make a difference?


Private capital levels are on the rise and owners are looking for asset classes that will deliver reliable returns. Dominic reports on how the Channel Islands’ private fund regimes are providing a solution.

November 2019 -January 2020 5

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in the NEWS UK EXTENDS MEMBERSHIP OF WTO TO ISLANDS The UK has notified the World Trade Organization (WTO) that it will extend its WTO membership to include the Channel Islands. UK Trade Policy Minister Conor Burns agreed the extension with Deputy Gavin St Pier, Guernsey’s Chief Minister, and Senator Ian Gorst, Jersey’s Minister for External Relations, in October, before the UK Parliament was dissolved for the country’s general election. The decision will take effect on the UK leaving the EU and taking up independent representation at the WTO. Remaining part of the international trading system will help Channel Islands businesses remain competitive and ensure they cannot be subject to any discriminatory practices when operating internationally. JERSEY FINANCE LAUNCHES NEW YORK OFFICE Jersey Finance has opened a New York office, as the jurisdiction looks to promote itself as a gateway to Europe for US alternative fund managers. Speaking at the launch on 16 October, Philip Pirecki, Jersey Finance’s Business Development Lead in the US (pictured below, centre, with

Senator Ian Gorst and Jersey Finance CEO Joe Moynihan), highlighted Jersey’s position as a specialist funds centre. The island will support US private equity, real estate and hedge fund managers by providing seamless access to European investor capital, he said. The number of managers accessing EU investor capital through Jersey’s private placement regime grew to more than 172 at the midway point in 2019, according to the Jersey Financial Services Commission, while Monterey Insight said the number of US-based promoters grew by 164% over the past five years. GUERNSEY RETAINS ASIA CAPTIVE REVIEW AWARD Guernsey has won the NonAsian Domicile award for the second year in a row at the 2019 Asia Captive Review Awards, held in Singapore in October. The awards recognise and reward providers of captive insurance products and services that have outperformed their competitors and demonstrated the highest levels of excellence over the past 12 months. The Guernsey entry focused on the island’s ongoing work in Asia to boost its captive business, and on progress in the wider insurance sector, such as the introduction of the ILS rollover and the first hybrid vehicle for use in the ILS sector. JERSEY NAMED BEST IFC Jersey has been named Best International Finance Centre at this year’s International Investment Awards. Jersey Finance CEO Joe Moynihan said the award recognised the island’s innovative and foward-thinking aproach. n

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Done Deals Investment adviser Seaton Place has purchased 27/28 Esplanade in Jersey for £41m, achieving a net initial yield just above 6%. Known as JTC House, the seven-storey Grade A office building was completed in 2017 and is fully let on long leases to JTC Group, Saltgate and Ardian Capital. Seaton Place sourced, structured and advised on the purchase for the Silk Road Opportunities Fund, a Jersey Private Fund that launched on 30 September. Advisers on the transaction were Collas Crill, CBRE (Jersey), Grant Thornton International and fund administrator Praxis Fund Services (Jersey). Carey Olsen’s Guernsey corporate team has advised on the initial public offering of JP Morgan Global Core Real Assets (JARA) and its admission to trading on the Main Market of London Stock Exchange (LSE). The Guernsey-registered company’s initial placing raised £148.9m, well above the £100m minimum needed to launch. Working alongside onshore counsel Herbert Smith Freehills, the Carey Olsen team advising on all Guernsey aspects of the establishment, regulation and admission of JARA was led by Partner Tony Lane and assisted by Associate Jamie Oldfield. Walkers’ Jersey office has advised on the Jersey law aspects of the refinancing of a major portfolio of premium UK student accommodation. A team led by Partner Nigel Weston advised Singapore Press Holdings on the £205m refinancing of a portfolio of 20 purpose-built student accommodation buildings across eight cities, including London, Glasgow, Bristol and Birmingham. The Walkers team included Senior Counsel Louise Hamilton and Associate Meg McAuley, working with lead counsel CMS. Ogier has advised Resonance Asset Management on the launch of its third Guernsey fund, Resonance British Wind Energy Income II – an authorised closed-ended investment fund designated as a Guernsey Green Fund. The fund focuses on consolidating the fragmented UK and Republic of Ireland small and medium-sized wind farm industry, providing investors with an investment return through income, whilst mitigating environmental damage. Partner Bryon Rees and Senior Associate Michelle Watson Bunn advised Resonance Asset Management on Guernsey law matters and worked with lead counsel Simmons & Simmons. Mourant has advised gambling and entertainment company the Rank Group in relation to its acquisition of Stride Gaming for £115m. The transaction was implemented by a Jersey court sanctioned scheme of arrangement. Corporate Partner James Hill, Litigation Partner Stephen Alexander and Counsel Andrew Salisbury provided Jersey legal advice on all aspects of the acquisition, working alongside English counsel CMS. n

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MERGERS AND ACQUISITIONS Grant Thornton Channel Islands has acquired chartered accountancy firm Price Bailey in Guernsey. All five Price Bailey staff will join Grant Thornton. As a result of the acquisition, some of the back-office work currently done by Price Bailey in the UK will now be carried out in Guernsey by Grant Thornton. Kirsty Warner joins Grant Thornton as Director of Business Advisory, having worked at Price Bailey for the past 16 years, most recently as Managing Partner in Guernsey.

Director of Zedra Lugano, while Talenture’s management team – including Antonini, Giuseppe Costantino, Uberto Meraviglia Mantegazza and Michele Meretti – will join Zedra.

Financial services group Zedra is to acquire LJ Fiduciary from investment firm Alvarium. Following the deal, which is subject to local regulatory approval, LJ Fiduciary will be rebranded and merged into the Zedra network. LJ Fiduciary’s Swiss and Isle of Man service offering encompasses global private client, fund and corporate administration services. The deal adds nearly 50 new staff to Zedra’s total headcount of more than 500. Overall staff numbers in Switzerland will now exceed 70, while in the Isle of Man there will be more than 100.

London-based asset management consultancy MJ Hudson is to acquire Jersey administrator Anglo Saxon Trust (AST), subject to Jersey Financial Services Commission regulatory approval and certain other conditions. The acquisition adds to MJ Hudson’s existing operations in Jersey, allowing it to consolidate its Channel Islands operations. AST was founded in 2005 by chartered accountants Gordon Angus, Nick Walker and Roger King. All existing staff will transfer to MJ Hudson, and the business will trade initially as MJ Hudson Anglo Saxon Trust. The acquisition separates AST from its sister company, chartered accountancy Jackson Fox. Two of the co-founders, Angus and Walker, will leave AST to focus on running Jackson Fox, while King will remain with AST to run the business with MJ Hudson.

The announcement follows Zedra’s acquisition of Talenture, an independent corporate and services provider based in Lugano in southern Switzerland’s Italianspeaking Ticino region. The acquisition, which is expected to close by the end of the year, will bring Zedra’s global office network to 17 across 13 jurisdictions. Talenture specialises in accounting, corporate secretarial, tax compliance, payroll and HR services for Swiss and international companies. It has provided consulting and corporate services solutions for entrepreneurs and corporations since 1989. Following the acquisition, Talenture Director Michele Antonini will assume the role of Managing

Jersey-based employment specialist Law At Work (LAW) has acquired ASL Recruitment. Under the transaction, completed on 25 September, ASL has taken offices alongside LAW’s in St Helier, although the two businesses will continue to trade under their existing names. They will offer a full range of human capital services, including recruitment, induction and engagement, developing and safeguarding staff, and managing change across finance, commercial, public sector, charities, construction, hospitality, retail and care providers. ASL Recruitment, led by Tina Palmer, has been providing recruitment agency and training services in Jersey for more than 40 years.

8 November 2019 -January 2020

The Channel Islands Media Group, a joint venture between Bailiwick Investments and MXC Capital, has purchased the Guernsey Press Company and its wholly owned subsidiary Guernsey Distribution from the Guiton Media Group. The deal includes the production and distribution of the Guernsey Press newspaper, including its digital platforms and GY4 You app. After more than two decades of off-island ownership, the takeover brings the company into local ownership. Bailiwick Investments, an investment company quoted on The International Stock Exchange, has been investing in Channel Islands businesses for more than a decade, while MXC Capital is an AIM-quoted investor in, and adviser to, technology companies. Ogier advised Guiton Media on the sale of the Guernsey Press Company. Collas Crill assisted Bailiwick Investments and MXC Guernsey with the acquisition. Professional services business Smith & Williamson – which operates from offices in Jersey – is to merge with wealth management specialist Tilney. On completion, the combined business will be named Tilney Smith & Williamson, operating across 36 towns and cities in the UK, Ireland and Channel Islands. The transaction – which values the merged business at an enterprise value of £1.8bn, and will have revenues of £500m and EBITDA of £150m – is expected to complete in early 2020, subject to regulatory approvals. The Chairman of the merged business will be current Tilney Group Chairman Will Samuel, while Tilney’s CEO Chris Woodhouse will be Group Chief Executive. Kevin Stopps and David Cobb, joint CEOs of Smith & Williamson, will join the board of the enlarged group on completion. n

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Appointments KPMG in the Channel Islands has made several appointments across its tax team. In Jersey, Paul Eastwood (pictured) joins as a Director, having served as Deputy Comptroller in the Jersey Taxes Office, and before that in Deloitte’s tax practice in Jersey. Also in Jersey, Chris Lowe has been promoted to Associate Tax Director, having led the Automatic Exchange of Information offering in the Channel Islands for several years. In Guernsey, Paul Beale has been promoted to Tax Director, Anderson Page has become Senior Manager in US tax, and Nana Aboagye and Matthew Thomas have been promoted to Tax Manager.

Leanne Wallser has joined law firm Walkers’ Jersey office as a Group Partner. Leanne has worked in the offshore sector since 2003 and her previous experience has included legal work in Hong Kong and London, as well as in Jersey. A specialist in Jersey fund structures, particularly environmental, social and governance (ESG) and impact investing, Leanne joins the firm having spent 16 years with local law firm Mourant, where she most recently served as Counsel, Investment Funds. According to Walkers, the headcount within the firm’s Jersey office has increased by more than a third over the past year.

Crestbridge has appointed Michael Johnson as Group Head of Fund Services, responsible for growing Crestbridge’s funds proposition, supporting managers and helping them to navigate the regulatory environment in multiple jurisdictions. With more than 17 years’ experience in global financial services, Michael joins Crestbridge from Intertrust, where he was Head of Fund Services in the Channel Islands, helping develop the firm’s fund strategy. He was previously based in London with Swiss Re Capital Markets/Asset Management, and before that PwC. He is currently Vice Chair of the Jersey Funds Association.

Intertrust Jersey has promoted Chris Bowden to the role of Director within the Corporate Services team. Chris, who joined the team in 2017, will oversee Intertrust’s corporate offering, with a focus on business development and implementing new initiatives, including new digitalised processes. Chris has more than 20 years’ experience working within the finance industry. Before joining Intertrust, he spent eight and a half years with RBC Wealth Management, before moving on to senior management roles within FML Trust & Corporate Services and, more recently, Vistra.

Vistra has appointed Derek Kemp as Regional Managing Director of the UK, Ireland, Channel Islands and the Middle East. He will be responsible for leading and developing Vistra’s businesses in those four regions, which combined account for about 20% of Vistra’s global business. Derek has held a range of international senior management roles in his 30-plus years in technology consulting. He joins Vistra from Capgemini, where he most recently served as Executive Vice President of EMEA/APAC Business Services, as well as Global Sales Officer.

Investment services company Ravenscroft has appointed Kevin Boscher as its first Chief Investment Officer (CIO), a role created as a result of recent acquisitions and expansion into new jurisdictions. Kevin has worked in the investment sector for more than 35 years, most recently as CIO with Brooks Macdonald International in Guernsey. Prior to this, he spent four years in a similar role with Spearpoint. His experience covers global macro analysis, investment strategy, fund selection, risk management, and client and media presentations.

12 march/april 2017


HSBC has appointed Tania Sobey as Country Head of Retail Banking and Wealth Management in Jersey. Tania brings 30 years’ experience in financial services to the role. She previously served as Head of Retail Distribution for HSBC Expat in Jersey, overseeing Jersey, Hong Kong and Dubai teams supporting expatriate customers all over the world. Having started her career with Allied Irish Bank in the 1980s, Tania worked at Santander for 23 years, holding senior branch network roles, as well as the position of Head of Offshore Strategy and CEO for Alliance and Leicester International in the Isle of Man.

Former Jersey Finance leader Geoff Cook has joined the Jersey board of financial services provider Apex Group as a NonExecutive Director. Geoff served as Chief Executive of Jersey Finance between 2007 and 2019. Before that, he was Head of Wealth Management at HSBC for 17 years, during which period he oversaw the delivery of financial planning, trust and mortgage services. In his new role, Geoff will help Apex Jersey develop its profile in the Channel Islands and continue its growth strategy. Alongside his Apex role, Geoff also serves as Chair of Qulilter Cheviot and is a Consultant at law firm Mourant.

Litigation lawyer Nic Journeaux has joined Ogier as a Partner after almost 32 years working for Carey Olsen. Nic has appeared in many complex trust and commercial cases over more than 20 years and has been integral to developments in substantive and procedural law. He specialises in commercial and trust litigation, including asset recovery, shareholder disputes, as well as insuranceled defence of professionals. In his previous role as Partner at Carey Olsen, Nic appeared as Counsel for Grupo Torras in the groundbreaking Esteem Settlement litigation of 2003.

Collas Crill Jersey has appointed Laura Perkins as Of Counsel to its International Private Client and Trusts team. Laura has spent the past two years practising offshore law with Harneys in the British Virgin Islands. Prior to this, she spent nine years in Edinburgh with Turcan Connell, working on tax, succession planning, trusts and probate. Experienced in both contentious and noncontentious matters, Laura is able to advise on all aspects of trust law. She specialises in wealth planning for high and ultra-high-networth clients, focusing in particular on the use of trusts for succession planning, wealth preservation and asset protection purposes.

The Jersey Financial Services Commission (JFSC) has appointed Sarah Kittleson as a Director of Supervisory Engagement. Sarah has worked at the JFSC since 2004, most recently as Head of Programme Management. In her new role, she will be responsible for the JFSC’s two relationship managed supervision teams, which supervise the banking and fund services business sectors; and the trust company business, investment business and insurance sectors. Sarah is also an Associate of the ICSA: The Chartered Governance Institute.

Jersey-based fiduciary business Forward Group has appointed Simon Voisin as Client Director. Simon brings to the company more than 27 years’ experience in providing professional fiduciary wealth management services to private and corporate clients. A qualified trust practitioner, he has spent the past year working as an independent consultant, but previously worked as Client Director for Zedra Group. Earlier in his career, Simon held Director roles within Highvern, Coutts, TMF Group and Equiom, having started out in the banking sector. march/april 2017 13

Advertising feature

Blue Islands’ Paul Simmons explains the importance of regional airlines to island life Earlier this year, former easyJet Director Paul Simmons joined Blue Islands’ board as a Non-Executive Director. Paul spent seven years with easyJet, initially as Group Head of Marketing and Distribution and for the last five years as UK Director. In this role, he was responsible for the commercial performance of easyJet’s UK fleet and consistently grew the profitability of the business. Prior to airlines, Paul held senior international marketing executive positions with blue-chip organisations in the FMCG and hospitality sectors, including P&G, Kellogg’s and InterContinental Hotels. He is currently CEO of Sequestim, a new airport security business co-owned by Cardiff University. Paul has a strong understanding of regional aviation markets and, here, he offers his unique insight into a subject that stirs up many emotions across the Channel Islands – air connectivity

THE CHANNEL ISLANDS are wonderful places to live: stunning locations offering high employment, excellent education, lower taxes than the UK and low crime. We are served by telecoms, water, electricity and other utilities tailored to our local Channel Islands needs and, of course, transport infrastructure. Due to small markets on the islands, the organisations providing these services do not enjoy the scale of similar providers in the UK serving far larger demographics. That means the cost of procuring robust and resilient services for our islands is greater. With financial services one of the islands’ largest industries, but an isolated travel market, the business community relies on connectivity provided by regional airlines to meet their immediate, time-sensitive needs by providing a choice of frequent daily flights throughout the year. Optimised schedules and multiple flights allow sameday travel if required, ensuring productivity when away from the office and reducing accommodation and sustenance expenses to satisfy ever stricter travel policies.

12 November 2019 -January 2020

Sport is also part of the fabric of Channel Islands life, and sports teams know they can fulfil inter-insular and UK fixtures even in the winter and typically return on the same day – again, avoiding accommodation and sustenance expenses. Guernsey and Jersey boast excellent healthcare provision but, inevitably, there is often a need for off-island treatment. High-frequency year-round services ensure that patients can rely on travel services to get them to the UK for appointments – and be able to return home the same day if treatment allows. All of this also means we should be wary of ‘non-strategic’ new entrants, especially low-cost carriers (LCCs). As a former UK Director of the largest British LCC, I know how shorter routes are often used to optimise schedules until something better comes along. I did this myself with routes from the UK to the Isle of Man. There is a clear danger that a longer runway at Guernsey, for example, would attract new entrants looking for short ‘filler’ routes – promising great things,

demanding financial incentives and insisting on prime routes such as Gatwick – until they can find something ‘more useful’ to do with the aircraft. During the time that they do operate, they will typically cherry-pick the best days and times to operate, and crash pricing. Although this may bring short-term benefits to the travelling public, in the medium term it destabilises the established regional airlines trying to provide regular, reliable lifeline services – leaving everyone in a worse off position – except the LCC.

SCALE AND CHOICE THROUGH ALLIANCES The costs of operating an airline are high. With sub-scale markets in Guernsey and Jersey, it is a challenge to balance the needs of serving the local communities with a route network that offers high frequency year-round services and ensuring that the business is sustainable to ensure long-term viability. To successfully manage the high costs of operation and sales for a regional airline, operators must seek alliances and

Advertising feature

partnerships. This would provide scale for cost-effective access to state-of-theart inventory distribution and revenue management systems. This scale and marketing reach enables growth with access to otherwise costprohibitive sales channels. At the same time, the customer benefits from featurerich booking platforms and mobile apps, which also present simple one-booking connectivity through hub airports for a wider choice of travel options. The services available on the Blue Islands-operated route network need to be viable. As such, we fly a carefully selected route network between Guernsey and Jersey and to the UK. As a Flybe franchise partner, Guernsey and Jersey residents can choose from over 50 flights to Southampton per week and easily connect through the airport’s single terminal to a wide range of UK and European destinations on the wider Flybe network. In future, we also hope to be able to offer seamless ‘one ticket’ connections on to long-haul services too. One booking and one check-in make connections simple. And a through-ticket, rather than flying point-to-point, ensures the customer will be re-booked on the next available service in the event of any flight disruption. The launch of new Blue Islands-operated services from Guernsey to Liverpool, London Southend and Newquay for 2019 demonstrate that we are striving to offer a growing choice of new destinations, flight times and value for money. With 70% of

a regional airline serving relatively small communities needs to keep very close to the needs of its travelling population, and to respond accordingly

passengers travelling on these new services being incremental visitors to the Channel Islands, they also serve to stimulate the inbound visitor economy.

EXPECTATION GAP We often see comparisons with headline (lowest advertised) fares offered by LCCs. However, it’s important to understand the differences between a regional operator and an LCC. As described above, in isolated island markets, our communities rely on high-frequency year-round travel. An LCC’s model typically targets leisure markets,

cherry-picking high-traffic flights, avoiding loss-making travel days, months or times to sustain lower fares. And they are not slow to move aircraft or close routes if a better opportunity comes along elsewhere. During times of significant demand, LCCs can take the opportunity for headline-grabbing fares of a different kind, as with fare hikes on Jersey–Gatwick seats ahead of the strike action by British Airways pilots earlier this year. There were reports of easyJet seats on the route costing up to £1,000 return. To succeed, a regional airline serving relatively small communities needs to keep very close to the needs of its travelling population, and to respond accordingly. Blue Islands is committed to this, and to developing new services whilst always being aware of the very important need to keep fares competitive and provide a value for money service. Blue Islands’ aim is to be a long-term, commercially viable economic and social enabler for the islands, serving Channel Island communities, including business, leisure, sport and health travellers, with a wide choice of destinations. What’s more, we take very seriously our responsibility to encourage potential new visitors. Allowing more people to discover our beautiful islands supports the visitor economy. Blue Islands is striving to balance the challenges of a sub-scale local market and ever-increasing costs against the consumer demand for lower fares and new routes. n

November 2019 -January 2020 13


Why fund finance lenders need greater protection

MATTHEW GILLEY Group Partner, Jersey, Collas Crill

A recent fund finance case involving the Abraaj Group has highlighted the need for notice of security on a capital call facility to be given to the underlying investors of a fund


und finance is an understated and often unrecognised part of the financial services business carried on across the Channel Islands. That is quite surprising, considering how well established both the fund and banking industries are here. Given the physical proximity to trust company administrators, local banks have found a ready supply of customers and as a result fund finance can, and in some cases does, form a large part of a local bank’s loan books. So how does fund finance work and why talk about it now? What is fund finance? A capital call facility or a subscription facility is a fund financing tool that bridges the gap between the time a fund is required to fulfil its obligations to complete an investment and when a call is made on the investors of the fund. The term of that loan is a relatively short period of time and typically for no longer than a 12-month period. A lender can take security for a loan to protect against the borrower failing to make a loan repayment. A common example of security is a mortgage over a house. Lenders making a capital call facility available are no different. They may take security over the fund’s right to call for monies from investors. Why talk about fund finance? A recent fund finance case involving the Abraaj Group highlighted the challenges for all stakeholders, including investors (into a fund) and lenders. In that case, a lender had taken security over the right to call for monies from a fund’s investors. However, the lender found itself fighting to enforce that right because: (a) no notice had been given of that security

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to the fund’s investors and (b) the fund had released each investor of its obligation to pay those monies. The case identified the risks of a fund becoming insolvent, alongside the need to be clear on the adequacy of investors, the documentation around a deal, and pricing for all parties involved. Jersey security As a matter of Jersey law, security over the contractual right to call for monies from investors into the fund is perfected by way of registration on the Jersey Security Interests Register – a public register maintained in Jersey on which security over, among other things, Jersey contract rights may be registered. The Abraaj case, however, demonstrates why many legal practitioners in Jersey believe that notice of this security should also be given to the underlying investors. In the scenario where a fund releases its investors from their obligations to make good on calls to initiate payments to the fund, notice of that security can make it easier for any claimant bank to utilise the Jersey customary law principle, known as a Pauline Action. That action can be brought before the Royal Court by the claimant bank and, if successful, would mean that the fund’s investors would be required to pay any monies should calls be made on them. Any claimant bank would then be able to enforce its security, which would now have value and enable it to satisfy any loan payments that were in default. While Jersey has a robust and modern security interests law, the origins of Jersey law may continue to play an important role in the developing finance industry in the island into the 21st century. It is vital in an ever increasing and competitive environment that Jersey looks to its origins to supplement decisions handed down by our judges and the laws made by the Government of Jersey, which may be sufficiently flexible to address modern day complexities. Financial professionals across the spectrum in Jersey (trust company practitioners, legal professionals and bankers) must continue to address challenges to Jersey’s finance industry with a collective determination and with an eye on identifying opportunities to distinguish ourselves from competitive jurisdictions. A Pauline Action may be one such distinguishing feature. n

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At Butterfield, we specialise in assembling the best people, products and services to create bespoke financial solutions for wealth management and the financial intermediary market. It is a skill Butterfield has honed over 160 years in banking. Although much has changed over that period of time, our core values, entrepreneurial spirit and unrelenting focus on our clients’ needs, remains at the heart of everything we do.

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THE BAHAMAS • BERMUDA • C AYMAN ISL ANDS • GUERNSEY • JERSEY • SINGAPORE • SWITZERL AND • UNITED KINGDOM Butterfield Bank (Guernsey) Limited (“BBGL”) is licensed and regulated by the Guernsey Financial Services Commission (“GFSC”) under the Banking Supervision (Bailiwick of Guernsey) Law, 1994, The Protection of Investors (Bailiwick of Guernsey) Law, 1987 and the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000, each as amended from time to time. Company Registration No. 21061. BBGL is a participant in the Guernsey Banking Deposit Compensation Scheme. The Scheme offers protection for ‘qualifying deposits’ up to £50,000, subject to certain limitations. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details are available on the Scheme’s website or on request. Butterfield Trust (Guernsey) Limited (“BTGL”) is licensed and regulated by the GFSC under the Regulation of Fiduciaries, Administration Business and Company Directors, etc, (Bailiwick of Guernsey) Law, 2000, as amended. Company registration No 31645. BBGL and BTGL are both registered under the Data Protection (Bailiwick of Guernsey) Law 2017 and are registered for the purposes of The Companies (Guernsey) Law 2008. Their registered office is P.O. Box 25, Regency Court, Glategny Esplanade, St Peter Port, Guernsey GY1 3AP. Butterfield Bank (Jersey) Limited (“BBJL”) is regulated by the Jersey Financial Services Commission to conduct deposit taking business under the Banking Business (Jersey) Law 1991 (as amended), investment business, fund service business and money service business pursuant to the Financial Services (Jersey) Law 1998, (as amended). BBJL is registered under the Data Protection (Jersey) Law, 2018 and is registered with the Jersey Registrar of Companies for the purpose of the Companies (Jersey) Law 1991 (as amended). BBJL’s registered office address is St Paul’s Gate, New Street, St Helier, Jersey JE4 5PU. Company registration number 124784. BBJL is a participant in the Jersey Bank Depositors Compensation Scheme. The Scheme offers protection for eligible deposits of up to £50,000. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details of the Scheme and banking groups covered are available on the States of Jersey website, or on request. BBGL, BTGL and BBJL are wholly-owned subsidiaries of The Bank of N.T. Butterfield & Son Limited. Photo by Lachlan Dempsey on Unsplash.

