www.hedgeweek.com special report

A Global Fund Media Publication | April 2019

Guernsey Fund Services 2019

In association with

Guernsey Green Overcoming NPPR – a proven Funds Brexit uncertainty distribution solution CONTENTS In this issue…

03 Reinforcing Guernsey’s financial services reputation By James Williams, Managing Editor, Hedgeweek

11 Guernsey – the specialist jurisdiction with the global reach Interview with Dr Andy Sloan, Guernsey Finance

13 Guernsey’s certainty is the solution to Brexit uncertainty Interview with Guernsey Investment Fund Association

17 Expanding the capital pool By Mark Oliphant, The International Stock Exchange Group

19 Private equity fund raising in Guernsey Interview with Mark Hooton, TMF Group

22 Why Guernsey bridges the gap By Craig Cordle, Ogier

24 Guernsey substance and benefits of the mature NPPR By Shaun Robert, PraxisIFM

26 The route to going green By Kevin Smith, Estera

27 Guernsey has reason to be optimistic By Cyril Swale, Grant Thornton

Publisher

Published by: Global Fund Media Ltd, 8 St James’s Square, London SW1Y 4JU, UK www.globalfundmedia.com ©Copyright 2019 Global Fund Media Ltd. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. Investment Warning: The information provided in this publication should not form the sole basis of any investment decision. No investment decision should be made in relation to any of the information provided other than on the advice of a professional financial advisor. Past performance is no guarantee of future results. The value and income derived from investments can go down as well as up.

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Reinforcing Guernsey’s financial services reputation By James Williams Managing Editor, Hedgeweek

In light of global initiatives such as the Paris be able to provide them with the product Accord, one area the bailiwick of Guernsey capabilities and wrap-around services.” has focused on, with respect to product The consultation process for the GGF innovation, is green investing in the financial closed at the start of June 2018, incorporating services industry. It has developed policies feedback from industry players, and the in response to expected demand for green Guernsey Green Fund was officially unveiled investment products over the next two or the following month. This is effectively an three decades; i.e. verifiable, certifiable entirely new asset class for the jurisdiction green products. where the underlying assets will need to “Our strategy has been to utilise our conform to green credentials and will need regulatory autonomy to create the world’s to be verified by a third party or a licensee. first green fund product; the Guernsey Green Discussing the drivers of green finance, Fund (‘GGF’),” says Dominic Wheatley, Chief Wheatley points out that when one considers Executive of Guernsey Finance. “We intend the amount of money one needs to attract to build on this and develop more ESG into new investment areas, managers have products. It’s necessary to anticipate what got to find a way to create products that fund managers will want, going forward, and marry up investors with the assets.

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“It’s necessary to anticipate what fund managers will want, going forward, and be able to provide them with the product capabilities and wrap-around services.” Dominic Wheatley, Guernsey Finance

in to our fund product. It is therefore quite a flexible fund product.” Anecdotally, Wheatley says he has heard from a couple of fund managers that their fund raising has been enhanced by having the accreditation; that is, they were already fund raising before, they then received the accreditation, and it triggered a number of “I think the issue around green investing investors to commit to the fund. and other aspects of impact investing is “Clearly there is an awareness and an how you provide a product that people interest among the investor community, can put their money in, knowing that the which we are encouraged by. I think people impact income they are expecting from can also expect to see an impact fund, with the investment is part of the regulatory its own taxonomy, introduced at some point, oversight,” says Wheatley. again with the GFSC overseeing a process “Then you might start to see pension funds of verification against a taxonomy with an investing more heavily, as they know the fund international standard. is regulated and includes the assurance that it “Some managers believe they have good meets green investing criteria. At the moment, enough green credentials and don’t feel they a lot of green and impact investments are ‘we need a verification process, which some do no bad’, but that doesn’t mean to say they investors might find acceptable where that are doing any good.” manager has the right reputation. But as we The GGF is applicable to all types of get more start-up managers in this space, fund, can be compliant with AIFMD, and investors will probably look for a bit more it is a fully regulated fund product, subject certainty than simply a manager saying, ‘Don’t to the rules and regulations of the island’s worry, we are a green fund’,” adds Wheatley. regulator, the Guernsey Financial Services There is no other fund like this yet in Commission. the marketplace. Paul Smith is Chairman of A rules overlay has been put in place to the Guernsey Investment Fund Association ensure that the fund’s “green” credentials are (‘GIFA’). He welcomes the introduction of verified and accredited. Industry specialists the Guernsey Green Fund and views it as worked with UK policy makers, including a good news story, in terms of the ethical discussions with the London Green Finance principals behind the product. Initiative as well as the United Nations and “It shows the innovation of the island the OECD, when developing the framework. and puts us in a good light,” says Smith. Wheatley confirms that the criteria used “We don’t want this to be a Guernsey niche are those laid out in the United Nations product, we want to make sure it is widely green taxonomy “so we’ve adopted an acceptable and something that can fit in international framework”. to global portfolios and can be understood “We’ve designed a third party verification by everyone. It’s been one of our more process with a regulatory wrapper,” explains important product innovations recently. Wheatley. “That framework can respond to “We are looking at other innovative ideas other taxonomies as they are introduced. For and we will continue to introduce new example, the EU is developing its own green products, at the right time, going forward, to taxonomy so if somebody wants a GGF maintain our reputation as a good place to based on that, in the future, we can build it come and do business.”

