Jersey intends to introduce a new unregulated fund regime early in 2008 designed to meet more closely the needs of the hedge fund community.
Jersey intends to introduce a new unregulated fund regime early in 2008 designed to meet more closely the needs of the hedge fund community. It follows extensive consultation with the funds industry both at home and in London, which identified that the island needed to widen its capabilities through the provision of unregulated funds to remain on track to become the European jurisdiction of choice for the alternative funds sector.
The new regime is designed to provide promoters and other fund introducers with the simplicity, certainty and speed they seek when setting up certain types of specialist fund.
The move comes at a time when Jersey is enjoying record growth in its funds sector. The catalyst was the introduction of the Expert Fund Guide, the streamlined approval process for professional investor funds, launched in 2004. Since then the industry has enjoyed consistent and sometimes spectacular growth. The latest figures show that industry assets grew by more than 30 per cent to GBP210bn during the 12 months to the end of June.
More than GBP110bn of that total is in the alternative market, with an estimated GBP51bn in hedge funds and funds of hedge funds, GBP31bn in real estate, GBP16bn in venture capital and private equity and GBP12bn in other specialist vehicles including corporate debt.
Since the changes to the regulatory platform in 2004, Jersey has continued to consult and the Jersey Financial Services Commission (JFSC) has implemented further changes to the regime.
The island also has in its regulatory armoury the Non-Jersey Domiciled Fund Guide, which allows Jersey functionaries to service non-domiciled funds under a streamlined authorisation process. This gives fund promoters greater choice if they wish to domicile their fund elsewhere but still take advantage of the administration and custody skills prevalent in Jersey.
Earlier this year the Listed Fund Guide was introduced, a fast-track authorisation process for the establishment of closed-ended collective investment funds that are to be listed on recognised stock exchanges or markets.
As a result of further consultation with the JFSC, Jersey is now ready for its next move, the unregulated category. Fund promoters will not need to seek regulatory approval if they apply to set up a fund in either the Unregulated Eligible Investor Category or Unregulated Exchange Traded Category. Consultations continue with the regulator to fine-tune the proposals ready for the launch, but one of the key features is that there will be no requirement for a Jersey-domiciled administrator, directors or custodian and, significantly, no audit requirement.
Unregulated Funds will be only suitable for professional and expert investors or those who have taken appropriate professional advice. Investment warnings will be prominent to indicate that such funds are unregulated, and existing funds will not be able to transfer to the new regime.
Professionals in Jersey have welcomed the new categories, believing that they will appeal to promoters such as hedge fund managers and other financial institutions, who look to set up certain funds in jurisdictions in which they can establish an unregulated product, often because speed in bringing the product to market is essential.
Ever evolving to meet the demands of the marketplace, Jersey’s funds industry believes that the new additions to its funds capability will enhance the island’s appeal as a centre for alternative investment funds and will encourage a further inflow of new funds business.
Beverley Le Cuirot is director of marketing at Jersey Finance