Why Jersey is the perfect market for fund restructurings


TIM MORGAN Partner, Mourant

Jersey is in an excellent position to assist the growth of increasingly popular general partner-led secondary transactions, thanks to its political and fiscal stability, taxneutral environment and market access


istory has often shown that by-products of a process can, with the right entrepreneurial focus, turn into major business areas in their own right. Think of the transition of Marmite from an unwanted brewer’s by-product into a much-loved national treasure. In the same way, restructurings of troubled ‘zombie funds’ have evolved from being a by-product into, in many cases, a highly dynamic restructuring tool, particularly when combined with support from significant secondary fund investors. There has been a notable rise in the popularity of such general partner (GP)-led restructurings in recent years. Why has Jersey been so well placed for such deals? And why does it continue to be a big growth area in the jurisdiction? Types of GP-led restructurings Several features may form part of GP-led secondary transactions, which are being used by funds: • Fund restructurings typically give investors a choice between rolling their positions into a newly formed successor fund vehicle or realising their position for cash. At the end of 2017, 79% of the limited partners (LPs) surveyed by Preqin completed a GP restructuring and 63% said they were likely to increase their GP restructuring activity in 2018. As part of this, tender offers give LPs the choice between remaining in the fund or selling to a secondary investor. In 2017, 21% of LPs participated in a tender offer. • Direct secondary transactions involve the sale of existing positions in a portfolio, and passing on responsibility of managing those positions to a new GP. Again, in 2017, 79% of LPs surveyed had completed one of these transactions. • A variation can be stapled secondary transactions, which occur when a secondary buyer purchases an interest in an existing fund and invests in a new fund being raised by the GP.

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In the same 2017 survey, 36% of the LPs were involved in a stapled secondary transaction. These transactions can offer both LPs and GPs significant benefits and can provide an effective compromise among investors with different interests. LPs seeking liquidity will take this option, while LPs that wish to retain exposure will be able to roll over and continue with their investment. The extension of the fund and the potential for additional capital may result in better returns on the assets, benefiting those who elect to remain with the GP. Moreover, with new capital and time, the GP may become re-incentivised, allowing for the potential of more capital to be raised and an even greater return on investments. Why Jersey? Often, new funds emerging as follow-on vehicles in a GP-led restructuring will be established in the domicile of their predecessor fund. Given the large number of funds from the early 2000s in Jersey, this promises significant activity around these funds. However, Jersey also offers a number of advantages for transactions relating to funds being restructured from other jurisdictions. The island has all the well understood advantages of political/ fiscal stability and a tax-neutral environment, as well as a well tested market access position for investors inside and outside of the European Union. These all lead to Jersey being a suitable jurisdiction for deals of this type, which when combined with experience of executing complex transactions, together with the Jersey Private Funds (JPF) regime, provides a particularly strong platform for such transactions. ILPA guidance and managing conflicts The growth in popularity in these transactions has led to increased regulatory focus. A recent Institutional Limited Partners Association (ILPA) report set out views as to how these transactions should be managed, including suggested periods for LPs to come to a decision, as well as default options for investors. Although most limited partnership agreements (LPAs) were not designed with the possibility of GP-led secondary transactions in mind, solutions have been found, and restrictive LPAs have not significantly slowed the growth of these transactions. Transparency from the GP during the process is important to ensure the LPs are treated fairly and manage conflicts. Third-party valuations, including fairness opinions, often provide another layer of comfort to LPs, combined with consultation of a limited partner advisory committee, if one exists. With $500bn of net asset value in pre-2008 funds maturing, the option of GP-led restructuring is not only becoming more respectable but also considerably more practical. We should expect GP-led secondaries to become increasingly important in the secondaries market. Jersey is in an excellent position to assist in the growth of these GP-led secondary transactions. n




We have expertise in the administration of both traditional and alternative asset classes with a strong focus on private equity, real assets comprising of real estate, infrastructure and renewable energy, hedge and debt. We also specialise and have built expertise in more niche sectors such as FinTech including crypto and ICOs. We pride ourselves on the relationships we build with our clients, and as an independent, award-winning fund provider, we know we’ll be the perfect partner for you.


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Information on JTC and its applicable regulators can be accessed via


Self-evaluation increasingly critical for CI fund boards



CEO, Altair

Consultant, Altair

In the wake of new substance rules, it’s time for non-listed Channel Islands funds to take their corporate governance to a different level and consider the use of external assessment and advice


or many companies, evaluation of the board has been required for some time. Many UK-listed companies – both trading companies and funds – have to comply (or explain the extent to which they do not) with the requirements of the UK Corporate Governance Code, which highlights that there should be ‘a formal and rigorous annual evaluation of the performance of the board’. For non-listed Channel Islands funds, there is an ongoing requirement under codes of corporate governance. However, a number of factors indicate that the time has come for boards to take this to a different level and consider the use of external assessment and advice. Substance has become the topic of the moment. At its core, it asks that the board shows it is effective in overseeing the business of that entity in the jurisdiction where it is registered. At the same time, we are seeing more examples of investor or other groups making judgements on the decisions of fund boards and the level of perceived governance standards. Indeed, recent examples in the media indicate that perhaps there is some room for improvement. Regulators are also taking more interest in who is on boards, and how they handle the decision-making and recording process.


So, is it time for fund boards to consider an evaluation process? While many boards of funds may be operating effectively, all can improve their performance. There

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are considerable advantages in doing so, particularly if the evaluation is carried out by an independent third party. We see five key benefits from these assessments: • It allows an assessment of the skills needed around the board. Funds may change their strategic direction and performance can fluctuate, so assessing what skills may be needed now and in the future is a worthwhile exercise. A regular skills audit may often be a recommendation that comes out of an evaluation. • There can be a focus on diversity, in the widest sense of the word, encompassing gender, ethnicity and background as well as skills. Diverse boards are often considered to make more effective decisions but, whatever the position, regulators and others are very focused on this area, so it is an issue to address and keep under review. • It provides the opportunity to look at the dynamics around the boardroom table. If you have all the right skills in the room but five people who don’t work well together, then you are likely to have a dysfunctional board. An evaluation enables the dynamics to be assessed. Is the chair a good facilitator in driving discussion or do they dominate? What is the contribution like from members? Do people listen to each other? It is fair to say that the interviews and observations of an external third party are often the most important components of any evaluation. • The evaluation should consider the matters being discussed. Agenda management may sound dull but it is vitally important to effectiveness – is the board discussing the right things, and is it prioritising? • Finally, an evaluation will look at the quality of the management information coming to the board. Non-executive directors in particular depend on the quality of this, and too many boards receive heaps of data and not enough meaningful information. Do the papers highlight the matters on which directors should focus or do they just swamp the board with information? Like all high-performing organisations, fund boards should be actively considering their performance, and the impact this has on the quality of their decisions and ultimately the performance of their fund. From a Channel Islands perspective, this is particularly important given the demands of the new substance rules and the ever greater oversight and scrutiny of regulators. While a high-performing fund board does not necessarily lead to a high-performing net asset value, we assume most boards and investors would not like to take a bet on the reverse also being true. n

HELPING YOU THRIVE IN A CHANGING WORLD • Fund Services We provide fund administration and accounting services across a range of asset classes for both private and institutional clients from multiple jurisdictions. Whether a start up situation or mature fund, we build long-standing relationships with investors and deliver high quality reporting tailored to meet your needs and specific requirements.

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MS Fund Services (Jersey) Limited is regulated by the Jersey Financial Services Commision. Registered office First Island House, Peter Street, St Helier, Jersey, JE2 4SP

A chance to step up


LAURA HAZZARD Director – Listed Funds, Apex Group

In an increasingly complex regulatory environment, fund administrators have the opportunity to add tangible value for their clients by offering a more proactive and tailored service that is attuned to market developments


he Channel Islands have long been an important centre for open and closed-ended funds. As the industry evolves, Jersey and Guernsey remain key jurisdictions for administering funds listed on London Stock Exchange. Europe as a whole has become an increasingly complex regulatory environment and, as such, the role of the fund administrator has been elevated in its importance. Keeping pace with the plethora of governance requirements and new regulations is a must for listed fund boards. Service providers able to support funds in navigating this landscape have substantially enhanced their value. Recent changes to corporate governance codes, together with the intensifying gaze of the investor requiring ever more detailed due diligence and transparency, make an already competitive landscape a complex place to operate. These factors combined highlight the crucial role the fund administrator plays in supporting funds and their boards. To be a competitive partner, administrators must be proactive and attuned to market changes, able to tailor their service offering appropriately as regulation and governance requirements evolve. Cross-jurisdictional compliance The cross-jurisdictional nature of the asset management space means funds are often subject to compliance in a number of jurisdictions. For example, funds domiciled in Jersey and listed on London Stock Exchange must comply with both the Jersey-regulated fund regime as well as the UK rules and governance standards. When it comes to compliance, unlike for other Jersey-domiciled funds, where the administrator

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performs the customer due diligence on investors, a listed fund’s relationship with its investors sits with the receiving agent, registrar and regulated broker. This poses different considerations when monitoring compliance within the Jersey antimoney laundering framework and means compliance officers may have to expand the scope of the fund’s compliance monitoring programme, tailoring it to reflect the specificities of listed funds. The requirements of the UK Corporate Governance Code apply to all companies admitted to the Financial Conduct Authority’s official list with a premium listing. Listed funds generally adopt the Association of Investment Companies (AIC) Code as it is tailored to recognise the fact that corporate governance within the closed-ended investment company space differs from other industries. This is where an administrator can add tangible value, by benchmarking these requirements against existing governance arrangements. As a steward of the board, it can embed those requirements into the fund’s policies and procedures and ensure relevant disclosures are made in the annual report. Increasing shareholder engagement There must also be a focus on increasing shareholder engagement. Market uncertainty, continual changes to the regulatory and governance landscape and the rise of environmental, social and governance (ESG) factors affecting the asset management space, mean engagement with shareholders has never been more important. Boards should be more attuned to shareholder views and sentiment and the increasing demand for transparency. A proactive service provider can provide support by keeping abreast of proxy voting agency policy trends and working with the fund’s advisers to gauge the impact these might have on shareholder voting at general meetings. Knowledge share through leveraging economies of scale is also highly beneficial. Large global administrators with the ability to share their insights into market trends and provide technical input into the preparation of annual report disclosures provide additional comfort to fund boards. They can even assist in drafting policies and establishing board committees designed to address emerging areas of investor interest. Looking forward to 2020 and beyond, administrators will continue to play an increasingly important role in supporting listed fund boards in developing the tools they require to navigate the changing fund landscape and helping them to digest, simplify and adhere to compliance requirements on a local and cross-jurisdictional basis. n




Alexander Forbes Offshore understands that financial well-being is about feeling and being financially healthy and secure during your working life and in retirement. Speak to an experienced financial adviser for advice on your pensions, investments and protection solutions. Telephone: 01534 837 837 | Email: |

Alexander Forbes Channel Islands Limited is regulated by the Jersey Financial Services Commission | Registered Company Number 9596

Onwards to incorporation and implementation


TOM CAREY Partner, Carey Olsen

Incorporating Guernsey Harbours by law could give this key piece of infrastructure in the bailiwick’s economy some much needed commercial agility


n recent months, we have been bombarded by plans relating to the future of Guernsey, its harbour, the economy and the property owned by the States, to name but a few. At the heart of all these plans is the recognition that Guernsey needs to stimulate its economy by developing and modernising its infrastructure and commercialising its property portfolio. I do not disagree with this, but implementation is key and I worry that any attempts to deliver these plans may not be effective if strategy and management are scattered between various committees of the States. Taking the harbour as an example, I want to make the case for a new law to incorporate Guernsey Harbours. I see incorporation as being the best means of implementing the plan to enhance the harbour area and secure its financial future. Nothing new Incorporation is not a new governance and ownership structure for the States to grapple with. Guernsey Electricity and Guernsey Post are incorporated and are independent and successful businesses. They have the ability to respond to threats and opportunities and react to the market in a commercially agile manner. Guernsey Harbours should be able to do the same. This could enhance services for customers, allow the development of the estate and remove the future financial burden to the States. From a financial perspective, the harbour may require a substantial capital investment over the coming years simply to maintain the essential infrastructure needed to enable it to remain secure, open and safe. This is against a background of what I understand are declining business volumes and a cost base that’s rising faster than revenue. Without an

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incorporated harbour, such a shortfall could only be addressed through other measures such as subsidy derived from general taxation or year-on-year increases in harbour dues. Incorporation would enable Guernsey Harbours to build cash reserves that could be used to address any capital investment programme through the delivery of commercial development projects on the estate. These reserves could also be used to provide financial benefits to Guernsey through dividends and taxation. In order to ensure the continued safe operation of the harbour, the law would need to ensure that the company retained its responsibility for the duties that Guernsey Harbours is currently responsible for under existing legislation. Furthermore, so that the company can develop and maximise the returns from what is prime real estate, the property portfolio within the harbour area should be transferred to it. This would also give the company the ability to raise finance to further enhance its commercial activities. Incorporation can cause concern among staff about the security of their jobs, but where incorporation has happened elsewhere, staff have been transferred to the company on identical terms without redundancies. In order to support the many clubs, associations and organisations connected with the harbour, the company would be required to follow best practice in corporate social responsibility, with these clubs continuing to enjoy security of tenure as required notwithstanding incorporation. Safeguards needed Transforming the harbour into a company would represent a significant change in its operation, so safeguards in the law would need to be put in place, including: 100% States ownership, with the power to take control when it is in the national interest; a memorandum of understanding between the States and the board of directors to provide clarity on the governance and operation of the company; and the production of a business plan, an annual set of accounts and an annual general meeting, to which deputies could be invited. Incorporation of ports is not a new concept. Across the world it is the norm, and the evidence is that incorporated ports, led by experienced boards and executive teams, provide improved social and economic returns in the area of their operation. I hope that the States of Guernsey gives serious consideration to the benefits that the incorporation of Guernsey Harbours could bring to our community. n

Goodbye Active Optimus. Hello Aspida With the merger completed, of the respective Active and Optimus Groups, it’s time for a new look, and new vision for the group. The group has chosen a brand name evocative of the services and solutions it provides to clients globally. Aspida, a Greek word for ‘shield’, was chosen (after consultation with staff and other stakeholders) to reflect the protective and defensive element of the work the group does, and the solutions it provides in Compliance and Risk Management, Board Advisory and Hosted Services. The logo is similarly a classic shield design, with a shade of green was chosen to reflect growth, with the strapline of the brand clearly setting out the ethos of the relationship it strives to have with clients – ‘your partner in protecting and growing your business’. The vision and ambition of Aspida Group is to be the leading support and advisory service to global

business, offering robust yet innovative solutions to support growth, whilst helping to mitigate and manage risk. And the group is well placed to achieve that vision, given their unique ability to provide clients with a one stop advisor for businesses not only looking to establish in the CI and Malta but also a number of other offshore jurisdictions worldwide.

For an informal discussion about any the services offered by Aspida Group please do not hesitate to contact us.

Your partner in protecting and growing your business +44 (0) 1481 741900

1st Floor, Tudor House, Le Bordage, St Peter Port, Guernsey GY1 1DB

PLEASE REMEMBER THE VALUE OF INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU MAY GET BACK LESS THAN YOUR ORIGINAL INVESTMENT. Barclays offers private and overseas banking, credit and investment solutions to its clients through Barclays Bank PLC and its subsidiary companies. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 122702) and is a member of the London Stock Exchange and NEX. Registered in England. Registered No. 1026167. Registered Office: 1 Churchill Place, London E14 5HP. Barclays Bank PLC, Jersey Branch is regulated by the Jersey Financial Services Commission. Barclays Bank PLC, Jersey Branch is regulated by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended. Barclays Bank PLC, Jersey Branch has its

Our investment experts get under the surface of your business Our on-island experts use their local knowledge to deliver the personal service your business needs. Our global presence can bring scale and flexibility to your strategy, and grow your network along the way. Find out more about our offering at

principal business address in Jersey at 13 Library Place, St Helier, Jersey JE4 8NE, Channel Islands. Barclays Bank PLC, Isle of Man Branch is licensed by the Isle of Man Financial Services Authority. 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 Bank PLC, 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 Bank PLC, Guernsey Branch has its principal place of business at Le Marchant House, St Peter Port, Guernsey, GY1 3BE. Created September 2019. BD08862-01.

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Driving performance why liquidity and capital management matters

Getting your treasury policy right, then executing it well, is essential to underpinning successful business practice. Three Barclays Investment Advisers from the Crown Dependencies discuss why liquidity and capital management is key to driving performance Nick Carpentier What are the main challenges around liquidity and capital management? Andy Maxwell: Interest rates on cash are negligible at best and penal at worst. Institutions are (for certain currencies) charging you to hold cash on their balance sheet now as costs are rising and yields continue to fall. Typically, to manage liquidity, our clients will look at cash or cash-like instruments, such as short-dated bonds and Money Market Funds. In a world of falling interest rates that yield well below inflation (which is one of the side effects of quantitative easing as the central banks hoover up debt issuance), there’s not a lot of yield to play with any more. To manage your liquidity and longer term capital, you need a policy in place that determines the company’s appetite and objectives. You can’t just sit on cash any more because the risk and returns don’t work in the same way they used to. Pete Downey: Yes, so in terms of market dynamics, if you’re holding assets, particularly cash, and you’re not managing risk, realistically what you’re seeing is a fall in returns that affects performance. For longer term capital management, this becomes even more critical as the yield dictates limited returns even out past 10 years. Determining how to blend risks across capital protection, credit/ counterparty, access/liquidity and price volatility will determine the most sensible policy for our clients’ business.

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Are clients awake to the opportunities and risks around liquidity and capital management? Nick Carpentier: For shorter term holdings, clients remain fixated on having cash to hand, but this is rotating. Its utility value is seen more as a tool to support trading activities than as something that could help to enhance overall returns or manage risk. Andy: It’s a historic position, but clients are waking up to the effects that zero return can have, especially while inflation continues to erode. We advocate having an appropriate policy in place and monitoring its effectiveness. We live in extraordinary times, so to continue effectively managing your business’s short-term and long-term cash flow is imperative. Pete: That’s right. Ignorance to risks can have catastrophic consequences, but all too often the default position can be, ‘well let’s keep everything liquid in the event of a rainy day’. But the reality is that rainy days come along less often than you might expect – look at global GDP growth over time as an example! If clients undertook analysis on their existing assets and their liquidity requirement, they’d probably find that they can consciously make their holdings work much harder. And, of course, whether it’s a term deposit with a bank, buying an equity or a bond, it’s time in the market as opposed to timing the market that we would advocate.

Peter Downey

Andy Maxwell So, how can Barclays help clients address these challenges? Andy: Access to the wider Barclays Group is invaluable when we’re helping to implement a treasury and investment policy, so we can bring in specialists to optimise the risk management and returns across asset classes. A common demand will be to ensure we are helping with liquidity management on both sides of the balance sheet and, as a bank, this is an area where we’re very strong. The ability to construct an end-to-end liquidity profile solution that spans both banking and investments makes a real difference.

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Pete: It’s central to our proactive approach with clients, offering a holistic rather than a silo solution, which looks at the length and breadth of a company as opposed to just one individual item on the financial statement. Nick: On a practical level, the range of products and the risk modelling tools at our disposal to help clients see what the potential outcomes of a decision are, even if that decision is to do nothing, makes a real difference. In terms of those products and solutions, is innovation important for your clients? Pete: It’s really important. As we’ve seen the market and regulation change over the last 10 years, being innovative around how we pick and blend specific solutions that will perform across various scenarios, and how we support all the elements that surround this, is critical. It’s important not to overstep the mark, however; innovation that leads to little more than complexity isn’t beneficial. It’s important to know our client and mirror their need. Nick: I agree. Innovation is important, providing it actually meets a need, rather than just simply the next shinier, brighter solution. Investment in our platform, developing risk management tools and structuring solutions – including everything from simple onboarding, reporting and specialist support – have been particularly beneficial for clients. Andy: Innovating to provide solutions to clients that solve problems they may have

We live in extraordinary times, so to continue effectively managing your business’s shortterm and long-term cash flow is imperative

thought were unsolvable is absolutely essential. The Barclays platform is a great example of us investing in infrastructure that will make it even easier for clients to manage their liquidity and capital in one place, by allowing them to have greater visibility and control in a defined risk framework. Coupled with personal support from specialists who are experts in the industry, we think that the client outcomes are excellent.

What factors of liquidity management can be a driver of performance? Nick: You can’t beat the yield curve without managing alternatives to cash, so we advise clients to look at certain parts of their holdings, then look to apportion them dependent on their eventual requirements. You may have very short-term cash holdings that are your working capital. You may have other funds assigned for expenditure six to 12 months down the line. And then you may have assets you’ve never dipped into for the last five years or more. A first step is to understand the holdings and capacity/tolerance for risk in each area. From here, it’s working with your investment specialist to determine whether it could work harder. Andy: Our breadth of offering means we have an investment suite that’s capable of providing solutions for clients with different objectives; we can look to build out short-term liquidity or capital management solutions that target returns, for example. That’s where the advisers come in, providing professional advice and making sure that it’s the right product for a client, not just the right return. n Please remember that the value of investments can go down as well as up, and you may get back less than your original investment.

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Since taking over as Director General of the Jersey Financial Services Commission earlier this year, Martin Moloney has been in listening mode. Now, he’s ready to engage with the island’s financial services community in a mutually constructive way – He calls it ‘smart regulation’ Words: Eila Madden Photos: John Liot amount of transactions going on, but we try to find ways to encourage and support industry to do a high-quality job.

What appealed to you about being a public servant versus working in the private sector? I hope it doesn’t sound in any way pompous, but there is something about working for everyone, for the community at large, that is quite assuring. The work is also really challenging because, by contrast with a lot of private sector roles, in the public sector you are asked to do a lot of different things and combine them together, so you get involved in many different types of work and build up a lot of different skills. For example, my original university course was in history and philosophy but I ended up subsequently studying law and economics as part of my personal development. That was essential for the kind of complex work you do as a regulator.

On your appointment, your vision was for a public-service based, technologically ambitious and team-focused approach to financial regulation. Why did you want to focus on these areas in particular? We all have to recognise that organisations

You joined the Jersey Financial Services Commission (JFSC) earlier this year. In a nutshell, could you describe what the JFSC does? Putting it very simply, we try to make sure that financial firms don’t fall into low standards of behaviour. We check the quality of what financial services firms do and make sure their standards are high. We can’t, of course, guarantee high standards; it’s a very complex industry and there is a huge

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What excited you about the opportunity to come to oversee regulation in Jersey – a much smaller jurisdiction than Ireland? My last role actually was very global in character, but it was also a very focused role in the sense that I specialised in liquidity and innovation and how regulators should deal with those issues. This job is very diverse in terms of the themes I have to deal with and, although it’s a smaller jurisdiction, Jersey has a really strong reputation for solid regulation. I’ve been very excited and motivated by the trust and responsibility I’ve been given – that trust focuses the mind and really makes you determined to do your best for the people who’ve placed that trust in you.

If the regulator doesn’t keep up with fintech, even get ahead of it, then the quality of regulation will fall and that’s something we need to call out

have become really complex internally and co-ordinating people within organisations has become a key challenge. We all have to be more aware and have more conversations and discussions inside organisations about how we do things. This feeds into the agenda of inclusion and diversity – which is an issue I’m very keen about because organisations need to be able to ensure that their teams are working efficiently. I strongly feel that when teams work well together, they massively outperform less well functioning teams. So anything you can do in an organisation to focus on that – and get people to be aware of the things they do, often by accident, that exclude people and/or underuse people’s abilities – is really important in terms of us delivering as a regulator and being cost-effective. The second aspect you mentioned, which is important, is that everyone can see all around them the growth of fintech and the changing significance of technology in the financial services sector. If the regulator doesn’t keep up with that, and doesn’t even get ahead of it, then the quality of regulation will fall and that’s something we need to call out very clearly as a regulator. Do you feel you’ve been able to make progress in achieving that vision? The JFSC is performing really well in a very challenging environment, and the pace of change that the organisation is facing is really intense. What I have started to do here is have discussions and assessments around where we need to go in order to be able to respond well to that pace of change. So, yes, I would say we’ve made great progress. What’s driving that intense pace of change? First, I’ve already mentioned the technology. Second, we are still dealing with a lot of the consequences from the financial crisis; a huge raft of new regulations has been brought in, but our ability to effectively supervise industry compliance with those obligations is something we still need to work on and get really good at. We’re also living in an increasingly

What’s your background and how did you get to where you are now? My father and grandfather worked in banking, so banking was in my blood as a young man. I started my career in the private sector, working in banking in London, but I got an offer of a job in the Irish civil service and it was quite a hard choice to make because it involved cutting my salary in half and moving back to Ireland. I decided to go back and it was at that point that I realised that I was naturally a public servant. I have spent most of my career since trying to build my capacity as a professional public servant and that’s very much what I see myself as. I worked for a long time in the Irish Department of Finance and then in Ireland’s financial regulator. I am very much a regulator’s regulator at this point.



interview Martin Moloney

November 2019 -January 2020 29


We don’t know when a storm is coming and we don’t know what its character will be, but now is the time to invest and prepare rather than wait for it to hit us

The external environment is increasingly risky in that regard. We have a good record of making sure that we are among the best in the world at this.