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Moving forward on the front foot Along with other offshore jurisdictions, there was somewhat of a ‘punch drunk’ feeling that Guernsey experienced with regards to the political discourse on offshore jurisdictions being tax havens and so on – indeed we’ve just seen Bermuda added to the EU’s blacklist. Smith is very clear when he states that “we’ve gone past that feeling now and things are very much on the front foot. “We need to continue to be a lot prouder and confident in Guernsey and what it can offer. It’s very easy when people are knocking you to retreat into the background. The fact is, this is a very tax transparent jurisdiction. We do excellent reporting. “The Guernsey Green Fund shows the Service providers here are feeling that positivity and confidence and hopefully that innovation of the island and puts us will feed in to more business coming to the in a good light.” island,” remarks Smith. Paul Smith, Guernsey Investment Fund Association

ECOFIN decision to benefit PE managers jurisdiction with robust regulation,” To illustrate how well trusted a jurisdiction says Wheatley. Guernsey is in the eyes of the European Indeed, Guernsey has been given a clear Union, in terms of tax transparency, it was bill of health in relation to its tax regime, recently announced that its funds had been substance and so on as part of Base reopened to future investment from the Erosion and Profit Sharing (BEPS) regulation. European Investment Fund. This followed a That gives the island a stable, reliable decision by the European Council of Finance platform for fund management groups and Ministers (ECOFIN) that it was satisfied with their end investors. the island’s legal substance requirements. “The EU hasn’t gone through two years The European Investment Fund is a of assessment to simply change its mind. It specialist provider of risk finance for small is trying to provide people with certainty and and medium-sized enterprises across clarity in relation to what it regards as an Europe, backed by the European Investment acceptable partner, and has come out and Bank, European Union, and a range of public very clearly stated that Guernsey is a reliable and private banks and finance institutions. partner,” continues Wheatley. It has just published new policy on its “We will do everything necessary to operations following the ECOFIN ruling. maintain that relationship with the EU as The new policy from the EIB confirms things evolve because inevitably, criteria will that there should now be no impediment evolve over time. For now, people can come to private equity firms in the islands here and know that the relationship we have conducting “business as usual” with the EIF, with the EU is on a stable footing and that which has invested into Guernsey funds we are in many regards in step with what previously as part of EUR147 billion invested the EU looks for in a third country.” across Europe. There is an overriding belief that “This is great news for Guernsey and a Guernsey’s regulatory and tax regime validation of all the work put in over the past provides stability in a way that meets the couple of years to ensure that Guernsey expectations of the marketplace. It has been has been recognised by the EU as a careful to balance what the EU expects with jurisdiction of real substance. It demonstrates what industry practitioners want in terms of once again that we are seen as a quality ease of doing business.

