Guernsey private equity fund assets rise 9 per cent in third quarter

The value of the island’s private equity funds grew by GBP8bn, or 40 per cent, in the first nine months of 2007 and by GBP2.4bn during the third quarter despite the onset of the credit crunch that has hobbled much private equity activity worldwide.

Overall fund business in Guernsey grew by GBP8.9bn (5.7 per cent) in the three months to the end of September, the significant market turbulence during the quarter. The total value of funds under management and administration reached a new high of GBP164.5bn, an increase of GBP44bn (36.5 per cent) year on year.

‘These statistics are particularly impressive given the economic climate during the period,’ says Peter Niven, chief executive of GuernseyFinance, the promotional agency for the island’s finance industry. ‘They illustrate how Guernsey’s vast private equity experience and expertise is gaining ever-increasing recognition from fund sponsors and promoters across the world.

The value of Guernsey private equity funds tripled between the end of 2002 and the end of 2006, in considerable part thanks to the launch in mid-2006 of the USD5bn Guernsey-domiciled, Amsterdam-listed closed-ended fund KKR Private Equity Investors by Kohlberg Kravis Roberts.

Since then the roster of high-profile Guernsey private equity funds has been bolstered by Mid Europa III, the largest central European buyout fund with more than EUR1bn, Valdivia Private Equity Fund, Energy Ventures III, AA Development Capital India Fund (a joint venture between Ashmore and Alchemy, and EQT V, which raised EUR4.25bn.

Guernsey is continuing to attract private equity professionals to live and work in the island. Jon Moulton, founder and managing partner of Alchemy Partners, now lives in Guernsey, and Terra Firma, headed by leading industry luminary Terry Hands, has announced plans to open an office in the early part of this year.

‘This body of evidence is just the tip of the iceberg, but it clearly illustrates Guernsey’s credentials as a jurisdiction of choice for private equity,’ Niven says. ‘The island is a private equity success story.’

Mike de Haaff, chairman of the Guernsey Investment Funds Association, says: ‘Even putting aside the tax neutrality of the island, our success in private equity is down to the intellectual property that has built up, the experience and infrastructure now on the island in not only setting up these products but also in their administration. Guernsey has a long-established expertise in this area.

‘The majority of the business still comes through lawyers in London and it is a known fact that people come to Guernsey for private equity. Word of mouth is a big factor in the relatively small private equity community. It’s recognition that we have everything in place and are well placed to set up these products.

‘Also in the private equity arena, as with many other products now, management control issues and corporate governance are more to the fore, and we are very conveniently located for directors to get on an aircraft to Guernsey for board meetings on the island.’