What’s your strategy for tackling these kinds of challenges? We’re in the middle of a very intense debate internally around that. We will be announcing our strategy at the beginning of next year and we want to have really strong engagement internally, talk to industry in advance of that and get what we want on board in terms of support for our approach.

Which aspects of financial crime are you particularly concerned about? Financial grooming is a big concern, but there are other areas – around money laundering, in particular – where, I’m glad to say, Jersey’s record is really strong. But the way in which people attempt to do money laundering is constantly changing and we have to be assured that we have the systems to keep up with those changes. For example, we have to make sure Jersey is well placed to deal with risks such as cybercrime.

Where can we expect the JFSC to focus its efforts during the next period? As an organisation, we have to ensure that we are resilient and that we can deal with change. We have to ensure that we have the organisational and financial strength we need to do our job. Money spent on financial regulation from the point of view of Jersey is money well invested because the financial sector is so important for the island. So that is definitely going to be an important feature for the next period. The quality of supervision and making sure we’re able to supervise an increasingly technological environment will be another priority for next year. The third aspect is the importance of pivoting to a focus on the quality of our controls here in Jersey against financial crime.

How widespread is financial grooming within Jersey and how is the JFSC helping to tackle it? The cases I’ve come across are, frankly, deeply disturbing. You often see elderly people whose savings have been taken and, unlike younger people, they haven’t got the capacity to go back into the workforce and rebuild their financial position. So the harm that has been done will stay with them for the rest of their lives. Preying on the vulnerable is a really obnoxious and objectionable type of crime; we need to talk about it and raise awareness. There is a problem, however, which I want to recognise up front. Financial services regulation is not designed to protect people against this type of financial crime. One thing people should not do

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You’ve called for the establishment of an investor compensation scheme, but are you disappointed that industry hasn’t really engaged with the idea? If I was working in industry, I would be cautious about this and would want to know what it actually means for me. That’s fair enough. But it’s important for us to be honest and tell Jersey the truth. From where we sit as the regulator, it’s not a great idea that Jersey does not have an investor compensation scheme. If you look at the way the investment business is going, with increasing amounts online, you don’t want to get yourself into a position as a sector where you are uncompetitive compared with online services. One thing that might really damage people’s faith in the local industry is exactly the kinds of behaviours that we’ve just been talking about. So the Jersey financial services sector, particularly the investment advisers, should think carefully about the possible merits and benefits for themselves of a well-proportioned and not overly costly but well-structured investment compensation scheme. How would you assess the health of the JFSC’s relationship with the financial services community on the island? I have certainly found that the local industry is up for engagement, conversation and for reviewing and testing where we are in relation to various issues. There are

uncertain world. The way I think about that is we don’t know when a storm is coming and we don’t know what its character will be, but now is the time to invest and prepare for that rather than wait for it to hit us.

is assume that they are safe because a financial adviser comes from a firm with a licence from the JFSC. The vast majority of advisers we authorise are entirely honest and decent people doing a good job. But occasionally someone can get through the system through lies and deception and they can do huge harm unless people are really aware of the risks. People are the best guardians of their own money, so they need to be aware of these risks and we will do anything we can to help raise that awareness.


Inn vative We understand funds. Ogier’s specialists have been at the forefront of fund set-up, structuring and finance since the inception of the industry with many actively involved in drafting the key laws that underpin fund structures across our international jurisdictions. We act for investment fund managers, banks, financial institutions, funds, investors and promoters, working with blue chip clients with established track records and the most innovative and entrepreneurial new sponsors entering the market. We pride ourselves on providing responsive and practical advice, while our hands-on, partner-led teams ensure a consistent approach.

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November 2019 -January 2020 31


FACT FILE Name: Martin Moloney Age: Never ask a regulator their age! Position: Director General, Jersey Financial Services Commission Home town: Dublin First job: Working in my grandmother’s newsagent Family: Married with children Hobbies: Loves walking, likes not running Did you know: I still play the 1990s Sega game Dr Robotnik’s Mean Bean Machine

a number of initiatives under way around trying to ensure that industry’s voice gets heard within the JFSC. It’s very important to the style of regulation that we do here in Jersey that we listen very carefully to the messages coming from industry. We have to form our own judgement in the end, but it has to be an informed judgement. Do you think that the JFSC hasn’t perhaps listened as closely to industry as it should have in the past? I think you have to constantly renew what you’re doing. You may have established mechanisms for consultation with industry, but you always have to go back and ask, particularly when a new person comes on board, how well is that working? Styles change over time, too. My style is very much to say that my door is open. I have turned down very few invitations from industry to meet or talk to them – I’m

One of the most important skills when you join an organisation in my position is the ability to listen. to listen carefully, take notes, reflect on them

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very open to those kind of discussions. One of the most important skills when you join an organisation in my position is the ability to listen. To listen carefully, take notes, take them away, reflect on them, and try to build a picture of everything you hear in order to keep being agile in responding to the changing environment. You’ve talked about using ‘smart regulation’ to maintain and protect Jersey’s reputation as a well-regulated jurisdiction. What is smart regulation? It’s about us all seeing our mutual dependence on each other here in Jersey. There’s always a temptation in all walks of life to see our own interests narrowly, but if we can see our interests broadly, we will usually do better. Jersey is a tight-knit community. It potentially has a competitive advantage compared with larger jurisdictions if we can turn those tight-knit relationships into a smart approach for achieving high-quality and efficient regulation. It’s a bit like a football team. If the people who are off the ball are constantly paying attention to how they can help the person who has the ball, then that’s a wellformed football team and they will work well together. Similarly, if I can make my problems as a regulator industry’s problems, and if I can take on some of the burden of helping industry with its problems, then Jersey becomes a distinctive location with a distinctive culture and a distinctive competitive advantage. I don’t pretend that that’s easy. Naturally, we all tend to look at things from our own point of view and it’s hard to actually share the other person’s point of view to figure out a solution that works for everybody. How can you help Jersey’s financial services community move towards that approach? The cost of compliance for businesses has risen over recent years. I’m happy to put that issue on the table and to try and help industry to control those costs.

But, by the same token, if I’m finding that there are weaknesses in the quality of outcomes that are being delivered by financial services firms in terms of their compliance, risk management and the quality of the services they provide to their customers, I would hope that industry would not see that just as a problem that I have to deal with, but a problem that they have to deal with too. Are you getting much enthusiasm from industry for the greater collaboration and co-operation you’re talking about? They get it in principle. In practice, we all are subject to constraints: various legal obligations that I have to meet and various budgetary controls and commercial pressures that they have to meet. So I don’t want to be naïve about this and suggest this is all easy. It’s not. But in principle, I think people are encouraged and enthused by being willing to put those issues on the table, discuss them and see what progress we can make. Your predecessor stepped down for reasons of stress and risk of burnout – an issue he was very open about. In light of this, going forward, how does the JFSC plan to help employees deal with these pressures? It’s a really important issue and it is definitely something where we have a very active approach to supporting our staff through an employee assistance programme and a stress and wellbeing policy. But one of the things that has struck me since I came to the JFSC is that the staff here are a caring bunch. There’s a lot of laughter around the office. People get on well together. If they see each other having problems, they rush to help and that’s one of the great things about coming to work here. It’s a really positive culture in this organisation, where there’s recognition that people sometimes can have problems and we need to help each other. If the organisation is supportive, then that really matters to people. How do you personally handle the pressures of the job? When I was a young man, one of my first jobs was a very high-pressured, time-limited job and I learnt a few techniques in terms of maintaining calm under stress back then. I also had the experience of going through the financial crisis in Ireland, which was one of the worst financial crises that any country experienced and that was quite a stressful period. So if you’ve had past experiences that have been quite stressful, you can reflect on how you deal with that. I also find that a good walk in the fresh air always helps. I get to walk past the bay and Elizabeth Castle on my way to and from the office and that’s quite a calming experience. n

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3926 BL Global Funds Ad ARTWORK.indd 1

16/10/2019 10:09

Advertising feature What are you looking forward to in 2020? Jacob: Next year, we’re looking to continue to build a better company for clients and employees alike. That means a company that uses technology to its best effect and marries that with spending more time with our clients to understand what they want. Marie: The technology that we’ve invested in is starting to change the way we work, so I’m excited to see how that’s going to continue to evolve in 2020 and beyond. We want business partners on the islands and further afield to recognise that our people offer so much more, such as truly bespoke private wealth, fund and corporate services.

as it continues to progress into an exciting future

(L-r): Jacob Smed, Marie McNeela and Shankar Iyer

Intertrust’s recent acquisition of Viteos, a provider of leading-edge technology solutions, points to how firms are reacting to clients’ demand for sophisticated, technology-led products and services. Here, Intertrust’s Guernsey and Jersey Managing Directors, Marie McNeela and Jacob Smed, discuss how the Channel Islands fit into the firm’s new overall vision, which places technology at the heart of its business. They’re joined by Shankar Iyer, founder of Viteos and now Intertrust’s Chief Solutions Officer, who outlines how Viteos will enable the firm to forge into the future

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How central is technology at Intertrust? Marie: It’s absolutely crucial to everything we do. We realise that we can offer more nimble and creative solutions to our clients, and technology is going to enable us to do that. It is fundamental to our adaptation to the future business environment and connects us to our clients and colleagues around the world. Jacob: The finance industry has moved very little in the past 10 years and now there’s a chance for a progressive company like Intertrust to stand up and say, loudly and proudly, that we have an ambition to be a business that services its clients more efficiently through technology. Why did Intertrust acquire Viteos? Marie: We’ve worked with Shankar and the team at Viteos for a long time, so we knew that we were getting a quality provider of a quality solution. The combination of both businesses enables us to overhaul our technological offering and enables Viteos to expand its knowledge of our other service lines, such as private wealth and corporate services. The unified company will have a greater global presence than ever before, too. Jacob: The acquisition of Viteos will ultimately make our employees more effective and efficient, which in turn benefits our clients. It makes us an interesting place to work, where you can learn new skills and dedicate yourself to your development and client services. Not many financial services firms can offer that level of time and autonomy. Shankar: In our initial discussions with Intertrust, one of the things that kept coming up was the importance of timely filing and regulatory reporting. In the North American market, regulatory reporting has become an important aspect of fund services and, of course, that’s also true for financial services around the world. Typically, businesses would engage their existing funds services provider, but we changed the paradigm as firms started to approach us, as a third party, because of our platform. Intertrust wanted that consistent, quality approach across its service lines and that was one of the reasons the link-up made so much sense. What does Viteos do? Shankar: When we first developed Viteos, we set out to view the operational side of funds administration through a technological lens.

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Our focus on tech is really going to revolutionise the way we work and the way we service our clients

We removed as many manual operations as possible to increase efficiency and this means that day-to-day tasks, such as reporting to clients, calculating returns, the middle-office function and working out net asset value, are all going to be technologically driven. Viteos automates workloads, frees up employee time to do more review and control functions and is a great value to clients, who will receive information about their structure, entities and investments in a more timely and accurate fashion. Marie: One of the really exciting things about Viteos is how it will enable us to service our clients when they’re on the go, through the client interface. Client service has changed as they are more mobile, expect to receive responses and information almost instantly and their provider needs to be able to meet their demands easily and quickly. Viteos is certain to help us achieve that through its bespoke reporting and client interface. How will Viteos allow Intertrust to stand out in the islands and around the world? Jacob: The acquisition sends a clear signal that technology is a central part of Intertrust’s vision. The senior leadership team here has put being a tech-enabled company on the agenda and that’s how we’re all being encouraged to think and talk about Intertrust. We have a change mindset and that is going to become a differentiator in the market for us. Marie: Something that’s high on the global agenda is the importance of compliance and regulatory reporting. The automation offered by Viteos also provides greater risk mitigation for Intertrust worldwide. The Channel Islands are at the forefront of international regulatory standards and Viteos will help our team to continue to meet these high standards. Shankar: Everyone in financial services knows the Channel Islands’ reputation for complying with regulations and meeting transparency standards. However, these things are only becoming more rigid, wide-

reaching and time-intensive, and reporting therefore absolutely has to be accurate. Automated inputting of information and production of reports will minimise the risks inherent in manual inputting – which is great for Intertrust in the islands and globally. Viteos was built for US hedge fund administrators; how will it adapt to the Channel Islands’ funds environments? Marie: The Channel Islands have longestablished funds expertise and that has led to the development of bespoke products such as Private Investment Funds (PIFs). The nature of the Viteos offering means we will be able to adapt our platform and reporting to meet the requirements of all types of fund products. We will be working to make sure that the platform meets our administrators’ and clients’ bespoke needs. Shankar: Viteos is all about collecting, aggregating and processing data from different sources in order to file returns and reports in a timely fashion. That principle is applicable across jurisdictions and across service lines, so we’re looking forward to training our Channel Islands colleagues on the platform’s capabilities and building further technological solutions to the challenges they face in their day-to-day work. Are you positive about the future for Intertrust in the Channel Islands? Marie: Absolutely. Our focus on tech is really going to revolutionise the way we work and the way we service our clients. Viteos will enable us to ask our clients what they want and meet that need in a smarter, more comprehensive way than ever before – and that’s hugely exciting. Jacob: We already have an excellent workforce and our technological advances represent our next evolution and will enable our employees to put even more focus on client service, which is why many of them got into this industry in the first place. n


If you would like any further information on Viteos solutions or any of the services provided by Intertrust, please contact: Marie McNeela, Managing Director, Intertrust Guernsey T: +44 1481 211275 E: Jacob Smed, Managing Director, Intertrust Jersey T: +44 1534 504300 E: Information correct as of October 2019. For disclaimer and legal messages, please visit the Intertrust Group website at

November 2019 -January 2020 35

Start-up funds

Home sweethome

Small, newly established funds in search of a well-regulated home offer a growing business opportunity for Channel Islands corporate services firms. But they need to take it before competitor jurisdictions catch up

Words: Richard Willsher

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TRADITIONALLY, START-UP funds have often been domiciled in Caribbean jurisdictions such as the British Virgin Islands and the Cayman Islands. This has been largely down to their light-touch regulatory regimes and low-cost structures. But this has changed over the past couple of years as market demand has shifted. With scandals such as the Panama Papers shining a public spotlight firmly on the morals of the wealthy, private investors are looking to place their money in well-regulated jurisdictions. ‘Start-up funds’, which tend to cater for this market, are typically those that are established by new, first-time managers or promoters who have not established a fund before. Start-up managers have usually had a background with an established investment bank or fund manager and have now decided to go it alone or with former colleagues.

Start-up funds

DIFFERENT FOCUS Tony Gardner-Hillman, founder of Gardner Hillman, a specialist provider of tailored solutions to the funds industry, agrees. “Established fund administrators in the Channel Islands have tended towards a commoditised product, delivered by a systems-driven focus on collating and reporting in the ‘pure admin’ style,” he says. “Their investment in systems and the low margins on the work they chase necessitate volume and growth in headcount in the collating and reporting roles. If they offer governance, it tends to be an add-on to help them win the pure admin and to facilitate their own compliance obligations. “There’s an opportunity for newcomers to fund administration, specifically private wealth management businesses, to focus on substance in governance as their bespoke core service – high-level management functions delivering tailored solutions – and farm out the pure admin to established providers or develop that as their add-on.” The demand from private investors, family offices and private wealth in general

There’s an opportunity for newcomers to fund administration, specifically private wealth management, to focus on substance in governance as their bespoke core service

is understandable. A low interest rate environment, a massively and restrictingly regulated mainstream fund and wealth management sector, as well as loss of reputation across swathes of the financial services sector over the past decade, all play their part. There is a willingness and desire for one-off investment opportunities, especially in alternatives. Closer relations with wealth managers and funds may promise less risk and greater attention to investors’ needs. Smaller, energetic, ambitious start-up funds can meet such demands. Yet at the same time, jurisdiction plays an important role, explains Chet Pohl, Counsel at law firm Appleby. Whereas the perceived low-cost, light-touch regulation offered by Caribbean jurisdictions has been attractive, investors are now looking for other things. “Guernsey has numerous factors which make it successful in attracting new funds,” says Pohl. “It’s in the same time zone as the UK. It is in close proximity to London. It offers promoters and managers high-quality legal, accounting and administration services. “The regulator is relatively pragmatic and is willing to meet with new promoters to guide them from the outset. There is a robust, but practical, regulatory and legal landscape. This provides investors with comfort that there is a level of protection afforded to them by virtue of the oversight of funds by the regulator. “Yet, at the same time, there’s enough flexibility to enable fund promoters to get the funds set up easily.” The same can be said of Jersey. And, as Walker’s Reed points out, it’s not that the islands are missing out on start-up fund

November 2019 -January 2020 37

Christopher Reed, a Group Partner at law firm Walkers, notes that first-time promoters will typically have a cornerstone investor in mind, or at least a particular type of investor they will target. “Having this investor on board may be key to being able to attract other investors where the fund manager has no prior track record,” he says. As new kids on the fund management block, start-up funds need support to establish themselves. This requires a highly tailored service, explains Robert Ayliffe, Executive Director of Jersey-based Fiduchi, an independent fund administrator that specialises in working with start-ups. “The start-up fund does not typically have that much cash for working capital,” says Ayliffe. “They’ll be looking to do things as effectively and efficiently as possible. The price of the services they need has to be kept as low as possible and they probably need a bit more handholding. They may not be familiar with technicalities of regulation and what you need to do to get a fund launched.” Herein lies the challenge, and the opportunity, for firms that supply fund administration services. Ayliffe notes that small start-up funds may fall below the cut-off size of funds preferred by larger administrators. “A lot of big providers will struggle to provide a commercial proposition to some start-up managers,” says Ayliffe. “They may have de minimis levels in terms of the size of the funds they administer – maybe £100m plus – before it becomes commercially viable for them. Senior people will be busy on their existing books of business and less able to provide the hand-holding to start-up managers.”

Start-up funds

the number and type of investors,” he says. “Whilst at the Guernsey Financial Services Commission, I created the Private Investment Fund, which redefined the concept of private investor to one who could bear the loss of this investment.”


Over the last five years, Guernsey and Jersey have sought to attract sensible, good-quality start-ups through regulatory products that have a private feel to them

business but that there is still plenty of room for growth. “The 2017 introduction of the Jersey Private Fund (JPF) regime, which is targeted at groups of less than 50 professional and sophisticated investors, is persuasive,” he says. “The JPF regime has proved to be attractive to not only first-time fund promoters but also to experienced institutional investors and sovereign wealth funds. The stats show that the JPF has had a positive impact and has been a popular addition to Jersey’s funds products. “The most recent figures from Jersey Finance show a 25% increase in the

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number of JPFs over the last six months, with a current total of £43bn assets under management. That is an impressive increase and reflects the global standing of Jersey as an investment funds jurisdiction of choice and the JPF as an attractive investment fund product. The Guernsey Private Fund regime has been a similar success story.” EY’s Mark Le Page, a former Deputy Director at the Guernsey Financial Services Commission, agrees. “Over the last five years, Guernsey and Jersey have both sought to attract sensible, good-quality start-ups through regulatory products that have a private feel to them, insofar as there are requirements limiting

In such an environment, start-up funds look set to prosper. A higher number of smaller, perhaps independent, service providers would probably increase the islands’ capacity to handle more start-ups and their reach can be global. In the wake of the Panama Papers, the Caribbean jurisdictions may lose out. Meanwhile, although centres such as Dublin and Luxembourg may be obvious competitors, unless investors are European, fund managers have no need to be subject to EU regulation – which some argue is excessive. “That’s where Jersey has a lot to offer,” says Fiduchi’s Ayliffe. “Longer term, Singapore may become a more competitive jurisdiction, especially to service Asian investors. They are starting to develop new fund products but it is an embryonic industry there. “Africa is also a source of business. I see a lot of business coming out of Africa and the Middle East. It may be, years hence, that Jersey becomes the EMEA hub and Singapore becomes the Asian hub. Jersey is open for smaller funds and there is a growth opportunity there,” he concludes. All in all, both Guernsey and Jersey look set to benefit from growth trends in wealth management and in the drive for entrepreneurial fund managers to strike out on their own. It is still early days in many respects and the islands have plenty of scope to develop their start-up fund services offerings before competing jurisdictions develop their capabilities. n


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Why manager selection is crucial in private markets UBS Wealth Management Jersey Director and Senior Client Advisor Paul Raphael highlights the importance of manager selection when investing in private markets

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WHAT ARE PRIVATE MARKETS? ‘Private markets’ is a broad term for the range of strategies focused on illiquid investments that do not trade on public exchanges. Examples of these underlying investments include: a stake in a start-up company; non-traded senior debt buildings; and rental properties. Investing in these types of assets requires a different approach and skill set compared with public markets investing. There is no continuous market or pricing for these assets, there is limited availability of relevant information for each asset, and transactions require time to negotiate and execute.

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in driving outperformance. The best private equity fund managers bring expertise, not just capital, to benefit their portfolio companies and drive returns.


Yet these challenges and inefficiencies are precisely what make the opportunity set compelling. The potential for mispricing exists because many investors do not have the necessary time or information available to evaluate, invest in and help realise the potential intrinsic value of these assets. Instead, private markets investments are primarily the domain of professional third-party private fund managers who are trained to make these investments on behalf of others. These managers raise locked-up pools of capital from institutions and individuals, which gives them the time and flexibility to source and assemble a portfolio of these illiquid investments and work with them to realise their potential.

Private equity fund portfolios differ significantly from one another because they each own a completely different set of companies. In buyout and growth, typically only one fund owns a stake in a specific private company. Venture funds will participate in financing rounds together with peers, but their aggregate portfolios are still quite distinct. This contrasts with public markets where many investors can own shares of a given company, and mutual fund portfolios are often similar in composition and performance. Individual private equity funds are each distinct, with a unique set of portfolio companies, hence overall performance is expected to vary widely. Because individual private equity funds can generate a wide range of performances, investors allocating to private equity must pick and manage funds carefully. Their returns may depend significantly on the set of funds chosen and their relative strategy weightings. Strong capabilities in manager due diligence and selection skills can improve the odds of constructing a portfolio of top-performing managers. Without these capabilities, investors could receive quite different performance than was expected when allocating to private equity. n

The best private equity fund managers bring expertise, not just capital, to benefit their portfolio companies and drive returns

WHY USE A FUND MANAGER? Unlike in public markets, where the target opportunity set is defined by what is listed, private equity fund managers must actively source potential investments, as there are no centralised databases offering information or opportunities. Some investments arise as a result of auction processes run by investment banks, but most are sourced directly by fund managers through their networks, research and active outreach. Managers’ ability to source investments is a differentiator that can be instrumental


UBS Wealth Management in Jersey has significant experience in private markets and can provide investors with selective access to some of the top-tier managers in this asset class. This level of expertise and support is essential when navigating this challenging yet potentially rewarding investment strategy. For more information, please contact: Paul Raphael, Senior Client Advisor, UBS AG, Jersey Branch 1, IFC St Helier, Jersey JE2 3BX T: +44 1534 701107 E:

© UBS AG, Jersey Branch is authorised and regulated by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. UBS AG, Jersey Branch is a branch of UBS AG (a public company limited by shares, incorporated in Switzerland whose registered offices are at Aeschenvorstadt 1, CH-4051, Basel and Bahnhofstrasse 45, CH-8001 Zurich) with its principal place of business at 1 IFC, St Helier, Jersey JE2 3BX. Terms and Conditions are available upon request. © UBS 2019. All rights reserved.

November 2019 -January 2020 41


From investor demand to public opinion to policy developments, the funds sector is having to juggle multiple influences as it seeks to build robust ESG frameworks for a more ethical era of investing Words: Dr Desné Masie

How ESG is shaping the


arising from inequality, climate change and migration is beginning to affect the sustainability of the business environment to degrees too significant to continue to ignore. To mitigate the impact of instability on investment returns and economic growth, environmental, social and governance (ESG) factors are increasingly being taken into consideration by institutional and private investors in alternative and vanilla funds. Demand for ESG investing is being further reinforced by the realisation that responsible capital presents a tangible way to address global sustainability concerns while also producing more robust longterm investment returns. Not only does this reconfiguration of attitudes to capital present challenges and opportunities for the Channel Islands funds industry, but it is also ultimately changing the way that funds are structured, administered and managed. “This shift is undoubtedly being driven by global macro trends,” says David McNay, Director and Head of Funds at Zedra Guernsey. “Society in general is moving much more towards impact investing. Consumers are driving the shift in businesses, and people are more comfortable working in businesses that are sustainable. We are keenly aware of

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ESG as part of what we look for when we are setting up a structure or an investment solution now, as these strategies also provide a good investment return over the long term. [Launching an ESG solution] is absolutely part of our conversation.” Kevin Smith, Director at Estera International Fund Managers (Guernsey), echoes this: “The [funds] business is changing, and it is changing very rapidly. 2018 was a big catalyst point for many things – particularly green issues, compounded by the Attenborough effect and the Greta effect – all coming together in the ESG space.” Professional services providers and administrators are already beginning to see more due diligence questions on ESG coming from clients about their operations. At the moment, administrators are more routinely subject to this shift than other service providers, but across the board, businesses are going paperless and offsetting their carbon footprints to signal they are not only ‘norms-takers’ but very much ‘norms-makers’ with regard to ESG.