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TISE since the business was established in 1998. It took the total number of listed securities on TISE to 2,857 at the end of December 2018. Fiona Le Poidevin, CEO of The International Stock Exchange Group (TISEG), was quoted as saying: “I’m delighted that in 2018 we were able to not only surpass the stellar achievements of 2017 but also, at the same time, set a new record for the largest number of securities listed in a single year.” During 2018, TISE played a role in an innovative Insurance Linked Securities (ILS) transaction when it became home to what is believed to be the first ever listing on a regulated exchange of notes digitised on “I’m delighted that in 2018 we were able to a blockchain; USD4.1 billion of bonds were listed on TISE as part of the world’s most not only surpass the stellar achievements of expensive real estate transaction for a single 2017 but also, at the same time, set a new building, The Center, which is Hong Kong’s fifth largest skyscraper; and a GBP3.5 billion record for the largest number of securities debt issuance from sports betting and listed in a single year.” gaming giant GVC Group was the first listing on TISE to be sponsored by one of its Isle of Fiona Le Poidevin, The International Stock Exchange Group Man based member firms. A number of firms joined as Listing “I think we’ve struck that balance well, Members of the Exchange during 2018, based on how busy various practitioners are including ILS specialist Solidum Re at present,” says Wheatley. (Guernsey) ICC Limited, Isle of Man-based Smith does not expect economic FIM Capital, and, in Jersey, Intertrust substance requirements to necessarily Securities, as well as Maples and Calder. lead to any drastic change to the island’s In the second half of the year, TISE infrastructure but it may lead to change in introduced a new market segment, TISE how that infrastructure is used. GREEN, to enhance the visibility of those There is, he says, potential for fund investments which make a positive impact managers to locate more of their staff to the on the environment and updated the Listing island for substance requirements, which will Rules, in particular to appeal to Small and be good for Guernsey’s economy. The more Medium Sized Enterprises (SMEs). people there are working on the island, the Le Poidevin added: “There were a number more of a multiplier effect it will have on the of significant developments at the Exchange wider economy – i.e. residential real estate, during 2018 of which our team should be restaurants, office rentals, etc. very proud. A particular focus for us during “Substance will be a positive factor for the this year will be showcasing how both island in my view, as we look to encourage UK SMEs, as well as companies from our more fund managers to open representative ‘home’ jurisdictions of Guernsey, Jersey and offices,” says Smith. the Isle of Man, can potentially benefit from listing on TISE. I look forward to working TISE enjoys record listings with all our stakeholders as we take further To further underscore the strength of the strides forward in 2019.” jurisdiction, The International Stock Exchange (TISE) confirmed that 865 new listings were Proven fund distribution track record recorded during 2018, a 23 per cent year- Brexit has generated a great deal of on-year increase and the largest number business uncertainty over the past 12 of securities listed in a calendar year on months. This has put doubts in the minds of

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some UK fund managers as they weigh up whether to launch new funds or not. Some onshore jurisdictions have focused heavily on Brexit and their ability to offer the funds passport under AIFMD. As much as Guernsey, and the Channel Islands more broadly, are used to operating outside of the EU that message has been drowned out by the PR machine in other jurisdictions, as they seek to capitalise on the Brexit uncertainty. There is, however, no contamination threat to Guernsey regardless of what the final Brexit outcome looks like. That it has already been approved by ESMA as a third country means that it will allow managers to fully passport their Guernsey-domiciled funds across the EU. The passport is not “With Brexit, there is uncertainty as to yet available, but in the meantime, fund managers can freely avail of National Private where the UK sits and therefore coming Placement Regimes to market their fund(s) to somewhere like Guernsey, where into individual EU Member States. “The central message is that we have NPPR is a tried and tested route, is a well-established routes into markets around sensible option.” the world, including the EU through the Sam Shields, PraxisIFM National Private Placement Regime,” asserts Wheatley. “Guernsey has a lot of experience and vanguard of jurisdictions able to deliver that expertise in managing funds on behalf of mechanism to fund managers who launch investors across the globe. It is partly about funds from the island. market access and partly the fact we have a “We expect the excellent work that our highly specialised industry workforce able to tax authority and industry specialists have deal with any issues that arise from investors done to produce a good level of success across the world. for our funds industry going forward,” “Our relationship with the EU as a adds Wheatley. third country is completely unchanged Sam Shields is Head of Fund Marketing regardless of what happens with Brexit. We at Praxis Fund Services Limited, the were assessed by ESMA and were in the fund administration arm of PraxisIFM, an first of countries accepted as meeting its independent group of companies providing equivalence criteria under the AIFMD. That financial administration services. process was put on hold, because of Brexit, He notes that the firm has seen a but if that project comes up again we see significant increase in private equity activities no reason why we would not qualify on an over the past 12 months, “partly because we updated assessment.” have focused our efforts on supporting this In the meantime, there’s no indication asset class but also because we’ve seen a the EU will change or stop the NPPR good influx of enquiries from managers”. provisions because it would cut them off When it comes to marketing funds into from significant source of capital investment, the EU, Shields thinks Guernsey has some and clearly it would not be in the EU’s best real advantages and a solid track record that interests to do that. make it appealing to fund sponsors. The majority of funds look to raise assets “If you look across the jurisdiction as in a limited number of EU countries (France, a whole,” says Shields, “it has a solid Germany, the Nordics, Amsterdam) and as marketing regime that allows managers such NPPR is a very effective and reliable access to investors across Europe way to fund raise. Guernsey is at the and globally.