GREEN FINANCE LEADER Guernsey has been particularly agile in positioning itself as a leader in green finance. Its green funds framework, introduced in July 2018, is now well established, with $4bn under management.

The first Guernsey green fund was oversubscribed, clearly showing that the opportunity is making ethical and commercial sense to investors. Government and industry in Guernsey are now trying to move the application of ESG factors along in a few other key areas. For example, the Environmental and Social Impact Monitor recently co-developed by Justin Sykes, Managing Director of Innovest Advisory, is being widely touted as a way for funds to benchmark themselves against, and contribute to, international standards. The decision by Generation Investment Management – the firm co-founded by former US Vice President and climate activist Al Gore – to domicile its $1bn Generation IM Sustainable Solutions Fund III in Guernsey has been a boost for the bailiwick’s ESG credentials. Structured by offshore law firm Mourant and launched in May 2019, Fund III will invest between $50m and $150m in companies helping the

funds industry


November 2019-january 2020 43


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Learn more about our parent company at R A Rossborough (Insurance Brokers) Limited is registered in Jersey No. 1944 at Liberation House, St Helier and regulated by the Jersey Financial Services Commission no. GIMB0042. R A Rossborough (Guernsey) Limited is registered in Guernsey no. 2873 at Rossborough House, Bulwer Avenue, St Sampson, Guernsey and is licensed by the Guernsey Financial Services Commission no. 36009. Rossborough Insurance (IOM) Limited is registered with the Isle of Man Financial Services Authority as an insurance intermediary in respect of general business. Registered in Isle of Man No. 110231C. Registered Office: New Wing, Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ. Information on Rossborough and its regulators can be accessed via

44 November 2019/january 2020

ESG health of the planet or individuals, or those driving financial inclusion. Darren Bacon, a Partner at Mourant who was instrumental in the transaction, says: “They could have put that fund anywhere, but they chose to put it offshore, and to set up the fund in Guernsey.” Given the wider global conversation about the contribution of tax-neutral international centres to global inequality, and the profile of Al Gore within ESG circles, the formation of the Generation Fund on Guernsey helps the Channel Islands’ efforts to be transparent about their tax-neutral strategies. It also contributes to positioning them as highly skilled, well-run jurisdictions that provide funds – predominantly pension funds and public bodies – with wider operating margins and higher investment returns.


up there with other leading markets, including London Stock Exchange (LSE). Darko Hajdukovic, Head of Fixed Income, Funds & Analytics, UK Primary Markets at LSE, says: “There are now 22 green and renewable funds on our markets, raising over $10bn, deploying capital to meet universal renewable targets. More than 130 green, social and sustainability bonds are currently listed on London Stock Exchange, raising over £27bn.” Examples of ESG-focused capital-raising at LSE in 2019 include: Aquila European Renewables Income Fund, which raised $172m to invest in continental renewable energy infrastructure; the US Solar Fund, which raised $200m; and The Renewables Infrastructure Group (TRIG), which raised $676m across two capital raises to help further expand its investment portfolio. The move to ESG investing looks set to rise and rise, according to the 2019 Smart Beta survey from LSE’s FTSE Russell – 77% of European asset owners taking part in the survey stated that they plan to apply ESG to their strategy.

PROCESS OF NORMALISATION Wayne Atkinson, Group Partner at Collas Crill in Guernsey, has worked on green loans in fund financing. He thinks this trajectory is only likely to increase as ESG frameworks become standardised and, ultimately, entrenched. “There is a process of normalisation taking place to develop a best practice framework for incorporating ESG principles into funds formation and management, in a similar way to how corporate governance has evolved.” Annette Alexander, a Partner with Carey Olsen, who has been involved in social impact funds and several green funds, sees it from a capital-raising

businesses are going paperless and offsetting their carbon footprints to signal that they are not only norms-takers but very much norms-makers

Jersey is putting responsible and impact investing more firmly on its financial services agenda and has a strong showing on the ‘S’ in ESG. The island administers more than 30 socially responsible investment (SRI) funds and has attracted 41 new registered charities since its Charities Law came into force in 2018. Jersey Finance cites a number of factors that make the island an SRI hub, including a wide range of flexible structures, fund administration excellence, and unrivalled knowledge and expertise. Jersey’s credentials are also supported by the presence of investment manager Rathbones, which has operations on the island and has long offered bespoke ESG investment solutions through Rathbone Greenbank Investments, established in 2004. However, ESG considerations have become part of the groupwide DNA. Victoria Hoskins, Investment Director at Rathbone Greenbank, explains: “As at June [2019], we had £1.5bn of our discretionary managed assets just in our Greenbank team for the Rathbones group. That doesn’t take into account the £49.4bn as a group where managers also incorporate negative screening into portfolios and use MSCI screening to get a baseline ESG level.” Tim Ford, Rathbones’ Investment Director in Jersey, believes that this degree of transparent reporting on ESG assets under management is valued by investors, which helps the company set itself apart from competitors. Pan-island, The International Stock Exchange (TISE) is setting the pace for listed funds, having recently introduced its green segment. According to TISE Group CEO Fiona Le Poidevin, the transparency and good governance principles reinforced by ESG investing are at the core of the exchange’s listing process. TISE’s focus on ESG puts it right

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ESG-related policy developments 2006

The United Nations (UN) publishes its Principles for Responsible Investment


The British Private Equity & Venture Capital Association publishes its first Guide to Responsible Investment


International group the Financial Stability Board establishes Task Force on Climate-related Financial Disclosures

perspective, “whereby prospectuses are being changed to incorporate ESG factors, and in constitutional documents to incorporate ESG reporting”. Given the scale of the ESG-related opportunities presenting themselves to the funds sector, the likes of Estera are pushing on with efforts to upskill. As Kevin Smith says: “We already have [ESG] champions in each business. We need to learn all the time about the reporting requirements and have training courses informed by the international networks. We support this across the industry, not just at Estera.”

WOEFULLY UNPREPARED? Despite all this activity, should funds be moving much more quickly to consolidate their ESG frameworks? Andy Sloan, Deputy Chief Executive, Strategy at Guernsey Finance, says it is a matter of time before ESG becomes the normal way in which business is done. He fears the industry is woefully unprepared. But the drag on implementation may be due to the degree of regulatory discretion still allowed. While a long list of high-level policy developments (see timeline, right) are beginning to filter into best practice, many are voluntary. Sloan believes they will eventually become more explicitly required in law and regulation. With so much of the ESG framework under development, ‘greenwashing’ – making a company or fund appear more environmentally friendly than it really is – remains a concern in the race to win mandates or signal virtue. However, on both islands, concerted efforts are being made in the funds sector to adhere to best practice. n

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The UN’s Sustainable Development Goals come into force and the Paris Agreement commits signatories to strengthening the global battle against climate change


Network of Central Banks and Supervisors for Greening the Financial System (NGFS) is set up by eight central banks and supervisors


EU sustainable finance reforms approved by the European Parliament; UK Financial Conduct Authority proposes improvements to climate change disclosure by issuers and to green finance information for consumers

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why your genes are the future of medicine Healthcare companies exploring the new frontier of personalised medicine are attracting investors’ interest, says Michael Bull, Investment Director at Quilter Cheviot

OVER THE PAST 50 years, we have

become used to the idea of mass healthcare. Cold as it may seem, our health system is built on an industrial scale, with everything from heart disease to cancer treated using largely ‘one size fits all’ procedures. Is the industrial model of healthcare the future though? There are good reasons to think not. Advances in medicine and our understanding of genes are leading us to a new era of personalised medicine, where the treatment we receive will be based on our own genetic make-up. These advances unlock two exciting areas: first, the ability to cure genetic conditions; and second, medicines individually tailored to cure diseases such as cancer. Medical scientists are now concentrating their focus in one of two areas – cell therapy and/or gene therapy. Cell therapies are designed to improve the immune system’s ability to fight diseases such as cancer. They involve collecting cells from a patient’s blood, modifying them so they can make a more vigorous attack on a disease, and re-injecting them into a patient. Many believe treatments like Chimeric Antigen Receptor T Cell (CAR-T) therapy is the future of oncology. Gene therapy involves the modification of somebody’s genes. A ‘normal’ gene is inserted to replace an ‘abnormal’ gene, potentially curing a genetic disorder entirely. While individual genetic conditions are rare by themselves, together they are quite common, affecting around three million people in the UK alone. Gene therapy is a one-off treatment, which could potentially cure millions of people and eliminate the struggle of managing a genetic disorder altogether. While cell and gene therapy technologies

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are still at an early stage, there has been some success, with the US approving the first cell/gene therapy back in 2017 for a form of blood cancer.

CELL AND GENE THERAPY FEASIBILITY Treatments like cell and gene therapy build on almost a century’s worth of science, including that of Francis Crick, James Watson and Frederick Sanger. While Crick and Watson discovered the structure of DNA, Sanger was the first to establish techniques to sequence and map genomes in the 1970s and 1980s. The work of the Human Genome Project later mapped out the human genome, with the completion of the project in 2003 giving us a greater understanding of what individual genes are responsible for.

It is only now that the science is sufficiently advanced enough – and the technology cost-effective enough – to see treatments based on this work. In the decade and a half since the Human Genome Project, the cost of sequencing or mapping someone’s genome has fallen dramatically, from around $100m to $1,000. This has made it feasible for healthcare companies to invest in developing the ideas and treatments behind personalised medicine. Once somebody’s genome has been sequenced, new technologies such as CRISPR (clustered regularly interspaced short palindromic repeats) allow us to edit genes or turn them on or off without altering their sequence. CRISPR is widely used in scientific research today and some people are even eating ‘CRISPRed’ food.


We may be on the cusp of a new era where treatments are based on individuals rather than designed to work for whole populations

At the end of 2012, the UK government also set up the 100,000 Genomes Project, which aimed to sequence the whole genome of various NHS patients. The project focused on people affected by a rare disease or cancer, with its database particularly valuable due to its combination of genetic data and patients’ full medical records. The 100,000 Genomes Project has already yielded results. The first family with a genetic abnormality – causing kidney failure – was diagnosed in 2015 and changes then made to their treatment. The 100,000 Genomes Project is also being used to develop areas such as precision oncology. Genomics England, for example, is partnering with certain companies to combine genomic data on a patient’s cancer tumour with the drug response of that tumour, potentially making treatment far more effective.

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PERSONALISED MEDICINE TODAY The widespread adoption of new treatments based on cell and gene therapy is still some way away. However, some treatments are coming through. Novartis, a Swiss drug maker, now offers a form of CAR-T for leukaemia in children. The company has one of the most comprehensive CAR-T development programmes, with 13 advanced platform therapies in clinical development and nine expected to enter the clinic in 2019. The opportunities around personalised medicine are forcing lead drug makers to look outside their research and development budgets. Novartis acquired AveXis in 2018, which received US approval of the first gene therapy for spinal muscular atrophy earlier this year. Roche, another Swiss drug maker, has also been on the acquisition trail and is currently in the process of buying Spark Therapeutics, the owner of a gene therapy for retinitis pigmentosa, a genetic disorder which causes a gradual loss of vision.

BEYOND CELL AND GENE THERAPY The changes stemming from cell and gene therapies go beyond new potential treatments, however. Personalised medicine means more testing of patients to determine what exactly is wrong

with them and to monitor how they are responding to treatment. Demand for medical testing equipment and services is therefore increasing, benefiting medical tool companies in particular. One such company, Thermo Fisher Scientific, is seeing increased demand for its help in manufacturing cell and gene therapies, and for developing the instruments and services needed to understand why a drug actually works. The development of cell and gene therapy comes at an important time for healthcare companies, with the cost of researching and developing new drugs rising faster than drug prices. That trend looks set to continue for the meantime, although the use of artificial intelligence might streamline drug discovery. The hope is that artificial intelligence improves the design of clinical studies and the manufacturing process. We look for several factors when it comes to investing in healthcare. Given the political pressure on drug prices, it is important to look for companies that are taking novel approaches to target unmet needs, as well as considering the more traditional issues such as the opportunities in a company’s drug pipeline and how effective management are.

CONCLUSION The implications of cell and gene therapies are profound. We may be on the cusp of a new era in medicine, where treatments are based more on us as individuals rather than generic treatments designed to work for whole populations. It could affect everything from treatments to how we fund and pay for drugs. With our healthcare system currently designed to actively manage chronic conditions, the impact of personalised medicine may be as much organisational as physical. The real appeal of personalised medicine, however, will be a revolution in what we are able to cure and how. n Investors should remember that the value of investments, and the income from them, can go down as well as up. Investors may not recover what they invest. Past performance is no guarantee of future results. Any mention of a specific security should not be interpreted as a solicitation to buy or sell a specific security.


For more information, contact Michael Bull, Investment Director, Quilter Cheviot, Jersey, at

Quilter Cheviot Limited is registered in England with number 01923571, registered office at One Kingsway, London, WC2B 6AN, England. Quilter Cheviot Limited is a member of the London Stock Exchange; is authorised and regulated by the UK Financial Conduct Authority; has established a branch in Jersey and is regulated under the Financial Services (Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business in Jersey and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 to carry on investment business in the Bailiwick of Guernsey; is regulated by the Dubai Financial Services Authority as a Representative Office (and its business name in Dubai is Quilter Cheviot Limited (DIFC Representative Office)). Quilter Cheviot Europe Limited, trading as Quilter Cheviot and Quilter Cheviot Investment Management, is regulated by the Central Bank of Ireland. Registered in Ireland: No. 643307. Registered Office: Hambleden House, 19-26 Lower Pembroke Street, Dublin D02 WV96. Accordingly, in some respects the regulatory system that applies will be different from that of the United Kingdom.

November 2019 -January 2020 49


Two new climate change benchmarks from the European Union should help investors identify the genuine article when it comes to green funds, but industry watchers say teething problems need to be ironed out before the benchmarks can be really effective Words: David Burrows

new landscape for climate investors

50 November 2019-january 2020


the planet is your overriding concern? The European Union (EU) is in the process of changing the landscape for ‘climate investors’ with the introduction of climate change benchmarks. Two benchmarks are in the pipeline: the EU Climate Transition Benchmark (EU CTB) and the EU Paris-aligned Benchmark (EU PAB). Both aim to bring greater clarity to how companies focus on the climate and sustainability. They represent a new departure because, until now, no established framework has emerged for measuring the alignment of an investment portfolio with a temperature scenario. (The EU climate benchmarks only comprise companies that can demonstrate they comply with a global temperature increase limit of 1.5°C). But are the new benchmarks necessary? And what value do they bring?

GROWTH MARKET It is reasonable to argue that, given the level of growth in climate change-themed investing, there is a need to quantify what constitutes an environmentallyfocused company and investment portfolio – and what doesn’t. Certainly, we have seen huge growth in the number of sustainability funds over the last three years. According to Morningstar, sustainable funds attracted an estimated $8.9bn in net flows in the first half of 2019, surpassing their $5.5bn in flows for the whole of 2018. Stuart Phillips, Executive Director at BDO, believes that in general there is positive momentum for companies to take greater account of sustainability and thereby satisfy criteria to be included in a

‘climate change’ or ‘sustainability’ fund. “At BDO, we see a variance in demand across the global financial services landscape from the funds sector at this time. For example, environmental, social and governance (ESG) reporting has grown significantly across Asia over the past 12 months. In Hong Kong, a BDO survey among listed companies noted that 32% of responders were putting effort into formulating an ESG strategy – double the previous year.” Phillips points out that, with regard to Guernsey in particular, the growth in demand for services such as ESG reporting is at an earlier stage. However, through initiatives such as the new Guernsey Green Fund, The International Stock Exchange’s Green Market Segment and advisers raising awareness among clients of the options in sustainable reporting, the jurisdiction is positioning itself well for a certain upturn in demand, triggered by investors wanting to align with proven socially conscious approaches.

standardised benchmarks can create transparency for investors and a common language/ framework that helps non-specialists understand what is in a portfolio

AN END TO ‘GREENWASHING’ There is always a danger that an investment theme, which has impetus at any given time, is exploited as a marketing opportunity. A product is labelled and sold with, at best, sketchy environmental credentials. This fits in with the oftencited issue of greenwashing, which Rachel

HOW DO YOU invest responsibly if saving

November 2019 -January 2020 51


Four steps to meeting the benchmarks The two types of climate benchmarks, the EU Climate Transition Benchmark and the EU Paris-aligned Benchmark, should fulfil four conditions: 1) They must demonstrate a significant decrease in overall greenhouse gas emissions intensity compared with their underlying investment universes or parent indices. 2) They must be sufficiently exposed to sectors relevant to the fight against climate change. The EU argues: “Decarbonisation cannot happen through a shift in the allocation from sectors with high potential impact on climate change and its mitigation (for example, energy, transport, manufacturing) to sectors with inherently limited impact (for example, healthcare, media).” 3) Absolute performance must be a key factor – not just performance relative to the index. Climate benchmarks must demonstrate their ability to reduce their own greenhouse gas emissions intensity on a year-on-year basis. 4) The ‘green to brown share ratio’ of where companies derive their revenues must be at least equal for EU CTBs and multiplied by at least four for EU PABs.

Whittaker, Sustainable Investing Strategist at UBS Wealth Management, describes as “calling something sustainable when there is very little substance beneath the surface”. She believes the EU benchmarks could help to tackle greenwashing. “In our view, standardised benchmarks can play an important role in creating transparency for investors and a common language/ framework that could help non-specialists understand what is in a portfolio,” she says. “This helps reduce greenwashing, which both companies and investment managers can be guilty of.” However, she is keen to point out that there are shortcomings to standardised frameworks – potentially, it could inhibit innovation or become a ‘crutch’ for asset managers to lean on and avoid doing their own research. Ingrid Holmes, Head of Policy and Advocacy at Hermes Investment, agrees that there is value in the transparency and methodology the EU has used in constructing these indices. She argues that, from a retail investor’s perspective, an EU endorsement might provide the greater assurance they need on where their money is being invested. However, Holmes does have concerns over how companies will be monitored. “It is not clear at the moment who will be responsible for monitoring – whether it will be regulated on a national level or not.” She worries that there might be an element of bandwagon jumping by product providers keen to tap into the ‘climate’ theme, but without really buying wholeheartedly into the principle. “We may see new passive funds underpinned by one of these [EU] benchmarks, where managers just say ‘job done’ and fail to take their responsibility any further.” The onus is on fund managers in the climate change space to take a more active approach – to prove their worth in finding and highlighting turnaround stories rather

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than merely focusing on which companies are ‘in’ and which companies are ‘out’ of the climate benchmark. For active fund managers who are keen to market their fund as a ‘climate focused’ product, they will have to report what percentage of their fund complies with the taxonomy – the ‘green to brown share ratio’. The managers are clearly reliant on the transparency levels of the companies within their investment portfolio, with the green to brown ratio serving as the defined reference point.

DEVIL IN THE DETAIL? There will inevitably be grey areas. For instance, the Schroder International Selection Fund Global Climate Change Equity invests in Siemens Gamesa, a leading player in the wind energy sector. However, the parent company Siemens Group also has an interest in the mining and oil and gas sectors. Assuming a multinational conglomerate

such as Siemens is suitably transparent in its ESG reporting, it should be possible to evaluate from its disclosure if it complies or not. The green to brown share ratio comes into play in relation to where the group derives its revenues – at least equal for EU CTB companies and multiplied by at least four for EU PAB organisations. Holmes does not think the benchmarks on their own provide a solution. “The concern is that index funds won’t monitor what companies in the index are actually doing going forward. The climate change challenge is a dynamic one, which means shareholders ideally need to be watching out to check companies are keeping to their climate change commitments – and holding them to account through effective stewardship if they don’t.” She adds: “This requires time and resources. It goes way beyond choosing the right benchmark. The right benchmark is only the start.” Whittaker takes a similar line, arguing that any benchmarks of this kind are in no way a silver bullet. “A benchmark that invests in public companies has limited ‘real world’ impact,” she says. “Investing in public equities and bonds only sends a signal to companies and stakeholders that these issues are considered important by investors; it doesn’t actually channel new capital to any of these companies.” She suggests that investors who want to channel capital towards projects that will have a measurable impact on climate change need to be looking mainly at private market impact investments or, potentially, engagement-focused strategies. This is a valid point but, for many investors, private market impact investing may not be something with which they are either familiar or comfortable. In this scenario, benchmarked climate change funds and impact investing could work towards the same goal but from different directions. The effectiveness of the EU benchmarks cannot realistically be gauged until they have been introduced – probably not until early 2021. In the meantime, supporters of the climate benchmarks will continue to expound their virtues: the fact that there are specifics regarding the ‘green to brown share ratio’ of where companies derive their revenues; and that carbon and temperature targets provide a greater degree of clarity. On paper, there are many positives, but the major challenge will be in the effectiveness of monitoring and analysis. Will there be sufficient buy-in? And – taking a longer-term perspective – will the benchmarks play an important role in making Europe carbon-neutral by 2050? Time will tell. n

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Investment implications of climate change for pension funds Three degrees of warming would cause negative returns for almost every sector, including financials, agriculture, industrials and consumer staples A PUBLICATION BY Alexander Forbes’ global strategic partner, Mercer, has revealed the stark realities of the impact of climate change on the planet, with devastating consequences on everything from daily lives, to agricultural production and water resources. Investing in a Time of Climate Change – The Sequel 2019 represents three climate change scenarios: a 2°C, 3°C and 4°C average warming increase on pre-industrial levels. According to the report, a 2°C rise in temperature would result in significant losses between now and 2030 in coal, oil and gas, which would result in opportunities for higher returns on renewable energy investments. Premal Ranchod, Manager Research Analyst and ESG (environmental, social and governance) champion at Alexander Forbes Investments, contextualises these facts. “If a child with a 2°C rise in temperature is fever-struck, imagine how an unabated temperature rise affects the planet, including its fauna and flora. “Extreme weather patterns affect agriculture production and water resources, ultimately affecting the sustainability of society and the environment. It’s just a matter of time until these tangible effects begin to influence asset classes and therefore investment returns.” Three degrees of warming would cause negative returns for almost every sector, including financials, agriculture, industrials and consumer staples. The damage would be irreversible should we continue ignoring the signs up to 2030. “The current trajectory could put us beyond a temperature that humans have ever experienced, some time in the next 30 years,” says Ranchod. “The last time the global mean surface temperature was comparable to today was more than 100,000 years ago. The last time CO2 concentrations were as high as today (over 400 parts per million) was three to four million years ago. “And the last time the world was 4ºC warmer was more than 10 million years ago,” he adds. “It’s possible that we could reach 4ºC of warming by the end of the

century. Humans have never existed in a warmer time.” According to the Initial Report on Tackling the Climate Emergency, published in July 2019 by the Government of Jersey, ‘there exists a climate emergency likely to have profound effects in Jersey’. The report focuses on Jersey’s aim to be carbon-neutral by 2030 by putting in place ‘more ambitious policies to accelerate carbon reduction’. The financial services industry, too, will be considering the potential impact on the investments and pensions of clients. In South Africa, the Pension Funds and Climate Risk report by activist organisations Just Share and Client Earth, and accompanying legal opinion from law firm Fasken, requires South African pension fund boards to consider climate change risks in their investment decisions. A failure to consider material risks arising from climate change would likely amount to a breach of fiduciary duty by the board of a pension fund, under both South African regulatory frameworks and common law principles. Although not binding and ruling, Ranchod acknowledges the spirit of the report and opinion, in addition to the conversations that it has prompted across the industry. It is more than likely these discussions will be occurring in Jersey boardrooms as trustees and employers identify and try to mitigate the risks involved around climate change for investors and pensioners. He recommends that funds practically begin managing these risks by considering the following: • Beliefs – ESG policy – process – portfolio A fund should define its investment beliefs, which should be articulated in a policy. The portfolio should be managed and reviewed in accordance with the policy. • Be an active steward (active ownership and voting practices) Use influence as shareholders to positively affect a company’s conduct through engagement and proxy voting, and disclose the voting outcomes and reasons for supporting or going against matters. • Allocate to thematic investment Invest in

assets specifically related to sustainability. Also, ensure that there is a reporting framework in place that assists in monitoring and measuring the real impact these investments are having. • Use positive and negative screening Include or exclude companies from share selection according to climate change criteria. • Disclose carbon exposures and carbon tax valuation Ensure that listed companies disclose their carbon exposures and taxes. The users of financial statements should integrate these financial measures in their assessment of the value they attribute to the companies. “The global pension fund industry and average fund member are probably under-equipped to attend to these risks,” concludes Ranchod. “However, attempting to be proactive around climate change is helpful to long-term fund solvency and is encouraged by the regulatory environment. “Being conscious of where the pounds and pence of pension funds are ultimately going will encourage more sustainable allocation of assets.” n


For further information, please contact: Adrian Peacock, Managing Director, Alexander Forbes Channel Islands E: T: +44 1534 837837 Sarah Jouhal, Director Wealth Management E: T: +44 1534 837837 Alexander Forbes Channel Islands Limited (AFCI), registered company number 9596, trading as Alexander Forbes Offshore (AFO), is based in Jersey and is 100% owned by Alexander Forbes Group South Africa. We have been the Jersey presence for Channel Islands employers and employees since 1975 and AFCI is regulated by the Jersey Financial Services Commission.

November 2019 -January 2020 53

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Seán O’Callaghan, Head of Institutional Banking at RBS International in Jersey, explains an emerging trend in the management of private equity investments in real estate

The evolution of the private equity real estate sector NOTHING STAYS THE same for long in the world of investment, and it is crucial for institutional investors and fund managers to tell the difference between passing fads and significant changes in markets and products. A particularly interesting trend of recent times has been a shift in the investment vehicles of choice for institutional investors in real estate. Over the past two or three years, there has been a distinct move towards using open-ended funds, rather than the more traditional and more rigid closed-end funds that have previously dominated the sector. This is an intriguing development as it has chiefly been driven by a combination of investor appetite and innovation by managers, rather than regulatory reform. Private equity real estate managers have generally tended to use closed-end structures that have a defined lifespan of typically about 10 years, perhaps with scope for two or three one-year extensions. The investors are locked in for the life of such a closed-end fund so, when launching one, fund managers are very

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clear about how it will operate, with a defined investment period when it will call on investors’ capital and then look to return money to those investors prior to the maturity of the fund. Once they have called on typically 70% of the investors’ capital, they will start looking to raise another fund – a process that has long been a staple of private equity investment in real estate. What we have seen over the past couple of years is more managers looking for new structures as they seek to set themselves apart and produce more attractive offerings. There are many real estate funds available that may be achieving similar returns with a comparable investment focus and similar geographies, so a more flexible structure is one valuable way to differentiate a fund from others. Open-ended structures, or ‘evergreen’ funds, have no expiry dates. They give investors more liquidity rights by allowing them to exit or increase their investment and by permitting the fund manager to raise more capital. Such an open-ended fund can recycle

capital from its realised returns and change its strategies and timelines to suit market conditions as well as the performance of its investments. Open-ended funds aimed at institutional investors often have lock-in periods reducing the rights of investors to withdraw all or some of their capital – typically at the outset, when the fund is first raised, with the lock-in period being anywhere between three and five years. Those lock-in periods are designed to protect the funds until they know that they have a certain amount of capital over those first formative years so they can go out and invest. Lock-in periods provide more stability than one might see in retail-focused openended funds, which tend to have much lighter restrictions on withdrawals. Those retail funds can therefore face problems, such as the rush to sell holdings that followed the 2016 Brexit referendum, which forced some retail fund managers to freeze redemptions. However, institutional investors that use these open-ended real estate fund

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structures have a longer-term investment horizon of 10 years or more, and thus are less likely to react to short or medium-term macroeconomic conditions.

ADVANTAGES AND DISADVANTAGES An obvious advantage of open-ended funds is that the investors have more flexibility because they can sell (or increase) their holdings when they want, subject to any restrictions, such as a lock-in period. Importantly, the manager has the freedom to hold the assets for longer, rather than being forced to ‘flip’ them according to a pre-ordained timeline, and some investors are very keen to see longer-term annuity-type income from those assets. That is particularly attractive for pension funds and insurance companies, as well as for many other institutions. When market conditions are not great, managers in a closed-end structure could make a time-forced purchase or sale. If a closed-end fund buys an asset in year five, for example, they typically have another five years to turn that asset around to a point where they want to sell. So if the market is not at the right point in the cycle, they can be forced either to restructure the fund or even to sell off the asset at a loss. An open-ended structure allows them to choose their own timing for transactions. That gives them the flexibility to rethink their timing, perhaps holding on to assets

Many investors want the management team to have its own stake in the fund, but that is a bigger commitment for the managers when there is an indefinite timeline

for longer and implementing a new strategy that is best suited to those particular assets. The result is that with astute guidance the fund should end up holding bettermanaged assets. Another attractive benefit of these longer-term funds is that they avoid the extra costs and the distraction of management attention and resources that come from constantly having to set up new funds. The managers, and ultimately the investors, can escape the traditional costs of raising each new fund, which include marketing, structuring costs, legal advice, subscription agreements and all those

other things that need to be done when a fund is being constructed. An evergreen fund is already up and running, and that efficiency is especially attractive to institutional investors who are dealing with a long-term horizon rather than the dipping in and out that can happen in the retail space. The downside of an open-ended fund is that the greater flexibility for investors to withdraw their capital reduces the certainty of its funding. Once any lock-in period is over, a market downturn might always create a rush for the exits and resulting liquidity pressures. This is a particularly pronounced issue in the real estate sector, where you have a liquid investment product but an illiquid underlying asset. That greater uncertainty in turn can lead to financing becoming more expensive for fund managers after the lock-in periods, and all parties need to go into such funding arrangements with their eyes open. Another complication is that an openended structure does not fit as easily with some of the traditional methods used to compensate managers and ensure they have ‘skin in the game’. Many investors want the management team to have its own stake in the fund, but that is a bigger commitment for the managers when there is an indefinite timeline. It is also tougher to calculate managers’ performance incentives with an ongoing fund compared with simply measuring investors’ returns when a closed-end fund is dissolved. It can be complex, but banks and fund managers are keen to be innovative and are responding to this shift towards open-ended funds because the trend is clearly here to stay. At RBS International, we have seen some clients starting to run concurrent strategies – for instance, by still running closed-end funds while also using openended structures for specific elements of the European real estate market. One thing is certain: the market will keep evolving and the industry will keep tweaking its products to better serve the needs of investors. n


For more information, please contact: Seán O’Callaghan, Head of Institutional Banking, Jersey E:

November 2019 -January 2020 55



interview Mark Pesco 56 November 2019 -January 2020


with Rapid growth, M&A integration and a global rebrand, Mark pesco has had a busy first 12 months as group CEO of IQ-EQ. Year two, he says, will be all about demonstrating that the team has built a “resilient, sound and successful business”

What’s your background and how did you get to where you are now? I’m from Jersey originally. I was born and schooled there before going to the University of West London to study Business Studies. After uni, I went back to Jersey and did my training contract to qualify as a chartered accountant. I’m basically a failed musician. I love jazz and used to play the saxophone, but quickly realised that I wasn’t good enough to make a living from it, so I tucked my pipe dream away, got serious about my career and chose the accountancy path. I was in practice with PwC for 10 years and I spent lots of time overseas with them, in Singapore, Australia and London. When I decided to leave practice, I joined a small private client trust business in Jersey as a Partner. I’d always wanted to run my own business, not only for the personal challenge of seeing if I could do it, but also for the opportunity to make decisions with a team and revise those decisions if we got them wrong. I’m not sure where that entrepreneurial desire came from. My dad’s had restaurant businesses. He and my mum are from very humble backgrounds and they have a really strong work ethic. Running a business can be exhausting, but their example keeps me grounded and keeps me going. Tell us more about joining the trust sector. There were three of us as shareholders in the business and we grew it successfully together. Unfortunately, one of the shareholders passed away very suddenly

What’s driving the shift towards becoming a global player? Wealth has become much more globalised. Clients need players like us to structure them globally, giving them a consistency of service and approach, so that they don’t have to use 20 different providers. The other reason is that unless you are of a certain size, there are barriers to coming into our market and continuing to evolve. Unless you can invest in people to deliver compliance, learning and development, finance, IT and new products, you can’t compete. I see the market in three ways. There are the global players, of which we’re now one, who are providing more than one product offering and are located globally. You’ve then got the regional players that usually operate in one or two key geographies and offer one or two products; so either corporate or funds or maybe a combination of the two. And then you’ve got the boutiques. Boutiques, which offer a very specific service, will always have a place in the market. I think the regional players will either be bought out by the global consolidators or they’ll try and move into that space by coming together. Ultimately, we’ll be left with a smaller handful of players in the market. So you think that regional tier will eventually be taken out? It’s probably a bit provocative to say so but I think it’s highly likely. Regional players need to continue to show evolution in their growth and their profit. One of the ways you can do that is through acquisition, as we have done. What does that mean for clients who are too big for the boutique firms but not big enough to appeal to the global players? Because of the way that we’ve grown – organically and through acquisitions – the

November 2019 -January 2020 57

Words: Eila Madden Pictures: Charlie Surbey

and that led us eventually to sell the business to the international division of IFG Group, which had set up in Jersey for an acquisition about three or four years previously. I oversaw the integration of the two businesses and then they asked me to be MD of the Jersey operations, which we grew successfully from 60 to 100-plus people. In 2012, I was one of a handful of the leadership team that went out and got private equity backing for a management buyout. Essentially, what we did was acquire the international division from IFG. At that point in time, there were about 220 people across five locations. The first thing we did was rebrand the business as First Names Group and I was fortunate to later become its CEO. We totally transformed the organisation, growing it from 200 to 800 people and trebling the size of the business financially. At the end of 2017, I led the sale of First Names Group to SGG Group, which we later rebranded as IQ-EQ. There were lots of reasons for the sale. Primarily, when you looked at First Names Group, it was predominantly a private client business looking after family offices and ultra-high-net-worth individuals. SGG at that point in time was principally a corporate and funds business. First Names Group’s presence was heavily concentrated in the Crown Dependencies, while SGG was predominantly located in Luxembourg and the Netherlands. In my mind, if we talk about how the market is changing, it made perfect sense. Overnight, we created a global business. We then cemented our position as one of the top four global players following the acquisition of fund administration specialist Augentius in the second half of 2018. And then we started to diversify our business to offer a greater array of services across what I see as the three core service areas: funds, corporate and private wealth.


In a nutshell, what does IQ-EQ do? We’ve labelled ourselves an investor services group, which essentially means that we set up and administer investment structures for our clients – whether they’re in the funds, corporate or private wealth spheres – and we do this in a highly compliant and sustainable way and on a global basis. Whether you’re a family office, an

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ultra-high-net-worth individual, a multinational company or a fund manager, we help to run your structures. As you mentioned earlier, not long after SGG’s acquisition of First Names Group, the company rebranded as IQ-EQ. What was the thinking behind this? During the past 12 to 18 months, we’ve tripled our headcount, predominantly through acquisition, from 800 people to 2,500 people operating across 23 locations. With that comes a lot of integration work – and for us it’s not just about numbers and processes; it’s also about cultural integration. One of the things that I needed to do when I moved into the Group CEO role in January 2019 was to unite everybody within the business behind a shared vision and identity. That’s why we rebranded. Why did we go for something like IQ-EQ? First, it’s a bit modern and a bit different for our space. But, importantly, what it portrays externally is also true of us internally. A key driver for this brand is that clients in our industry expect you to be able to provide them with technical excellence – the IQ. But what makes us different, and what our clients really want, is the ability of our people to work with them over a long period of time and build that relationship – that’s the EQ bit. We spend a lot of time within our organisation focusing on emotional intelligence, both in the recruitment process and as part of our learning and

The culture within the organisation is very entrepreneurial. It’s about finding a reason why you can do something as opposed to why you can’t do something

culture within the organisation is very entrepreneurial. It’s about finding a reason why you can do something as opposed to why you can’t do something. We take that approach with clients. So, yes, we operate at the top end of the spectrum in terms of the clients we deal with, but we also work with very entrepreneurial clients where we believe we can grow with them as they build their wealth. Also, smaller clients tend to want a bespoke service tailored to their specific needs, which is what IQ-EQ is all about. The way we differentiate ourselves within those top four global players is through our absolute focus on the director- and team-led approach, which means the senior people who pitch to you will be the same people who look after you through the lifecycle of your relationship with us. We’re not offering a commoditised, system-driven approach to what we do with our clients, so it doesn’t matter whether you’re large or small; the approach we take is exactly the same.

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development programmes. That’s the philosophy behind the brand. We went through a massive consultation process internally to arrive at IQ-EQ. Alongside consulting key clients, we ran employee drop-in sessions in all of our locations, as well as focus groups, interviews and a global survey. There was lots of staff input on what made us unique as an organisation and, actually, it was the people, the high degrees of interpersonal ability, the flat hierarchy – all of that kind of stuff. The IQ-EQ brand came as a natural evolution from asking our people what made us different. And I’m pleased to say that the reaction to the brand, both internally and externally, has been very positive. Has the focus on the rebrand led to any sense that you’ve taken your eye off the ball with clients? Are they still feeling loved? One of the guiding principles I have in the business is that, first of all, you look after your people. If you don’t get that bit right, the client bit just doesn’t work at all. So the focus of our integration programme and our transformation has been on making sure we’re still investing in our people, developing them, giving them opportunities. Becoming a global firm allows you to do even more of that. As a result, we have very low staff

We’ve been very active and very noisy through M&A and the rebrand. The focus for us now is on making sure all of that M&A and the subsequent integration work bears fruit

60 November 2019 -January 2020

turnover across the group, so the impact of the rebrand on our clients has been minimal really, as they’re still dealing with the same primary contacts and they’re still getting the same quality delivery as they did before. That’s really important to us as being able to retain your focus on people is a challenge as you grow. But we’ve done it so far and I absolutely believe we can continue to do it. It’s about the leadership team behaving and acting in the right way and living up to the values of the business – if we don’t do it, how can we expect anybody within the organisation to do it? You’ve talked about growth through acquisition over the past 12 to 18 months. What’s the end goal of the buy and build strategy? There isn’t an end goal. As a business, we are unashamedly ambitious, so we want to continue to grow. In terms of buy and build, our focus has predominantly been on building a European platform, but we have started our growth journeys in both Asia and the Americas. We’ve built scale in Asia now, with around 550 people in Hong Kong, Singapore and the Philippines. Specifically, we want to continue building out our presence in Singapore and Hong Kong because there’s so much wealth being generated in that region. We also want to focus on North America, where we have limited presence at the moment but where there is significant room for growth. Beyond the drivers of wealth generation and macro conditions that are presenting us with opportunities to grow organically into new geographical areas, the fact remains that our sector is still very fragmented, so the opportunity to continue to buy and build and create value is still there. Are there any ambitions to see that number four ranking get higher? For me, it’s not about becoming the biggest; it’s about building a really successful business. If that ends up making us number one in terms of size, of revenue and of profit, then so be it. But, first and foremost, it’s about building a global business that can deliver quality service to our clients and create a culture for our people that they want to be part of. Integration is often where M&A deals fall down. How are you getting this right? If you look at the experience we have as a leadership team, between us we’ve done something in the region of over 30 deals in 15-plus years. That’s a lot of M&A. We’re very disciplined in our approach to acquisitions, from the way we go out and develop relationships to the moment we sign on the dotted line.

When we get to integration, we’ve got a very clear methodology we use time and time again. It’s not just about financial integration; it’s about people, IT, operations, risk and compliance. We spend a lot of time on the softer areas of integration as well. We give people change training when they come into the organisation. We explain to them how they’ll feel as part of the integration process and that they will go through an emotional lifecycle. And, most importantly, we communicate and tell people what’s going on. This methodology is why we’ve been able to grow through M&A at the pace we have. The other thing is that we made a lot of investment into the business at the time that we were acquiring and integrating. For example, we’ve invested a huge amount in technology and brought on board a new CIO at the beginning of last year. We’ve set up a management information team to generate information to help us manage the business in a better way. We’ve beefed up our operational teams. We’ve enhanced our existing systems. So, in other words, you don’t just acquire a business and then bolt it together; you’ve also got to change the organisation to fit the size that you’ve become and to build enough capacity and structure so you’re fit for the next phase of the journey. The group took on private equity backing in 2016 from Astorg Partners. How supportive has it been of your strategy to invest ahead of the growth curve? Had we not had private equity backing, we would never have been able to grow and globalise the business. We wouldn’t be able to invest in technology or in the development of our people. So, for us, it was the catalyst that allowed us to build and accelerate the growth of our business. We want to demonstrate to the market that, having brought together three large businesses – SGG, First Names and Augentius – we can continue to grow organically. Astorg is very happy to keep its shareholding for as long as we all feel we’ve created the type of business that we want to create. Where do the Channel Islands fit into your growth plans? After Luxembourg, Jersey is the second largest office in the entire group; there are almost 300 people now based there. Guernsey and the Isle of Man are also sizeable businesses. The Crown Dependencies are still regarded as very high quality, highly regulated, solid jurisdictions with well-established law and high-quality practitioners. So they continue to play an important part. Whether or not we want to


FACT FILE Name: Mark Pesco Age: 49 (the big 5-0 next year!) Position: Group CEO, IQ-EQ Home town: St Martin, Jersey Education: Degree in Business Studies, University of West London First job: Summer job picking tulips outside Amsterdam Family: Wife Sarah, daughters Sofia and Isabella, Lola the labradoodle and Charlie the Tibetan terrier Hobbies: Good food (cooking and eating), wine and getting out on the boat Did you know: If Mark didn’t work in finance, he would love to be a restaurateur

grow those significantly more will depend on future opportunity not only for M&A but also for organic growth. But the islands are a key part of our footprint and we don’t see that changing. What sector trends are you witnessing across IQ-EQ’s core segments? There are two things. First, globalisation’s going to continue and we’re going to see further consolidation in our marketplace, to the point that we may see a real rationalisation – in the way we did with the large accountancy firms. Second, one of the biggest opportunities in our sector is the use of technology and whoever really gets that right will win the prize. Our industry has for some time been the perfect environment for innovating technology to create greater efficiency and allow people to focus more on adding value. We’re making massive investments in enhancing the overall client experience by making the onboarding application process easier, giving clients access to their data through online portals, and so on. Internally, we’ve already automated a

significant amount of our processes and our procedures – automating bookkeeping processes, for example. We’ve also created a tech innovation team, which many players in our sector haven’t done yet. But we will see a significant investment in technology from lots of players in our sector to transform the way in which we as an industry have traditionally worked. This is going to be crucial if we’re going to keep up with the demands of the younger, more digitally-native workforce that we’ll be recruiting in the future. You’re now several months into the new brand. What’s the next stage of the growth journey for you? We’ve been very active and very noisy through M&A and the rebrand. The focus for us now is on making sure that all of that M&A and the subsequent integration work bears fruit. So our acquisition strategy will be more limited than it has been over the past 12 to 18 months. We’d like to see our organic growth continue to be above the market growth rate, demonstrating that we’ve built a resilient, sound and successful business.

You’re a big fan of mindfulness and meditation. How did you get into this? Everybody has really busy lives. I’m travelling constantly and dealing with so many different demands. Mindfulness is one of those things that I discovered having met somebody who had helped quite a few people learn it. They were quite evangelical about the benefits it could bring in terms of coping with stress, patience, being more grounded, being more authentic. The more I started looking at it, the more I thought, I’ve got to have a crack at this. I was fortunate enough to find an amazing teacher who had studied Chinese meditation for many years. People have different things they do to relax. I love sport, but I think mindfulness gives you a very different perspective; it keeps you grounded. For me, it creates huge amounts of patience and a huge amount of energy. I’m a big advocate of it. I think it has the propensity to make not only the workplace much better but individuals perform to the best of their ability because they’re able to cope with a whole plethora of things that life throws at them. n

November 2019 -January 2020 61

Advertising feature

Green finance in Guernsey: building on fertile ground Kevin Smith, Director at Estera International Fund Managers (Guernsey), takes a look at the important role Guernsey is playing in the global green investment space

ON 20 SEPTEMBER, millions of people around the world took to the streets and protested as part of a global climate strike. What turned out to be one of the largest ever demonstrations over global warming proved beyond any doubt how high climate change is on the public agenda. Inspired largely by students around the world, the march is indicative of a major shift within society over awareness and concern for environmental, social and governance (ESG) issues. The younger generations are increasingly making their voices heard, and that is being translated into much broader areas, including where they choose to invest their money. While there has been a significant rise in ESG investing in recent years, it has been predicted that over the next two to three decades, the millennial generation could put between $15trn and $20trn into US-domiciled ESG investments alone. This figure would roughly double the size of the current US equity market. If that trend continues, then the figures invested by so-called Generation Z could be quite staggering. If that huge potential is to be realised, innovative thinking is required on the part of the global funds industry. And when it comes specifically to green investment – money that goes towards supporting green and sustainable projects – Guernsey is playing a world-leading role.

BREAKING NEW GROUND When it introduced the Guernsey Green Fund rules in July 2018, the Guernsey Financial Services Commission (GFSC) created the world’s first regulated green investment product and gave both investors and managers a transparent product through which investments into green initiatives can be made. Most importantly, it effectively created a ‘kitemark’, assuring investors that specific

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green criteria have been met and that their investments are having the desired, positive environmental impact. Now that Green Funds are well into their second year, there have been some particularly notable developments that demonstrate very clearly the value that this product is offering. In April of this year, for instance, the Bluefield Solar Income Fund achieved accreditation as a Guernsey Green Fund and became the first fund listed on London Stock Exchange (LSE) to do so. A Guernsey-registered, closedended investment fund, Bluefield Solar invests in more than 80 UK-based solar assets, targeting long-life solar energy infrastructure that’s expected to generate stable renewable energy output over a 25-year asset life.

The Green Fund regime is just one part of a concerted effort to make Guernsey a centre of green investment excellence

Not only did the accreditation of such a major fund help raise the profile of the innovative Guernsey Green Fund regime, but it also reinforced the fact that it’s not just new funds that are applying for Green Fund status. Significantly, Bluefield Solar was launched in 2013 and was already listed on the Main Market of LSE when it applied for Guernsey Green Fund accreditation. While we readily admit that the number of funds accredited under the Green Fund regime is still relatively small, it was never the expectation of Guernsey’s fund industry that there was going to be an explosion in Green Fund launches. But there is a feeling among fund practitioners on the island that there is a definite growing interest.

THE BIGGER PICTURE The Green Fund regime is just one part of a concerted effort to make Guernsey a centre of green investment excellence. Hot on the heels of the Guernsey Green Fund, The International Stock Exchange (TISE) launched a new market segment, TISE GREEN, which aims ‘to enhance the visibility of those investments which make a positive impact on the environment’. Similar to the Guernsey Green Fund, any investment wishing to be admitted to TISE GREEN must meet an internationally recognised standard of green finance criteria. However, admission to TISE GREEN is open to all types of green investments, including bonds, funds and trading companies, from all jurisdictions. And again, as with the Green Fund, TISE GREEN helps those attracting investment into environmentally beneficial initiatives to highlight their green credentials while, at the same time, providing easier access for investors who are looking to put their money into those investments. Underpinning all of this admirable work is Guernsey Green Finance – the umbrella

Advertising feature body for green finance in the island, which pulls together the island’s government, the GFSC and the wider finance industry. Together, their intention is to provide the broadest, most comprehensive range of green and sustainable financial services. This not only comes from creating new products such as the Guernsey Green Fund, but also through engaging with international initiatives and partnering with fellow global finance centres. Earlier this year, Guernsey Green Finance announced a collaboration with the UK Green Finance Initiative and also played host to Stephen Nolan, Managing Director of the International Network of Financial Centres for Sustainability (FC4S). This is a United Nations-led programme that encourages financial centres to place sustainable and green finance at the heart of their operations and help fight climate change – Guernsey became an FC4S member at the end of last year. And businesses on the island continue to support managers launching a range of sustainable funds – such as the Greensphere Capital launch, in June this year, which was established as a Guernsey Private Investment Fund. Its intention is to back companies and projects that help to mitigate the biggest risks facing our generation – resource scarcity, commodity and fuel volatility, and climate stress. More recently, in mid-September, two new offerings added to Guernsey’s green credentials. Commercial lender Sarnia Mutual launched a ‘green loan’ product, offering preferential rates for customers seeking loans for certain environmentally friendly products, such as electric cars and bikes, and household insulation. The island also saw the launch of Environmental & Social Impact Monitor (ESIM), a not-for-profit accreditation service for island businesses, which rates businesses on environmental and social commitments. ESIM Founder Marc Laine was reported as saying that he intended the new business to facilitate the development of a new advisory and auditing sector, which would ultimately be able to export skills to other jurisdictions. And even as I was writing this article, the GFSC announced that its application for membership of the Network for Greening the Financial System (NGFS) had been accepted. Guernsey is the first island international finance centre to achieve NGFS membership, which was established by eight central banks and supervisors following the One Planet Summit in Paris in December 2017. Its purpose is to help strengthen the global response required to meet the goals of the Paris agreement and to enhance the role of the financial system in managing risks and mobilising capital for green and low-carbon investments.

THE ROAD AHEAD The reality is that Guernsey has been administering clean technology and ESG funds for quite a few years, so these recent developments are simply building on the expertise in this area and should only help attract further investment. And according to a recent study carried out by Guernsey Finance, the current political backdrop is encouraging private equity managers to consider increasing investment in green and sustainable finance. Three-quarters of those surveyed had increased exposure in green and sustainable finance and everyone planned to do so in the near future. They said that external drivers such as investor demands and competitive forces – including the ‘Attenborough Effect’, which credits the veteran broadcaster David Attenborough with making people more conscious about the impact of their consumption levels – were the main reason for doing so. They also agreed that transparent verification and certification, such as that offered by the Guernsey Green Fund, will catalyse investor demand. It’s clear that Guernsey is fully committed to its role as a global citizen and will use its position as a leading international finance centre to keep building on its standing in the green finance space. Indeed, Guernsey Green Finance continues to review the potential for the development of green insurance. And while it is hoped that Guernsey’s finance industry will benefit from increased fund launches or increased investment into these green areas, the greater benefit is the overall international strategic commitment to mitigating environmental damage and climate change. n

The reality is that Guernsey has been administering clean technology and ESG funds for quite a few years


Estera is one of Guernsey’s leading fund administrators and has a wealth of specialist experience in renewables and administering funds with an ethical investment focus. It services multiple clients in these sectors, such as long-standing clients Bluefield Solar Income Fund and Greensphere Capital. To find out more, please contact: Ethan Levner, Managing Director, Estera Guernsey T: +44 20 7002 7606 E: Kevin Smith, Director T: +44 1481 742 642 E:

November 2019 -January 2020 63

Specialist funds

The specials

From pop music to commercial ships to the Airbus A380, we take a look at what’s been piquing the interest of specialist investors 64 November 2019 -January 2020

Featureflash Photo Agency /

Words: Alexander Garrett

IT’S THE BRAINCHILD of Merck Mercuriadis, the former manager to Beyoncé, Elton John, Nile Rodgers and Guns N’ Roses; its assets include more than 1,000 songs that have been number 1 or 2 in the global charts; and it’s structured as a Guernsey registered fund. Hipgnosis Songs Fund has already raised £625m gross equity capital from investors since launching in July 2018. It is the most striking recent example of the growing appetite among investors for specialist funds that eschew conventional listed shares and securities in favour of alternative assets – ranging from ships and aeroplanes to solar panels, wind farms, major infrastructure projects and technology start-ups. There’s no precise definition of what makes a specialist fund, but Mariana Enevoldsen, Director of Guernsey-based Estera, which is the fund administrator for Hipgnosis, says: “I would say they invest in alternative rather than in traditional assets. Usually, alternative assets are things you can touch and feel, although in the case of Hipgnosis, it holds intellectual property rights.” The Specialist Fund Segment of London Stock Exchange’s Main Market includes many entities registered in the Channel Islands, and is, according to LSE, “designed for highly specialised investment entities that wish to target institutional, professional, professionally advised and knowledgeable investors”. The significance, says Enevoldsen, is that the assets of specialist alternative funds are generally uncorrelated with more mainstream investments and don’t go up and down in tandem with stock markets or interest rates. “It’s an important part of a balanced portfolio construction. Taking the case of Hipgnosis, people will always want to listen to music, irrespective of the state of the markets,” she says. Craig Cordle, a Partner at Ogier, the Guernsey legal adviser for the establishment of the Hipgnosis fund, echoes these sentiments. “There is interest from investors in getting exposure to types of investment that they wouldn’t otherwise be able to invest in,” he says. Anyone can set up an account with an online stockbroker and build a portfolio of shares within a few hours, he points out. “But it’s not every day you can own a slice of an A380 aircraft, for example.” Appetite for these investments – among both institutions and private investors – is growing because of the increasing challenge of getting a good return from conventional asset classes. And it’s a market in which the Channel Islands are well positioned, says Cordle. “Most things we do in Guernsey deal largely in alternatives and are pretty specialist,” he says. “We don’t tend to see the typical investment trust in equities

There is interest from investors in getting exposure to types of investment they wouldn’t otherwise be able to invest in – it’s not every day you can own a slice of an A380 aircraft

because it wouldn’t be the most efficient way of structuring that vehicle.” Green funds, and those focusing on renewable energy, are particularly in vogue at the moment thanks to the high profile of the climate change issue. The establishment of a Guernsey Green Fund accreditation has also given the island a lead on some of its rivals, says Cordle. Infrastructure funds somewhat less so, thanks in part to the fall-out from the Carillion collapse. Venture capital is also popular, with funds such as Merian Chrysalis investment trust offering the chance to get in early on tech start-ups. There’s also strong interest from investors and managers in funds focusing on innovative alternative assets such as blockchain or cannabis-related products, says Enevoldsen. Whatever might be piquing investors’ interest, specialist funds are bringing a welcome boost to plain vanilla equity and bond fund portfolios. Here, we take a closer look at five of the most interesting recent launches in the specialist space.

1. HIPGNOSIS SONGS FUND Hipgnosis invests in the copyright of hit songs by artists including the Eurythmics, Al Green, Booker T & The MG’s, One Direction, Mick Jagger, Tom Petty & The Heartbreakers, Chic, Sister Sledge, Diana Ross, Beyoncé, Rihanna, Justin Bieber, Gwen Stefani, Michael Jackson and Santana. It’s the only UK-listed investment vehicle to provide such pure-play exposure to music royalties and sets out to exploit royalties when a song is played or distributed – for example, through

November 2019 -January 2020 65

Justin Bieber, Diana Ross

Specialist funds

Specialist funds


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Specialist funds streaming – as well as ‘synch’ royalties from use in movies, TV shows and advertising. The investment adviser is The Family (Music), run by Mercuriadis. Launched initially on the Specialist Funds Segment of London Stock Exchange, Hipgnosis Songs Fund has since been promoted to the Premium Listing Segment; investors so far have been primarily institutions but the new trading venue means it will be more accessible to private investors. The fund raised an initial £395m from its initial IPO and two further placings; its C Share placing in October has just raised an additional £231m. Based on the issue price of the ordinary shares at IPO, the fund has a target dividend yield of 5% per annum and a target total NAV return of 10% or more per annum.

2. TUFTON OCEANIC ASSETS This Guernsey-domiciled investment company, launched in December 2017 and listed on the Specialist Funds Segment of LSE, invests in second-hand commercial ships. The investment manager is Tufton Oceanic, which also manages private maritime investments for other clients, such as pension funds. In September 2019, it raised $30m in a new share placing. Tufton offers investors the opportunity to have a stake in commercial shipping, where it says favourable factors include slowing growth in supply of new ships, secondhand vessels being below historic prices, and a forecast of increasing prices for new vessels over the next 10 years. It looks to invest in ships that will enter into medium- to long-term charters, giving some protection from fluctuations in the market caused by “commodity prices, geopolitical events and other short-term supply-demand factors”. That includes tankers, general cargo ships and container ships, but not cruise ships. The investment target is an annual dividend yield of 7%, and in the last 12 months, the total return was 8.1%.

3. QUINBROOK LOW CARBON POWER FUND This private equity fund targeting investments in low-carbon and renewable energy in the US, UK and Australia raised a remarkable $1.6bn in March 2019 from institutional investors that are primarily pension funds and insurance companies in the same three countries. It is managed by Quinbrook Infrastructure Investors, whose co-founders are Australian and whose background is in environmental, social and governance (ESG) investments. The fund’s investments include major wind farm developments in Texas and Arizona, as well as a ‘gas peaking’ scheme in Australia that will underpin renewables by using gas to top up electricity generation at peak times. The fund is a Jersey Eligible Investor

Fund. Carey Olsen acted as legal and regulatory adviser to the fundraising, while Oak Group is the Jersey administrator. David Scaysbrook, Co-Founder and Managing Partner of Quinbrook, has said that the fund “seeks to deliver both ongoing cash yield and absolute gains from the creation of new low-carbon energy infrastructure assets and the remediation of impaired or undervalued energy assets and businesses”, with “a commitment to ESG principles”. Performance data is not available.

4. VLC RENEWABLES FUND VLC Renewables was formed in July 2018 as a partnership between renewable energy investment company Low Carbon and Vitol, the world’s biggest oil trader, with a trading volume of more than seven million barrels of oil a day. The Jersey-based fund is Vitol’s first significant venture into renewables and the company is the sole investor. It has committed €200m to the first tranche of funding, which will be used to target investments in onshore and offshore wind in Europe. Third parties may be brought in to fund future investments. Low Carbon Investment Management is the investment manager of the fund. VLC has just one significant investment to date: the Zaporizhia wind farm in Ukraine, which will generate 500MW of electricity and is expected to be one of the top five largest operating onshore wind sites in Europe when it is up and running in 2020. At that point, it will generate enough clean energy to power more than 780,000 homes and offset 4,860,000 tons of carbon emissions. As Simon Hale, Investment Director at Vitol, explains: “By 2025, almost 27% of European electricity will be generated from wind and solar. As a major participant in Europe’s power markets and as a significant investor in energy infrastructure worldwide, Vitol is keen to build a portfolio of renewable investments to complement its existing activities.” Law firm Mourant advised Low Carbon in connection with the establishment of the fund, which has not published performance data.

5. DORIC NIMROD AIR THREE One of the more unusual funds to be listed on LSE – or on any stock market – Doric Nimrod Air Three invests exclusively in aircraft and, more specifically, in one particular aircraft: the Airbus A380. The fund was launched in 2012, the third in a series of funds holding aircrafts as assets, and is a Guernsey incorporated company listed on LSE’s Specialist Fund Segment – which means it is available to private investors. Since its establishment, it has bought four A380s, which have each been leased

There’s strong interest from investors and managers in funds focusing on innovative alternative assets such as blockchain or cannabis-related products

on 12-year terms to Emirates Airline in Dubai. The fund receives income from these leases, which enables it to pay a very healthy dividend, equivalent to a target 8.25% per annum on the issue share price, but which has recently topped 10% as the share price has dipped. The potential downside is that aircraft would normally be regarded as depreciating assets, and when the leases come to an end, the sum investors will get back is based on what the aircraft can be sold for. Independent estimates obtained by the company suggest that the four aircraft will be worth in total the equivalent of 178 pence per share, relative to a current share price hovering around the 80p mark. n

November 2019 -January 2020 67

Advertising feature, in association with Locate Jersey

Having had experience of working in the Channel Islands in a previous role, Andy Partlow, Director of the offshore arm of recruitment business Alexander Daniels, saw Jersey as an opportunity to grow the ambitious company even further. He helped set up a new office last year – a decision he believes provides some hugely exciting opportunities


Alexander Daniels 68 November 2019 -January 2020

Advertising feature, in association with Locate Jersey

What does Alexander Daniels do? We’re a consultative recruitment business, established 10 years ago and working across a number of professional sectors, including financial services, accountancy, legal and HR, as well as energy. Our head office is in Birmingham and over the past decade we’ve taken an increasingly international perspective, establishing offices in Spain, Germany, Scotland, the US and, most recently, the Channel Islands. It’s growth that has been supported by firms and individuals who value our passion for the sectors we’re working in, as well as our proactive and consultative approach. That means we’re constantly working to make sure that businesses get the right people for the right roles, and that people are finding real fulfilment in their careers.

It’s a really cosmopolitan community, which has added an exciting dynamic and brings different skill sets to the market

What made Jersey an attractive location to expand into? In a previous role, I had worked in Guernsey and knew that island well, so when I moved to Alexander Daniels in 2015 to work in our Birmingham head office, we had a conversation and took the strategic decision to look at the Channel Islands. I was then tasked with setting up our Guernsey office in 2016 and it’s a move that has proved hugely successful – to the extent that, in the space of a couple of years, we became a market leader. That success prompted us to look at Jersey as well. It was seemingly an obvious move; we knew lots of pan-island firms that were working across the two jurisdictions and, as island economies, the two are comparable – but they are also quite different, including from a recruitment perspective. Our opinion was that our knowledge of the key financial, legal and accountancy sectors in Jersey would stand us in good stead – and certainly from the people we spoke to across the island, it was clear that our proactive approach would be well received there too. It felt like a natural fit, so in July 2018, we took the step to bolster our Channel Islands presence by establishing a new office in St Helier.

Was the move straightforward? It helped that I had lived for a while in Guernsey previously and set up our other Channel Islands office there, so I knew a few people in the islands. Having said that, establishing an office anywhere from scratch is always a massive challenge, so to have such easy access to advice during the whole process was absolutely paramount. The support from Locate Jersey was exceptional, and we got some fantastic guidance from other businesses and advisers, which really helped manage expectations internally and get us through the more bureaucratic processes involved in setting up an office. Overall, we were really impressed with the ‘open for business’ mentality and proactive approach, which tallied with our own philosophy.

How is Jersey suited to the business? Over the past 12 months or so, we’ve been really pleased with the fact that firms in Jersey have been more than happy to hear about our consultative approach. What we have found is that firms here are focused on quality – getting the best candidates to give them an edge, help them cut through and show what they are all about in what is a really competitive marketplace.

That’s meant that our approach, passion and commitment to working with them to find the best solution has, fortunately, genuinely resonated. It’s also a really cosmopolitan community, which has added an exciting dynamic and naturally brings broad and different skill sets to the market, which is interesting from a recruitment perspective and positive for Jersey as whole. How is the business evolving since it was launched and what are your ambitions? We see the Channel Islands as mature markets. Certainly, our experience in Jersey over the past year or so has been that businesses here are, by and large, thriving, the economy is stable and businesses are very open, welcoming and place a huge value on their people – which is fantastic from our point of view. I continue to be based in Birmingham, but visit the island regularly and, I have to say, it’s been a real pleasure working here. It gives us confidence in the future of our offshore arm. Looking forward, our ambition is to become the largest and most successful recruitment business across the islands and we really want to make a positive impact on the local recruitment sector. And from a Jersey perspective, the sophistication of businesses here, the focus on professionalism and progression among the workforce, the digital aspirations of firms and the optimism people share, give us every reason to be positive about our future on the island. While we’ve only been here a relatively short time, we’ve built a good permanent team here and established ourselves well in the market. It’s a really exciting time to be working in our industry in Jersey and our focus now is on enhancing our visibility in the local community and building a strong platform to position us strongly for the coming years. n


This advertising feature was produced in partnership with Locate Jersey. Visit

November 2019 -January 2020 69

Private equity

Time to spend wisely With record levels of dry powder pushing valuations sky-high, can alternative asset managers avoid repeating the mistakes of the past?

Words: Amy Carroll

70 November 2019-january 2020

THERE ARE FEW who now doubt we are

teetering on the brink of an economic downturn after one of the longest bull runs in history. Indeed, just under two thirds of limited partners (LPs) in market intelligence firm Preqin’s Investor Outlook: Alternative Assets H1 2019 think we have reached the peak of the market. Deal volumes finally surpassed 2007 highs last year, according to McKinsey. And while fundraising has eased slightly over the past 18 months, in historical terms we remain in rarefied air. Dry powder, meanwhile, hit an incredible $2.4trn by the half-way mark this year. Unsurprisingly, this mountain of unspent capital, combined with a top-of-the-cycle ‘use it or lose it’ mentality, means valuations have hit superlative levels. Average private equity entry multiples across Europe and the US topped 11 times EBITDA over the past 12 months, exceeding the previous pre-crisis record. “If you consider the level of capital raised across alternative investment funds in the past two to three years, the amount of undeployed capital chasing opportunities has never been higher,” says Mike Byrne, Partner at PwC in Jersey. “There has been no equivalent increase in the supply of quality assets to satisfy this investor demand, however, so there’s no doubt that there is significant competition for deals.” “An awful lot of capital has been thrown at the alternatives industry in the years

Private equity

INVESTOR EXUBERANCE The reality is that, in a protracted low interest rate environment, the returns promised by alternatives have proved too great a lure for institutional investors, even as they recognise that their own enthusiasm for the asset classes is creating a bubble. “The continuation of low interest rates is still pushing inexperienced investors towards higher risk areas,” says Tony Gardner-Hillman, proprietor of Gardner Hillman, which specialises in resolving asset-related problems in the funds industry. “The urgency to deploy all of this dry powder means there is still a likelihood that assets are being bought at prices history will show to have been inflated.” PJ Thibault, Head of Private Equity at CBRE, meanwhile, believes that investors are naïve to think that these asset classes can deliver on their promises without dramatically escalating risk.

“I think the biggest fault lies with institutional investors expecting to achieve 15% to 20% IRRs [internal rates of return] in a zero to negative risk-free interest rate environment,” he says. “The reality is they are having to take ever increasing amounts of risk.” In the real estate world, for example, investors are now taking planning risk and letting risk in addition to development risk. “But in a five-year fund, time is your enemy. If planning is appealed, or a downturn means you suddenly have an empty building in the city, that can really hurt,” Thibault explains. And it isn’t just the weight of equity in the market that’s troubling. While the alternative asset classes have a rich tradition of finding opportunity in adversity, the sheer volume of debt in the system is also cause for concern. Global leverage loan issuance surpassed pre-crisis levels for the first time in 2017, with somewhere in the region of $1.6trn of loans currently outstanding, according to S&P Global Market Intelligence. Fitch, meanwhile, puts the leveraged loan default rate at the peak of the last recession at 10.5%. The numbers alone show the potential for fallout. Add in unprecedented borrower-friendly terms, driven by the proliferation of private debt funds – 85% of global leverage loan issuance in 2018 was covenant-light, compared with 26% in the run-up to the

In a five-year fund, time is your enemy. If planning is appealed, or a downturn means you suddenly have an empty building, that can really hurt

since the global financial crisis,” adds Nick Stevens, a Partner and private equity specialist at KPMG in the Channel Islands. “Investors love private equity, they love infrastructure and real estate, because of the solid returns they have delivered. “But there is now so much money washing around, which managers have to somehow deploy. They are entering into bidding wars with each other and in some cases paying over the odds.”

November 2019-january 2020 71

Private equity

financial crisis – and the situation becomes more worrying still. It appears that the early warning system has been disabled.

LESSONS LEARNT But it is not all doom and gloom. There are reasons to believe that the alternative asset classes are now better positioned to weather a change in economic fortunes than they were a little over a decade ago. While the level of dry powder has continued to rise, private markets are now double the size they were in 2007, average deal sizes are smaller, deals are less levered and the mega clubs associated with the worst excesses and implosions are no more. Institutional investors – many of which were newcomers to the alternatives space prior to the financial crisis – have now developed pacing plans that should give them greater staying power this time around. The secondaries sector has also matured exponentially, creating sophisticated options for both LPs and managers, which should prevent fund valuations from plummeting. General partners, meanwhile, have learnt some lessons as well. Most now have a more nuanced approach towards portfolio construction and vintage risk. And while avoiding competitive auction situations is all but impossible in today’s highly intermediated market, managers are taking a more thorough approach to pre-deal analysis. “Conducting a full suite of due diligence is really important. Rather than just focusing on the financial information and market diligence, private equity funds are now looking in depth at the political environment and the technology in the

72 November 2019-january 2020

Private equity funds are now looking in depth at the political environment and the technology in the business. They are going the extra mile to make sure their diligence on the deal is watertight

profit, with leverage multiples increasing along the way,” Archer says. “A number of private equity managers came out of that thinking that financial engineering was the route to stellar returns, but had forgotten that private equity’s core skill is adding real value to businesses they back and making good businesses great.” We now see alternative managers with rosters of operating partners, dedicated digital expertise, international networks focused on growing an asset’s global footprint, and specialist teams focused on talent management. “Operational improvement is the name of the game,” says KPMG’s Stevens. “Managers recognise that their job is to generate value by actually improving the way that a business works.”


business. They are going the extra mile to make sure their diligence on the deal is watertight,” says Marcus Archer, Partner at Clearwater International. Managers have also significantly evolved their strategies for identifying and delivering on value creation. True sector specialisation – as opposed to mere marketing spiel – has become increasingly common, enabling funds to speak the same language as management teams and to gain a competitive edge. And most firms have ramped up their operational resources dramatically. “In the years running up to the financial crisis, private equity investors could make money for their investors relatively easily by buying at 8x profit and selling at 10x

There is little doubt the market has become perilously heated and that managers are struggling to maintain investment discipline under the sheer weight of dry powder in the system. But, at the same time, those managers are also working hard to play a transformative role in the assets they back. As central banks ease monetary policy still further in expectation of tough times ahead, the quest for yield will only intensify, making alternative assets more popular than ever. If both LPs and GPs heed the lessons of the global financial crisis and hold their nerve, there is every chance they will reap the rewards of a market correction. “Alternative assets actually performed very well during the crisis for those that stayed the course,” says Stevens. “On balance, an end to this protracted bull run, and a softening of pricing, could prove a good thing.” n

Advertising feature

Fundamental changes to the taxation of UK commercial real estate for non-resident investors Adam Hart, Senior Tax Manager at Deloitte Guernsey, looks at the new capital gains tax rules applying from April 2019, which may have an impact on foreign investors in UK commercial real estate, and what funds should be considering now in order to navigate this new tax landscape The UK has, until recently, offered a highly attractive fiscal environment for foreign investment into UK commercial property. The benefits included: • Often low levels of UK tax on investment income through a range of deductions (for example, shareholder debt) and the availability of capital allowances and reliefs • No UK tax on capital gains • No UK stamp duties on disposal of foreign shares/units. This made the UK particularly attractive for foreign investors when compared with many other jurisdictions in which tax foreign investors hold property. Subject to a 5 April 2019 market value rebasing, foreign investors will now be taxed on realised UK commercial property gains, putting them largely on a par with UK investors. Funds will be within scope of UK capital gains tax, whether selling a property directly or selling an interest (of any amount) in a property-rich vehicle (75% or more of the value is derived from UK land of any type). However, new regimes are available which in effect pass the point of taxation from the fund to its investors. This could be attractive to certain types of ‘tax benefited’ investors, such as those who are tax exempt, and this is the principle reason (following industry consultation with HMRC) why these regimes exist. A large amount of UK commercial real estate is held by pension funds, for example. There are two regimes that may be elected into, depending on the circumstances. The first is the Transparency Regime – which may apply to income transparent funds (typically GPUTs and JPUTs). The effect of the Transparency Regime is to treat the fund as though it had always been transparent for capital

gains tax purposes. Thus, any disposals by the fund (of UK land or UK land-rich vehicles) will be treated as being disposed of proportionately by each investor. It is important to note that the Transparency Regime for existing incometransparent funds needs to be (irrevocably) elected into by 5 April 2020. Furthermore, the consent of all investors in the fund is needed to make this election, and so time is already running out to put this into effect. The second is the Exemption Regime, which may apply to non-transparent funds (such as companies). It allows an election to be made for the relevant fund or vehicle to be exempt from UK capital gains tax. The election also exempts any non-UK special purpose vehicles held below the fund. The Exemption Regime requires the fund to be widely marketed, or to be non-close (controlled by five or fewer unconnected persons) and have less than 25% of its investors being eligible for capital gains tax treaty relief. HMRC will require detailed information about each investor upon application for the regime, which may prove problematic for many existing funds. The election can be backdated for up to 12 months, so 5 April 2020 is also likely to be a key date for many existing funds wishing to enter the Exemption Regime.

IMPACT ON INVESTORS Whether either of these regimes is beneficial will depend on a number of factors; in particular, the investor base. It is perhaps unlikely that tax-benefited investors would want to invest in a fund that is not in one of these regimes. Conversely, the regimes may not be attractive to other investor types. Ultimately, both regimes currently require the investor to make a tax filing and pay the tax. This could be a burden on

investors and could lead to dry tax charges if not carefully managed. There is the possibility that HMRC will allow the fund to report and pay tax on behalf of the investors. This would be a welcome development, especially for the Transparency Regime, given the need for full investor consent. Both regimes are complex, involving a number of ongoing requirements, and they are likely to increase the cost of running the fund and the risk of inadvertent non-compliance. We have seen an increasing trend in the adoption of the UK REIT regime by closedended funds as a result of the ongoing changes to the taxation of UK real estate. Despite this, an offshore fund investing in UK property is still an attractive proposition for other tax reasons – for example, stamp duty or inheritance tax. And there are still many non-tax benefits to using an offshore vehicle, such as the legal and regulatory environment. n


Deloitte LLP provides audit, tax, consulting and financial advisory services, bringing world-class capabilities and high-quality services to clients. The company has the broadest and deepest range of skills of any global business advisory organisation and is a world leader in the professional services industry. We advise and deliver for the public sector as well as global and local businesses across every industry. Deloitte employs over 200 professionals in Jersey and Guernsey and is part of Deloitte North South Europe (NSE). The NSE firm brings together 13 countries and over 40,000 talented people, giving the firm the expertise to solve organisations’ most complex challenges and make an impact that matters. W: T: Deloitte Jersey: +44 1534 824200 T: Deloitte Guernsey: + 44 1481 724011

November 2019-january 2020 73

Advertising feature

Relocating to Jersey? Here’s what you need to know With golden beaches, stunning coastal views, pretty countryside and spectacular historic sites, Jersey lives up to the picture-postcard image it is known for the world over. A beautiful, secure, cosmopolitan island, Jersey offers an exceptionally high quality of life in a businessfriendly environment. The island has an enviable culture of safety and privacy, high quality health and leisure facilities, a world-class education system, globally renowned professional services and easy, frequent access to the UK, Europe and beyond. Buying a property on the island differs from mainland transactions and there are certain criteria to meet if you want to relocate here. First, you must get a registration card, which includes details of your name, social security number and residential and employment status (you also need one if you already live on the island and want to move to a new home, whether bought or rented, or start a new job).

Most property on Jersey is regulated and buyers must qualify for residency according to local connection, essential employment or tax contribution. However a fixed pool of houses is available on the open market which are called ‘registered’ properties (previously known as unqualified). There are four residential statuses, which determine where you can work and live. These are: • Entitled: Someone who has lived in Jersey for 10 years. They can buy, sell or lease property on the island and work anywhere without requiring permission to be employed. • Licensed: Someone who is an ‘essential employee’. They can buy, sell or lease any property, apart from first-time buyer restricted or social rented housing, in

their own name as long as they retain their ‘licensed’ status. An employer requires specific permission to employ a person under a ‘licensed’ status. • Entitled for work: Someone who has lived in Jersey for five consecutive years, or is married to someone who is ‘entitled’, ‘licensed’ or ‘entitled for work’. They can buy property jointly with an ‘entitled’ / ’licensed’ spouse and they can lease registered property as a

main place of residence. They are able to take employment work anywhere and do not require permission to be employed. • Registered: Someone who does not qualify under the other categories. They can only lease ‘registered’ (unqualified) property as a main place of residence and an employer requires permission to employ them.

Advertising feature Jersey’s Chief Minister can grant ‘entitled’ status to a high-value resident if he is satisfied that doing so will have a social or economic benefit and it is in the best interests of the community. If ‘entitled’ status is granted, you can buy or lease property in Jersey as your main place of residence on the island. The Population Office normally requires that you buy or lease a high-value property. Generally, this is a property valued in excess of £1.75m. If you’re thinking about making the move, and don’t qualify under the ‘entitled’, ‘licensed’ or ‘entitled for work’ categories, Savills is currently marketing the following ‘registered’ (or unqualified) properties:

The Oaks Manor A countryside manor home in a beautiful rural setting with its own impressive, tree-lined avenue. The house is in immaculate condition throughout, with substantial family/

Tesson House

entertaining rooms, seven bedrooms,

A luxuriously appointed tree top retreat screened by nature. The house has four bedroom suites

charming gardens and outdoor space, and a

with marble bathrooms, large reception room with vaulted ceiling, kitchen/diner and a separate,

double garage. Guide price £3.7 million

ground floor one bedroom area, ideal for relative or staff accommodation. There is also a private driveway, double garage and two acres of land above the property where you can enjoy a woodland walk. Guide price £3.75 million

La Blianche Rose

La Fougere

La Petit Cateaux

An idyllic luxury home built in 1995 in the heart

A detached, secluded property in the rural and

A stunning traditional granite coach house

of St Mary’s, towards the north coast. The

peaceful setting of St Peter. The house has

which has been completely renovated to

house features spacious reception spaces and

been refurbished to a good standard

provide spacious and flexible accommodation,

four bedrooms, with the potential to extend,

throughout and is set in about three acres of

including four reception rooms, a large kitchen

subject to planning. The house has mature

woodland. The accommodation includes an

and four bedroom suites, a garage and ample

gardens and an adjoining field with permission

exceptional open-plan living and dining room,

parking. Guide price £2.95 million

to convert to an orchard if required

kitchen, three bedroom suites, a pool complex,

Guide price £3.6 million

gym, one bedroom self-contained flat, single garage and a detached double garage. Guide price £3.45 million

For more information, contact Geri O’Brien at Savills Jersey on 01534 722 227.

Geri O'Brien Director Savills Jersey

Private capital

The changing face of

private capital 76 November 2019 -January 2020

Private capital

Jersey’s and Guernsey’s capacity for innovation and flexibility – as demonstrated through their private fund regimes – is proving attractive to private investors searching for new ways to put their capital to work

LAST YEAR, THE world’s millionaires and billionaires suffered a rare setback. After seven consecutive years of growth, the assets of the world’s high-net-worth individuals (HNWIs) – those with at least $1m in investible assets – fell by around $2trn, according to consultancy Cap Gemini. The culprits were poorly performing equity markets and slower growth in places such as China – two areas that, in more buoyant times, had been responsible for driving up wealth. It may prove to be a blip rather than the start of a trend, though. Boston Consulting Group, while acknowledging last year’s poor performance, nonetheless says wealth worldwide is likely to grow by around 5.7% a year between 2018 and 2023.

CHANGES IN BEHAVIOUR While they wait for the recovery to kick in, the tricky market conditions are prompting changes in behaviour from the world’s wealthy. Professional services firms say clients have been edging away from volatile equities and developing a greater appetite for assets offering more reliable returns. “There has been a notable move away from equity markets to a range of other asset classes, including private equity, real estate and debt,” says Kate Storey, a Partner in the Guernsey office of law firm Walkers. It is a trend that may be gaining momentum, particularly among those concerned about the long-term outlook for their family, where preserving capital may be more important than trying to grow it. Investors are also moving beyond standard funds. Emily Haithwaite, a Partner at Ogier, says there is a growing trend towards investing directly rather than via pooled vehicles managed by third-party

PRIVATE FUND REGIMES One particular attraction is the lighttouch private fund regimes developed by Jersey and Guernsey over the past few years. Although there are some technical differences between the Jersey Private Fund (JPF) and its Guernsey equivalent, the Private Investment Fund (PIF), they are broadly similar and both have proved appealing to private investors and wealth managers. Among other things, they are quick to set up and relatively cheap to maintain. It takes just 24 hours to gain authorisation in Guernsey for a PIF and 48 hours in Jersey for a JPF. It costs less than £6,000 to apply for a PIF and just over £5,000 in annual fees (which include annual fees for the manager), while a JPF application will set you back around £1,000, with £500 in annual fees. “The PIF and JPF regimes were introduced to simplify each jurisdiction’s funds landscape and provide a single, lightly regulated, vehicle,” explains David Walters, an Associate in Collas Crill’s Jersey office. “The speed and ease of setup have also helped make the PIF and JPF extremely popular with fund managers due to a short time to market, light-touch regulation and significant flexibility.” Guernsey was the first to move, setting up its regime in 2016. The following year, in its first full year of operation, it received 13 applications. That more than doubled

November 2019 -January 2020 77

Words: Dominic Dudley

managers. “We have established numerous proprietary investment structures for wealthy families, as well as joint ventures and co-investment structures,” she says. Such trends are global in nature and in the Channel Islands they are leading to a growing number of family offices being set up. In part, this is down to the political stability the islands offer, but it is also linked to the innovative fund structures that are available. Gareth Morgan, a Senior Associate in the Guernsey office of Collas Crill, says money is being drawn in from around the world, with “a noted increase in interest from private HNWIs and family offices in South Africa, the Middle East and Asia”.

Private capital

to 27 in 2018, according to the Guernsey Financial Services Commission, accounting for 50% of new registered funds that year. In Jersey, the JPF has proved even more popular since it was launched in 2017. By the end of 2018, some 202 JPFs had been formed, according to the Jersey Financial Services Commission. Of those, 128 were registered in 2018, or 59% of all funds approved that year. By June this year, the number had increased to 257. “JPFs are very popular vehicles for the deployment of private capital because they are quick and cost-effective to establish and authorise, no formal offer document is required and there are clear parameters regarding family and employee investment vehicles,” says Haithwaite. “It is also possible to create bespoke structures for professional and sophisticated investors.”

GAP IN THE MARKET The popularity of the new fund regimes suggests the islands have identified a gap in the market. “The introduction of these two regimes is a classic example of the ability of the Channel Islands, as self-governing bodies, to react to the interests of the market and develop products to suit,” says Walters. Tim Morgan, Chairman of the Jersey Funds Association, adds that the development of the JPF builds on the Channel Islands’ long experience – the accessibility of the fund has been a critical element in its success.

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“It’s a very clear regime, but it’s also flexible enough to cater for different types of uses,” he says. “It can apply to closed or open-ended structures. It can apply to different legal forms, whether they’re corporates, partnerships or unit trusts, and it can even apply to structures domiciled in other jurisdictions, provided there is a Jersey manager or other nexus. “It’s certainly bringing in new money and clients. Getting the balance between a strong regulatory and governance regime on the one hand and providing the most competitive product on the other is something we’re good at getting right.” All this has been happening alongside other trends in private capital, driven in part by greater interest in environmental, social and governance (ESG) issues among investors. According to UBS, more than a third of family offices around the world are now engaged in sustainable investments, while a quarter are involved in impact investments, according to its latest Global Family Office Report. That is part of a broader pattern in which wealthy individuals are starting to think about more than just the scale of their financial returns. “Areas that matter increasingly to new generations are philanthropy, sustainable investing and impact funds,” says Haithwaite. Morgan agrees. “We’re seeing shifts in investment attitudes as to how private

Private capital

Speed and ease of set-up have helped make the PIF and JPF extremely popular with fund managers due to a short time to market, lighttouch regulation and significant flexibility

Skilling up wealth is deployed. As ESG becomes more mainstream, many service providers we work with are focusing on delivering investment returns in a demonstrably sustainable and socially responsible way.” Other new areas of investor interest cropping up include cryptocurrencies and fintech. Such changing demands offer further opportunities for the financial sector in the Channel Islands to develop in the years ahead, although it does also require adaptation by firms serving the HNWI sector (see box).

THE FUTURE “We see private wealth forming a greater part of the Guernsey and Jersey markets in the next few years,” says Walters. “Political and financial instability in certain other countries has led to a migration of private wealth to jurisdictions like Guernsey and Jersey, and we expect this to continue. “As global trends shape investment moods, we expect to see an increase both in ESG investment and more structured wealth management offerings.” In the meantime, the new funds regimes should also continue to prove popular. As Carey Olsen Partner Chris Griffin says: “The approval time and the ongoing regulatory costs of the PIF and JPF are minimal. I think we’ll continue to see them being used widely. They have been hugely popular and I see no reason why that should change in the short to medium term.” n

The changing demands of wealthy investors is having a clear impact on professional services firms, which are having to expand the range of services they offer. In the Channel Islands, that is leading to the creation of new ways of working and the development of a broader base of skills. Firms now find it makes sense to bring together people from different areas of their business who perhaps weren’t used to working so closely together in the past, such as the private client, investment funds, insurance and dispute resolution teams. “The amount of capital in private hands has grown significantly and, with it, the demands and sophistication of investors deploying that capital,” says Kate Storey, a Partner at Walkers. “Service providers need to have expertise to meet those expectations. There’s more need than ever for us to work across traditional legal disciplines to deliver the services that clients demand.” As well as adapting the in-house structures, firms are collaborating more closely with third-party partners to provide clients with what they need in as seamless a way as possible. “Traditional decision-makers in the private wealth space don’t necessarily have the specialist expertise to conduct proper analysis on potential investments in tech, fine art and other esoteric asset classes,” says Alexa Saunders, a Partner at Carey Olsen. “One of the things we have seen spring up in the private wealth space is lots of asset-specific consultants and advisers who are able to give very bespoke advice to trustees and private wealth managers thinking of investing in these asset classes.” In some cases, companies are also having to rethink what sort of business opportunities they want to target, particularly given the fact that some of the new private investment structures can involve relatively low levels of capital at first. “More administrators and custodians are reviewing their business and fee models to accommodate this burgeoning business source,” says Collas Crill’s Gareth Morgan. “Administrators who previously would not consider a fund starting with less than £100m in investment are looking at proposed structures of £20m to £50m to ensure they capture that part of the market.”

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Working smarter Alternative fund managers need to rethink their approach to tech, talent and fees if they want to stay ahead of the pack in this increasingly competitive field

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INVESTORS HAVE HAD to trust their assets to an unconventional world for more than a decade. Since the crash of 2008, they have endured the lowest interest rates in living memory and unrivalled volatility in equities. Such uncompromising times call for an alternative to the traditional listed equities and corporate and government bonds. In the hope of diversification, investors are turning instead to hedge funds, private equity, infrastructure and real estate. Lumped together for convenience under the label ‘alternatives’, these assets – and there are other more esoteric ones in the group too, including timber, gold and wine – have attracted billions from all over the world as investors seek a way to ensure they get some bang for their buck. Assets under management (AUM) in the alternatives space have hit all-time highs consistently since 2008. According to Preqin’s The Future of Alternatives report, published in October 2018, private equity, private debt and infrastructure achieved all-time fundraising records amounting to $8.8trn AUM at the end of 2017. The figure is projected to reach $14trn by 2023. The Channel Islands have benefited

alternative funds are subject to disruption. Fund managers and their administrators and advisers must keep pace if they are to survive

THE ROBOTS ARE COMING Clearly, technology creates both challenges and opportunities for alternative fund managers. EY’s 2018 Global Alternative Fund Survey found a 200% increase in the use of artificial intelligence (AI) by hedge fund managers in the past year. AI and machine learning are more often being used by managers across asset classes and investment strategies to make actual investment decisions. The automation of various facets of the investment process is being embraced, and managers who can complement their operations with these tools are gaining significant competitive advantages. Matt Wood, Director at Altair, says: “Tech is critical to supporting the

Words: Gill Wadsworth

commensurately from these international trends. Jersey recorded inflows of more than £200bn last year – the highest recorded figure to date in hedge fund assets under administration. According to the Monterey Insight Jersey Fund Report 2018, the value of Jersey-domiciled fund assets originating from the US grew by almost 150% and the number of Jersey funds with US promoters increased 165%. Meanwhile, Jersey-domiciled fund assets with Japanese promoters have increased five-fold over the same time span. The islands’ high levels of regulation, sophisticated administration infrastructure and proximity to mainland Europe make them attractive locations to domicile an alternative fund. However, much as with fund performance itself, past glories do not mean that the future is without its challenges. Like so many other industries, from food delivery to public transport and energy, alternative funds are subject to disruption. Fund managers and their administrators and advisers must keep pace if they are to survive.

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Investors want performance fees with a hurdle operations of fund managers who need a specialist solution. Managers can buy this in from specialist providers or access it by outsourcing the administration of their funds to a specialist fund administrator.” However, the prevalence of AI and machine learning among private equity managers is far lower. The EY report found that ‘most private equity managers have not yet identified business cases to justify investing in AI’. Nick Stevens, a Partner in the Private Equity Group at KPMG in the Channel Islands, says private equity is far more of a people business than the algorithmembracing hedge fund world. “What makes private equity work is people with personal connections. It’s about human networks rather than computer ones,” he explains.

Performance fee only charged above a hurdle

Fund that only has a performance fee



Choice of paying higher management fee and lower carry percentage or vice versa


Private equity is not the only alternative asset class that needs to ensure it has the best people at the helm of its funds. The EY survey found that all alternative fund managers ‘are keenly focused on talent management as they attempt to respond to and gain a competitive edge as a result of changing business dynamics’. In particular, they are looking at ensuring teams are fully stocked with experts in their chosen investment fields. Wood says: “Alternative investment funds may struggle to outperform by being generalist in nature. We see that leaders are recruiting in-house expertise not just in fund management, but they are hiring operational, digital and regional expertise too. In this way, they can provide more value creation opportunities to the portfolio companies in which they invest. In turn, these funds are more sought after by investors.” The EY survey found that more than two-fifths (42%) of hedge funds and more than half (52%) of private equity managers had changed the educational background and past experience of the employees hired or interviewed for roles in the front office. Hiring practices are changing in the back office too to combat some of the challenges alternative managers face, particularly in managing the tech revolution. EY reports that in 2017, just 10% of hedge fund managers reported that they had invested in robotics or AI in the middle and back-office functions. In 2018, a third of hedge fund managers implemented robotics, while one in 10 uses AI.

FEE STRUCTURES All this change helps manage some of the escalating costs facing the alternative funds sector. But given that EY reported that more than a third (38%) of clients are unhappy with the fees on offer, providers

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Performance fee clawbacks


Fund that only has a management fee


Fee breaks for select investors based on commitment amounts

50% 48%

Tiered management fees (based on AUM) 35%

Longer duration incentive fee crystallisations Tiered incentive fees/carry allocations


Negotiated an expense cap


Cost pass-through model in lieu of management fees 1% or 30%

25% 20%

Source: EY

still have work to do if they are to find the sweet spot between turning a profit and delivering value. That work is not coming in the form of cuts. The EY survey says 82% of hedge fund managers refused to slash charges. However, there is evidence of an adjustment in fee structures. As the chart above shows, there is a willingness by managers to embrace alternative charging structures. Wood offers anecdotal evidence that there is some compromise in this area. “There have been some variations on the typical performance hurdles [over which managers receive fees]. I do see managers go to a money multiple hurdle rather than an IRR [internal rate of return], which is less hard to flatter and influence.” In private equity, the old 2 and 20 fee structure – a 2% management fee and a 20% performance fee – is stubbornly persistent. “The 2 and 20 model is very old – it’s worked for many decades and it’s here to stay. It does align interests between investors and fund managers,” KPMG’s Stevens says. The alternative space is dynamic and exciting, and has much to offer an informed investor looking to diversify their portfolio. For managers to survive, however, they will need to continue investing in technology, adding to their talent pool in new and interesting ways and – above all – make sure they remember that when it comes to fees, their clients’ pockets are perhaps not as deep as their own. n

given that 38% of clients are unhappy with the fees on offer, providers still have work to do if they are to find the sweet spot between turning a profit and delivering value






Meet Pierpaolo, he’s one of three Masters of Wine here at Waitrose & Partners. He and his team spend their lives searching the planet to find the best wines for our customers. Think of them as your very own sommeliers. Because every single wine we sell has been hand-picked by them.

Pierpaolo, Partner & Head of Wine Buying


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Knowledge Brain food for the busy business professional

The Knowledge is compiled by Alexander Garrett Safest city



Tokyo is the safest major city in the world, followed by Singapore and Osaka, is the conclusion of the latest Safe Cities Index study by The Economist. The study evaluates 60 major urban centres around the globe. The top-ranking cities were dominated by Asia Pacific, which held six of the top 10 slots. Each city is rated under four headings: personal security (relating to crime and violence); infrastructure security (such as safety levels of transportation networks and building construction standards); health security (public health policies and access to medical treatment); and digital security (measures against online crime). For 2019, a fifth aspect was added: urban resilience, looking at natural disaster preparedness and social connectivity of residents.

Upwardly mobile

Gentrification is more beneficial for the original residents of a neighbourhood than previously thought, according to a new study by the Federal Reserve Bank of Philadelphia. The research, which looked at fast-improving city neighbourhoods across the US, found that gentrification increases college attendance and reduces poverty among the many inhabitants who stay in the area, including the most disadvantaged, and does not make the leavers worse off.

Look who’s smiling

People who use emojis in their messages and emails have more dates and more sex, according to research by the Kinsey Institute at Indiana University. The researchers carried out two studies. The first, among a sample of 275 single people, looked at whether emoji use was associated with ‘success’ in dating; the second looked in more detail at the frequency and specific use of emojis. Those who used emojis were more likely to follow up a first date and for it to develop into a sexual relationship. There’s a simple reason why: in a digital world, where most communication is text-based, emojis allow you to express your emotions and send the right signals to a potential partner.

Lunar treasure

A study by geologists in Canada and the US suggests there may be vast reserves of precious metals deep below the moon’s surface. The study was published in Nature Geoscience. Lead author James Brenan, a Professor in the Department of Earth and Environmental Sciences at Dalhousie University in Nova Scotia, Canada, says the conclusion has been reached by drawing parallels with mineral deposits found on Earth. “We have been able to link the sulphur content of lunar volcanic rocks to the presence of iron sulphide deep inside the moon,” he explained. “Examination of mineral deposits on Earth suggests that iron sulphide is a great place to store precious metals like platinum and palladium.” Geologists at Carleton University and the Geophysical Laboratory in Washington, DC also participated in the research.

Rich boroughs

More than half of the UK’s top 1% of taxpayers live in London and the South East. And they are becoming more concentrated geographically, with half of the top 1% in 2014-15 living in just 65 constituencies – compared with 78 constituencies in 2000-01. That’s the key finding of new research by the Institute for Fiscal Studies into the group that largely makes up the highest earners. Over the same period, the proportion of the top 1% of taxpayers living in London has increased from 29% to 35%. In the capital, an income of £300,000 is required to put you in the top 1%, while in Wales, the North East and Northern Ireland, it’s around a third of that. And 83% of the top 1% taxpayers are still male.

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New in… BOOKS

rebel and a cause

glamour essentials

Rebel Ideas: the Power of Diverse Thinking by Matthew Syed (John Murray, £20, hardback) Britain’s former number one table tennis player has become a leading thinker in the field of performance both inside and outside sport. This latest book is about thinking outside the box in facing challenges across such diverse topics as obesity, terrorism and climate change. It promises: “Success is no longer just about talent, or knowledge or skill. Today, it is also about freeing ourselves from the blinkers and blind spots that beset us all, and harnessing a critical new ingredient: cognitive diversity.” Case studies include intelligence failings of the CIA before 9/11, a communication breakdown at the top of Mount Everest, and deradicalisation in America’s Deep South. Diverse it certainly is.

The Glossy Years: Magazines, Museums and Selective Memoirs by Nicholas Coleridge (Fig Tree, £25, hardback) As the UK Managing Director, and more recently Chairman, of Condé Nast, Coleridge has been at the epicentre of the glossy magazine world for three decades. This is his account of those times, laced with anecdotes of the rich and famous – Princess Diana, Beyoncé, David Bowie and Philip Green are just some of the names dropped by the publisher. Not to mention the fashion glossies’ own royalty, Tina Brown and Anna Wintour. Coleridge is, of course, a brilliant writer in his own right, so anyone whose simple pleasure is peeling back the latest front cover of Vogue or Tatler has a treat in store.

in it together

teatime treats

Couples that Work: How to Thrive in Love and at Work by Jennifer Petriglieri (Penguin Life, £14.99, paperback) Every relationship requires a bit of give and take – not just to keep the bond in good health, but to ensure that each person enjoys a satisfying career. The author of this book, an Associate Professor of Organisational Behaviour at international business school INSEAD, has tackled the two topics in tandem. Couples that Work... is targeted at couples to help them meet life’s challenges together, particularly where career conflicts, child-rearing challenges and the quest for a good work-life balance are at stake. It demonstrates that, for a couple to be happy both in life and work, it shouldn’t be down to one person to make all the sacrifices.

From the Alps to the Dales: 100 Years of Bettys and Taylors by Annie Gray, (Profile Books, £19.99, hardback) This is one of those corporate hagiographies in which the life story of a famous old business is recounted. The business in question is Bettys Café Tea Rooms of Harrogate in Yorkshire, together with its subsidiary, tea and coffee merchant Taylors. Bettys was actually founded by Swiss baker Frederick Belmont in 1919 and has gone on to become a Yorkshire institution. When it bought another Yorkshire business, Taylors, the two, we are told, shared a pursuit of ‘extraordinary flavour and traditional family values’. Not only is the history exhaustively researched, but there are plenty of pictures – including employees past and present.

All prices are RRP.

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The Knowledge

In numbers: Football finance



The revenue of the world’s richest club, Real Madrid, in 2017/18. Source: Deloitte Football Money League

qredible This pan-European find-a-lawyer resource targets conveyancing and divorce practitioners – the legal services most likely to be sought online – competing with the likes of The Law Superstore and MyLegalAdviser.

spectacular failures


The number of English Premier League clubs in the world’s top 10 by wealth. Source: Deloitte Football Money League

In this podcast from American Public Media, Lauren Ober recounts some big business calamities – the Christian theme park fraud scandal, the funeral giant sued for $500m, a bestselling beer producer’s ill-fated recipe change – and Donald Trump’s big failure in Atlantic City.

€222m World record transfer fee paid by Juventus to Barcelona in 2017 for Neymar. Source: BBC Sport

honcho Honcho is an app that enables car insurers to bid in real time for the business of individual customers. Known as a reverse-auction marketplace app, it will list the details of individual customers – particularly those with more challenging requirements, such as younger drivers – and brokers and insurers will pay £1 each time to put in their bid for the customer’s business.


Annual salary of Ada Heberberg of Lyon, the world’s highest paid female footballer. Lionel Messi, the highest paid man, gets €130m. Source: Marca

american factory Netflix documentary American Factory – backed by Barack and Michelle Obama’s Higher Ground Productions – looks at the culture clash that arises when a Chinese company takes over a glass factory in Ohio. As the Chinese owners attempt to ramp up automation, the US workers try to establish a union. Given the US-China trade war, it’s become compulsive viewing in China (where it’s not meant to be available).


The weekly wage paid to Sir Stanley Matthews, legendary England player, for his first professional contract in 1932. Source: Evening Standard/Hanson Auctioneers

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How to…

…Manage employee bonuses For some, it’s the annual payday that will buy that flashy new car or shrink the mortgage. For most, it’s a nice little extra that could fund a holiday or at least reduce your overdraft. Either way, everyone likes a bonus – but how do you make sure this handout makes a positive contribution towards your business?


“If you pay your big-hitters their bonus all in one go, there’s a danger they’ll be on the phone to headhunters the next day”

Non-discretionary bonuses are based on achieving clearly set out criteria that may be contractual and subject to legal enforcement if the company tries to wriggle out of paying. The important issue, says software and support provider Bright HR, is that ‘for discretionary bonuses to create an incentive, employees must trust they will receive a bonus for good performance’.

First, decide whether you’re rewarding what’s already been achieved or you’re incentivising future behaviour. HR consultancy Mercer explains: ‘Look at what your business objectives are and what behaviours you need to achieve going forward, in order to see whether a bonus scheme is appropriate.’ Objectives may vary from year to year, or even during the year. And ensure that short-term gains are not being encouraged at long-term cost.



It’s not unusual to start off with a bonus for the wider group based on company performance, then move on to assessment and reward on an individual basis. The buzzphrase is ‘line of sight’ – can each individual clearly see the actions they can take that will make a difference? If some people work entirely in teams, set team targets and assess the bonus for them as a group.

Many companies are extending their bonus schemes to cover a wider range of factors, which reflects a broader set of business objectives, according to UK pay and reward specialist Ashworth Black. ‘This can help avoid the potentially distorting effect of focusing too much on a single measure,’ the company explains. As well as financial and output targets, bonus schemes can include factors such as attendance, customer service, quality, safety, team and individual performance or various HR-related measures – depending on the nature of the business.

FIXED OR NOT? There are two basic types of bonus: discretionary and non-discretionary. The former isn’t written into employees’ contracts and, as the name suggests, it’s awarded at the discretion of management, so the performance required can be flexible.

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There’s no point in everybody getting fat bonuses if the company is about to go down the pan. You could set a threshold profit for the business as a whole, which has to be achieved before anybody gets a payout. You should also set minimum targets for each bonus factor and reserve the right to withhold bonuses in special unforeseen circumstances.


PAY MOST, BUT NOT EVERYONE There’s an element of psychology to getting the distribution of bonuses right. Those who don’t get at least the average bonus may feel like losers, which can be bad for morale, but if someone is a poor performer, you shouldn’t pay them. It sends a powerful message that they need to improve.

KEEP IT UNDER YOUR HAT Posting up the annual bonuses on the company noticeboard might seem like a

The Knowledge

Business leaders on making it to the top

Getting ahead Georgina Cook, Head of Property, Mourant What made you decide to become a lawyer? good idea, but it will almost certainly result in resentment. What should be transparent is the reason bonuses are paid, and what people have to do to earn them.

I wanted to be a chemical engineer but, after work experience, decided life in the lab wasn’t for me. Law was one of the few degrees I could swap to with science A-levels. Law offers a breadth of areas to work in: property, finance, environmental issues, family, crime, trusts, tech. It’s also a good career if you like working with all sorts of people and establishing close working relationships.


How difficult was it to start practising in Jersey?

Most companies tend to pay bonuses annually because they are linked to annual profit targets. But in some contexts, shorter measurement periods and regular bonus payments may have a greater motivational impact, according to Ashworth Black. The impact of a big one-off payment should be weighed up against the motivation provided by an ongoing incentive. If you pay your big-hitters their bonus all in one go, there is always a danger they’ll be on the phone to headhunters the following day.

I moved to Jersey in September 2000 after qualifying as an English solicitor and quickly realised the Jersey legal system is very different to England’s – not least because a lot of the property contracts are in French. However, the Jersey legal community is relatively small and I found many people willing to assist. My decision to requalify as a Jersey Advocate really helped: the studying immersed me in the detail of Jersey law, whilst my daytime work built up my practical expertise.

CONSIDER OTHER REWARDS There’s quite a bit of evidence that cash bonuses are not the best way to motivate and incentivise people – in some cases they may come to be seen as an expected part of pay. Share options are ideal for those in leadership positions who can influence the overall fortunes of the business. But there are many other ways of rewarding staff – time off, days out, vouchers, offering fresh food in the workplace or simply saying thank you.

What challenges do you face in this male-dominated sector? I’ve become more vocal about the inequalities that still face women in law and I regularly blog on it. While on the face of it we now have laws to address discrimination, and firms often have internal policies to prevent it, the challenge for businesses is to change systemic practices or unconscious biases. There’s a lot to do in Jersey: more women than men enter the profession but are hugely under-represented at top levels.

How can this be achieved? It’s about shifting established mindsets. I’ve begun to talk openly about my experiences to raise awareness. There’s a fear that if you speak out about inequality or discrimination, your career will suffer and that prevents a lot of junior lawyers from raising concerns. I feel I have a duty to try to make a difference for future generations – and this includes calling out biased behaviours.

What career advice would you like to have passed on to your younger self? To achieve real personal and professional success, you must be yourself, not a version you think other people expect. You don’t have to slavishly emulate your superiors to get on; your value is in being you. Authenticity is key and if your work environment is not aligned to your core values, you won’t be truly comfortable or successful. Oh, and if you’re the only woman in the room, never offer to get the tea.

November 2019-January 2020 89




Charles Handy


t the age of 87, Charles Handy can still lay claim to being among the first to recognise that the days of the old-fashioned Britain’s leading management guru; perhaps the only one hierarchical organisation were numbered, as were the days of whose influence has extended internationally. Where others the conventional lifelong career. The Empty Raincoat highlights have focused on thinking about topics such as strategy, innovation the pointlessness of creating a society in which economic or customer service, Handy’s contribution has been mainly in the productiveness is maximised at the expense of humanity. realm of organisational culture, as well as the nature – and future – Handy was one of the first to think about work having a real of work. He coined the terms ‘portfolio career’ and ‘Shamrock purpose beyond profit, and the need for organisations to organisation’, while championing ideas that captured become more people-focused. As he explained it at the “If economic widespread traction, such as ‘the second curve’, which time: “The empty raincoat is, for me, the symbol of our progress means we most pressing paradox. If economic progress means we describes the second phase of an individual’s career. Handy was in fact born in Ireland and, after become anonymous become anonymous cogs in some great machine, then university at Oxford, developed many of his ideas cogs in some great progress is an empty promise.” during the first curve of his career, in the marketing Many of the things he predicted – flexible working, machine, progress the extension of people’s careers into their seventies, and department of Shell. He also taught at London is an empty Business School and spent a year at the Massachusetts an increasing organisational dependence on outsourcing – promise” Institute of Technology in Boston before becoming a have come to pass, albeit not always in a good way. freelance author and thinker – and a prolific one at that, Handy’s influence came not just from his ideas and with more than 20 books to his name. Starting with Understanding thinking, but from his skills as a writer and broadcaster. He even Organizations in 1976, they include numerous bestsellers, including recorded his own Guide to the Gurus of Management for the BBC. Gods of Management, The Future of Work and The Empty Raincoat. His new book, 21 Letters on Life and its Challenges, looks to the If there is a common theme running through, it is having been challenges facing the next generation.


We’ve had greenwashing (overplaying your eco-credentials); genderwashing (ditto with your gender equality efforts); and pinkwashing (exaggerating your support for LGBTQ rights). So it was only a matter of time before wokewashing made an appearance. It refers to companies adopting the language and imagery of being ‘woke’ – championing popular causes and opposing social injustice – to promote their brand, particularly without taking any obvious tangible steps to make a difference. The most notable example of this is an ad by Pepsi featuring influencer Kendall Jenner, which jumped aboard the bandwagon of the Black Lives Matter movement in the US. Others who’ve been in the frame include Gillette – for its TV commercial ‘The best men can be’, which was perceived as jumping on the coattails of the #MeToo movement – and Marks & Spencer, which attracted flak when it introduced a lettuce, guacamole, bacon and tomato (LGBT) sandwich to celebrate Pride 2019. What next? A campaign to defend pigs from being made into bacon? That would be pure hogwash.

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Repetitive change syndrome Describes how public and private organisations are damaged by repeatedly jumping on the latest management fad.

Economic moat The competitive advantage that protects a business from its rivals. Companies with this characteristic are known as moat stocks.




The Knowledge

Top tech Face time




During the summer, a storm blew up when it emerged that property developer Argent was using facial recognition technology at London’s Kings Cross to scan the faces of workers, shoppers and other visitors. The exact purpose was never revealed beyond the vague premise of ‘security’, but in a leaked letter to the London Mayor, the company said it wanted to spot people who had carried out previous offences on the site. After a backlash in which privacy and human rights campaigners condemned the move as authoritarian – not least because it captures, stores and processes individuals’ facial images without their consent – Argent said it had scrapped the use of the technology. Kings Cross was just the tip of an iceberg for a technology that’s already heavily used in other parts of the world and is likely to become widely adopted in the UK and Europe over the next few years. In China, the authorities routinely use facial recognition to monitor large crowds and capture fugitives; it’s been speculated that the vast majority of the country’s 1.4 billion population have their images stored on systems that can make positive identifications within seconds. In the UK, shopping centres such as the Trafford Centre in Manchester and Meadowhall in Sheffield are reported to be trialling the technology, while museums and conference centres have also tried it out. In the US, the technology is used by Customs and Border Protection agents at many airports to screen passengers on international flights in the search for terrorists, though a number of cities – such as San Francisco – have moved to ban the use of facial recognition cameras in public places.

CHECK MATE Square Off is an artificial intelligencedriven chessboard that uses robotic arms to move the pieces under direction from chess software as you pit your wits against a spooky invisible opponent. £389,

Security may be the main application of face identification tech, but it’s far from being the only one. The other big area is marketing and retail. Imagine you’re working behind the counter in a department store and a customer approaches to ask for help. Using facial recognition, your screen can tell you immediately who they are, and how much they’ve spent previously. It’s an approach US retailer Saks Fifth Avenue already uses, comparing faces to two databases: one of security risks, the other of VIP shoppers. Californian burger chain CaliBurger, meanwhile, uses facial recognition technology to identify customers who’ve set up loyalty accounts and give them a display of their previous orders and discounts when they walk into an outlet. Shopping centres are interested in the technology as it enables them to track individual shoppers as they move around and find out which stores are being visited, the duration of the trip, and so on. Software specialist SAP is working in this area. Head of Product Marketing Drew Bates told Forbes magazine: “Forget recognising them as explicitly known customers and instead track them as sessions that can be used to build segmentation and sales-cycle analytics.” In healthcare, too, there is growing interest in facial recognition technology as a way to ensure that you are dealing with the right patient and giving them the correct medication. And there’s a plethora of other applications being developed, from cars that recognise the main driver when they sit down, to hotels allowing guests to check in and check out simply by showing their face. Privacy concerns notwithstanding, it’s clear this is one technology we’re going to hear a lot more about. So smile, you’re on camera.

SPINAL APP Dodgy back? Kaia claims to be the first medically approved app in the EU and UK that can help you manage back pain from your smartphone with individual exercise programmes. From $63 a year,

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Directory To advertise in the directory in print or online contact Carl Methven on + 44 (0)1534 615886 or

Great learning boosts performance It’s a simple fact of business that people who know how to use their IT systems properly are more productive and happier at work. At ALX Training, it is our mission to ensure that every person we work with can use their essential applications properly, saving time, smoothing processes and creating a more productive workplace.

Appleby is one of the world’s largest providers of offshore legal advice and 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 Hong Kong and Shanghai. We are also the only firm to have offices in all three British Crown Dependencies. Our services include:

Ashburton Investments is an investment manager offering discretionary portfolio, multi-asset and specialist fund solutions to international private and corporate clients including family offices, trustees and wealth managers. While the rest of the industry may have had to come to terms with how the global financial crisis changed the world for their clients, we have simply carried on doing what we have always done – delivering risk adjusted returns through all market conditions.

Our trainers are renowned for their product knowledge, and their friendly and energetic attitudes to training help them get the best from every person they teach.

l Corporate l Dispute Resolution l Private Client & Trusts l Property

Learning starts at induction We are well-known for our range of Microsoft Office courses which includes Office 365, Excel, Outlook, PowerPoint, Word, Project, SharePoint and Visio but our clients know we can do much more.

Members of the Jersey and Guernsey offices regularly advise London City and international law firms on all legal aspects of offshore corporate, finance and investment fund transactions and arrangements in the Channel Islands.

Not only do we train on well-known accounting packages such a Xero and QuickBooks but we create courses on bespoke in-house systems. We design unique courses specifically for your organisation, so that your staff learn precisely the information they need to work efficiently and effectively.

For more information visit our website

Multi Asset is not the latest investment trend to us. It has been the cornerstone of our business since inception, supported by our experienced and longstanding equity specialists. For more than 35 years, we have invested in what makes sense. Our product set and approach to investments has evolved over time to suit ever changing market conditions but the underlying constant is that we understand our clients need to effectively manage risk and we put them at the centre of our thinking.

Wendy Benjamin Managing Partner, Jersey Group Partner, Guernsey

Globally, Ashburton Investments has over £9.1bn under management as at April 2018 with offices in the Channel Islands, United Kingdom and South Africa.

We know there’s no better place for your new colleagues to start learning than during their induction programme, so we develop bespoke induction courses that give your new starters all the information they need to hit the ground running. We can even deliver content online, so training can be ongoing and continuous.

Contact Laythamm Malorey E: T: +44 (0)1534 512010

Contact us to discover great learning opportunities: T: 01534 873785 E :

92 November 2019 -January 2020

Independent and Professional We offer a full range of management and fiduciary services to our domestic and international private clients and corporate structures: Family office - bespoke assurance Wealth management - your strategy l Trustee - impartiality with vision l Corporate services - attention to detail l Good governance - a helpful eye l Strategic guidance - controlled ideas

Be Secure is a consultancy business providing services in the following areas; GDPR data protection ISO 27001 Information Security l Cyber Security l EU Representative services l l

(via Irish office)



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. Contact us: Tim Cartwright – Director Lisette Le Creurer – Associate Director Wendy Warder – Associate Director Áine O’Reilly – Director Tel: 00 44 1534 870670 We aim to assist in the provision of personal service to meet your requirements. Ask us. Being vigilant and proactive in the face of a fast changing legal, economic and fiscal landscape. We can provide the focus to your solution. Try us. Regulated by the Jersey Financial Services Commission

Be Secure, in association with partners who are experienced professionals in data protection, technology, cyber security and legal services are working to deliver high standard assurance and advisory services to Channel Islands organisations. We work as a business partner to your organisation in support of the board of directors, trustees, partners, senior management and staff in managing the governance obligations of data protection in this new GDPR data protection world! Be Secure is lead by a highly experienced finance professional, who has worked in senior roles in private equity owned businesses, in both commercial and financial services business sectors. As a member of the International Association of Privacy Professionals (“iapp”) and an accredited Certified Information Privacy Professional Europe (CIPP/E), Certified Information Privacy Manager (CIPM), Certified Information Privacy Technologist (CIPT), GDPR Practitioner, ISO 27001 Lead Implementer and Lead Auditor, Be Secure’s founder and director can help you, and your colleagues, manage this area in a professional and practical way for your organisation and clients. For further information please contact:

Carey Olsen is a leading offshore law firm. We advise on Bermuda, British Virgin Islands, Cayman Islands, Guernsey and Jersey law across a global network of nine international offices. We are a full service law firm working across banking and finance, corporate and M&A, investment funds and private equity, trusts and private wealth, dispute resolution, insolvency and property law. Our clients include global financial institutions, investment funds, private equity houses, multinational corporations, public organisations, sovereign wealth funds, high net worth individuals, family offices, directors, trustees and private clients. We work alongside all of the major onshore law firms, accountancy firms and insolvency practitioners on corporate transactions and matters involving our jurisdictions. Our advice is delivered by an approachable and experienced team of globally-minded lawyers who work in partnership with our clients to help them achieve their objectives. We have the expertise and resources to handle the most complex international transactions combined with a personal approach to business. Contact: T +44 (0)1481 727272 T +44 (0)1534 888900

Brian Siney, Founder and Director, CIPP/E, CIPM, CIPT, ISO 27K Lead Implementer, Lead Auditor, FCA +44 7797 738743 or

➔ November 2019 -January 2020 93


Deloitte LLP provides audit, tax, consulting and financial advisory services, bringing world-class capabilities and high-quality services to clients. The company has the broadest and deepest range of skills of any global business advisory organisation and is a world leader in the professional services industry. We advise and deliver for the public sector as well as global and local businesses across every industry. Deloitte employs over 200 professionals in Jersey and Guernsey and is part of Deloitte North South Europe (NSE). The NSE firm brings together 13 countries and over 40,000 talented people, giving the firm the expertise to solve organisations’ most complex challenges and make an impact that matters. John Clacy Partner, Guernsey D: +44 1481 703 210 Jo Huxtable Partner, Guernsey D: +44 1481 703 308 Alex Adam Partner, Guernsey D: +44 1481 703 214 Martin Rowley Partner | Jersey D: +44 20 7007 7665 Siobhan Durcan Partner, Jersey D: +44 1534 82 4274 Theo Brennand Partner, Jersey D: +44 20 7303 0035

94 November 2019 -January 2020

Estera is a fully independent, market-leading provider of corporate, fund and trust services. Our highly regarded practitioners have extensive experience and expertise of delivering tailored, commercially-focused fiduciary solutions that help our clients meet their business objectives.

Fiduchi is an independent multi-family office, trust, corporate and yacht services provider. We are owner managed free from the pressures of Private Equity, Corporate and Institutional ownership. We focus on the following three service areas:

We work with listed and privately owned companies of all sizes as well as leading financial institutions, advisory firms and individuals and their families.

Private Wealth: We provide bespoke solutions to family offices and a broad range of HNWIs, entrepreneurs, business leaders and large families from all over the world.

In Guernsey, we are one of the leading players in the funds industry having acted on both of the LSE IPOs for new investment funds last year and we provide a range of corporate and fiduciary services to high-networth individuals, private companies, funds and global corporations.

Corporate Services: including Real Estate, Capital Markets and Employee Services.

Our Jersey team offer a broad range of fund, fiduciary and administration services and manage over 1,000 structures for private and corporate clients as well as having over £10bn in assets under administration. Our global footprint in 11 jurisdictions means we can deliver service continuity across multiple time-zones, both onshore and offshore. For further information please visit our website or contact Corporate: Patrick Jones – Group Director Funds: Ethan Levner – Group Head of Corporate Development Trusts: Richard Prosser – Group Director

Yacht Services: (formally Jersey Yacht Management Limited) are leading specialists in the offshore yacht, megayacht and superyacht services industry. We have a thorough knowledge of all aspects of yacht ownership structures, yacht registration, tax, administration and crew employment and payroll. For further details contact: David Hopkins - Managing Director +44 (0) 1534 755 111 Robert Ayliffe - Executive Director +44 (0) 1534 755 124 Darren Hocquard - Executive Director +44 (0) 1534 755 101 Fiduchi Limited is regulated by the Jersey Financial Services Commission.

Estera Trust (Jersey) Limited is regulated by the Jersey Financial Services Commission Address: Estera, 13-14 Esplanade, St Helier, Jersey, JE1 1EE Estera Trust (Guernsey) Limited is regulated by the Guernsey Financial Services Commission Address: Estera, PO Box 25, Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3AP To advertise in the directory in print or online contact Carl Methven on + 44 (0)1534 615886 or

Intertrust is a global leader in providing techenabled corporate and fund solutions to clients operating and investing in the international business environment. The Company has more than 3,500 employees across 30 jurisdictions in Europe, the Americas, Asia Pacific and the Middle-East. Intertrust delivers high-quality, tailored fund, corporate, capital market and private wealth services to its clients, with a view to building long-term relationships. The Company works with global law firms and accountancy firms, multinational corporations, financial institutions, fund managers, high net worth individuals and family offices. In the Channel Islands we offer a comprehensive range of services to our clients and business partners:-

Julius Baer’s origins date back to 1890. From that time the renowned Swiss private banking group has been dedicated to serving and advising sophisticated private clients and family offices from around the world – going on 125 years now. Julius Baer employs more than 120 personnel in Guernsey and offers a full range of financial services, including discretionary portfolio management, investment advisory, structured products and credit services. There is also a dedicated team that supports the needs of External Asset Managers and the Branch works closely with the wider Julius Baer Group through the provision of administration and support services that are delivered from its booking centre.

KPMG in the Channel Islands is a leading provider of professional services, including audit, tax and advisory. With offices in Jersey and Guernsey, we employ over 260 members of staff across the two islands. We work closely with clients, helping them to identify and grasp opportunities, and mitigate risk. KPMG’s global network enables us to draw on international resources to meet clients’ needs. KPMG member firms are located across 154 countries and employ more than 200,000 people around the world. With passion and purpose, we work shoulderto-shoulder with clients, integrating innovative approaches and deep expertise to deliver real results.

Corporate Services l Fund Services l Real Estate Services l Capital Markets l Private Wealth l Performance & Reward Management Services

Stephen Burt Branch Manager

Guernsey Neale Jehan Chairman

Jean-Luc Le Tocq Head of Private Banking

Tony Mancini Tax Partner

We pride ourselves on providing professional, personal and cross-border services to our clients across the globe, enabling businesses to grow sustainably.

Craig Allen Head of Investment Management

Linda Johnson C.I. Head of Advisory

Shaun Kelling Head of External Asset Management

Jersey Andrew Quinn Managing Partner and C.I. Head of Audit


For further information, please contact Jacob Smed Managing Director, Jersey +44 (0) 1534 504000 Marie McNeela Managing Director, Guernsey +44 (0) 1481 211275 Intertrust Jersey is regulated by the Jersey Financial Services Commission and Intertrust Guernsey is regulated by the Guernsey Financial Services Commission. Bank Julius Baer & Co Ltd, Guernsey Branch is licensed in Guernsey to provide banking and investment services and is regulated by the Guernsey Financial Services Commission.

John Riva C.I. Head of Tax Robert Kirkby Advisory Partner

November 2019 -January 2020 95


Specialty: Bespoke IT Development & Business Consultancy

Building trust in society and solving important problems

Puritas is an award-winning provider of intuitive software and business solutions for the financial services industry.

We focus on three things at PwC in the Channel Islands: assurance, tax and advisory services. But how we use our knowledge and experience depends on what you want to achieve. So whichever one of our 390 staff in the Channel Islands you work with (or 225,000 people across the PwC global network of member firms), they’ll start by asking the following questions:

Specifically designed to meet the increasingly complex accounting, compliance, and reporting needs of our clients, all software features robust audit and control capabilities which can be easily updated to reflect changes in the regulatory environment. Our products include: l PureFunds - a unitized product platform specifically designed to support many different types of asset class and fund structures and help fund administrators and portfolio managers better manage investor activity l P ureClient - an advanced customer due diligence/client management system which will maintain and update client records for any entity or relationship and provides the necessary transparency and look-through reporting that is needed to manage sophisticated structures l P ureManager - a bespoke software package for fund and investment managers which provides for effective control, analysis, reconciliation and reporting of daily trading activity. As well as software development, our services include: l Systems integration and implementation l Programme and project management l Project and business consultancy To find out more how Puritas can help your business. Contact: Mike Feighan - Director Phone: +44 (0) 1534 874100 Email:

96 November 2019 -January 2020

Are you looking to build trust? Give your shareholders more value? Or do you want to do something completely different with your strategy? When we work with you we really listen, to understand you better. We’ll get to know you, your business and your goals. Then we’ll share what we’ve learned to help you get there. We want to deliver the value that you, our clients, our people and our communities are looking for. Talk to us about your issues and aspirations. For further information, please contact: John Roche, Partner, Guernsey Phone: +44 1481 752040 Email: Karl Hairon, Partner, Jersey Phone: +44 1534 838276 Email: Follow us: @PwC_CI

About RBC Wealth Management For more than a century, RBC Wealth Management has provided trusted advice and wealth management solutions to individuals, families and institutions. We are truly a global organisation, bringing our diverse expertise and deep knowledge to the sophisticated financial needs of our clients around the world. As one of the world’s top five largest wealth managers*, RBC Wealth Management directly serves clients globally with a full suite of banking, investment, trust and other wealth management solutions, from our key operational hubs in Canada, the United States, the British Isles, and Asia. The business also provides asset management products and services directly and through RBC and third party distributors to institutional and individual clients, through its RBC Global Asset Management business (which includes BlueBay Asset Management). For more information, please visit Contact: Phone number Tel. +44 (0) 1534 283 000 Address Gaspé House 66-72 Esplanade St. Helier, Jersey Channel Islands, JE2 3QT *Scorpio Partnership Global Private Banking KPI Benchmark 2018. In the United States, securities are offered through RBC Wealth Management, a division of RBC Capital Markets, LLC, a wholly owned subsidiary of Royal Bank of Canada. Member NYSE/FINRA/ SIPC. ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence.

Reaching the minds other publications can’t reach






questions with TIM PEARCE


Tea or coffee? Tea. Favourite song ever? Too shy by Kajagoogoo. Most amazing place you’ve ever visited? Sark. Scariest thing that’s ever happened to you? Becoming Global Managing Partner. Your best quality? Compassion. The worst thing about you? My timekeeping – but I’m getting better! Favourite food? Cake. Cats or dogs? Dogs. Can you play a musical instrument? No, but I’m great at karaoke! First job you had? Butcher’s shop on a Saturday.



Worst job you’ve done? I had to dress up as Bertie Bassett when I worked in a sweet factory.

What’s at the top of your ‘bucket list’? To cycle around America. Favourite book? Any Famous Five book. Sweet or savoury? Both. Have you ever met anyone famous? Ant and Dec. Who would you like to be stuck in a lift with? Oliver Reed. What one item would you save if your house was on fire (family excepted)? My phone. Buzzword you hate the most? The phrase ‘single source of truth’. What do you have for breakfast? Bacon roll. Something about you that people might be surprised by? I’m only 44! Tim Pearce is Global Managing Partner of Bedell Cristin, based in Jersey.


98 November 2019 -January 2020

Global specialist in trust, corporate and fund services, with 16 offices across 13 jurisdictions. Delivering bespoke solutions to a diverse client base of high-net-worth individuals, their families, international corporations, institutional investors and business owners requiring active wealth solutions.

Cayman Islands / Guernsey / Hong Kong / Isle of Man / Jersey Luxembourg / Malta / Netherlands / New Zealand / North America Singapore / Switzerland / United Kingdom Regulatory information is detailed on

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