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As Shields explains: “When we speak to clients, the first question when we discuss fund structuring is where the end investors are based. What we find with the AIFM passport is that it works well for those managers who plan to market their fund product(s) to a high number of EU jurisdictions but when you drill down and look at where they are distributing, it often tends to be a handful of jurisdictions. Guernsey provides managers with a fantastic structure and mechanism, using NPPR, to be able to access those investors in key markets like Germany, the Nordics, etc. “Then we will typically move on to ask about the fund offering itself, what their track record is – this is extremely important in the eyes of the GFSC – and then whether they can source a cornerstone investor to support their fund. This can help give confidence to “With Brexit, there is uncertainty as to other prospective investors if they are a first- where the UK sits and therefore coming to time manager. somewhere like Guernsey, where NPPR is a “We want to make sure the manager uses tried and tested route, is a sensible option. the right jurisdiction to domicile the fund, It is something that more UK managers are and that they set up the right structure. We now considering. can help them with this by sharing some “In this respect, we have a third party of the experiences we’ve gone through AIFM business that we own here in with other clients, before they engage Guernsey as part of the PraxisIFM Group, with legal counsel on the actual fund called International Fund Management. structuring process.” The IFM team has seen a strong uptick in The depth of experience among enquiries as managers consider using IFM Guernsey’s service provider community, in as their third party AIFM to handle all the addition to its fund distribution track record, risk and regulatory reporting.” is one of the island’s main draws, especially Using a third party AIFM gives fund for those launching private equity funds. managers the certainty to privately place “In addition to its track record, the island their funds into the EU using the various promotes innovation such as we have just Memoranda of Understanding that Guernsey seen with the Guernsey Green Fund. This has in place with EU Member States. In such helps the jurisdiction to continue to grow and an arrangement, IFM delegates the portfolio broaden its value proposition. We have to management function back to the manager come up with these new structures to attract sitting in London, or elsewhere. new managers and to keep us competitive,” At present, IFM has approximately USD4 adds Shields. billion in AUM. It leverages Guernsey’s reputation in relation to distribution and has Open to innovation marketed to jurisdictions including Germany, Reputationally, Guernsey has a Standard & Sweden, Luxembourg, Denmark, the UK and Poor’s AA- rating. This has helped attract 805 Ireland on behalf of its clients. investment funds which, together with LSE- Whenever a manager is preparing to listed trading companies, have a combined structure a new fund, the investor location market capitalisation of USD63 billion. is one of the most important considerations, The GFSC encourages as much dialogue and one that the PraxisIFM team will readily as possible and is always willing to engage discuss with new managers and their with managers to discuss their business advisors. requirements, sharing its expertise of

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having watched the island’s funds industry representations with respect to the ability grow for over five decades. Recently, it of investors to suffer losses. If there is no unveiled the Innovation SoundBox for existing manager, then the licence for the those considering new start-ups to interact manager can be dealt with by the GFSC at with the GFSC during the registration or the same time as the PIF’s registration. licensing process. PraxisIFM is one of the few Guernsey- Guernsey is always open to innovative based administrators servicing all different approaches to doing business. types of fund structures from open- to At the start of last year the island close-ended funds, listed and private funds, introduced the Guernsey Investment Fund, through to non-Guernsey structures, funds- which uses public money supplemented by of-one and managed accounts. It supports private sector money, to invest in technology all different types of asset classes and does and digital start-ups. That is indicative of a a huge amount of London-listed funds work. jurisdiction that wants to embrace the new To remain relevant to managers running and isn’t prepared to rest on its laurels. closed-ended as well as open-ended fund Other innovative solutions have been structures, Guernsey’s fund administrators introduced to make Guernsey an attractive continue to evolve their operating models proposition. and look to introduce new technologies From a fund manager perspective, it wherever possible. offers Manager Led Products, shifting In terms of PE fund structuring, PraxisIFM the regulatory focus from the fund to the has created a centre of excellence in Alternative Investment Fund Manager (AIFM). Guernsey. It has built a strong team over the This reduces the regulatory and compliance years not only to service funds domiciled in burden associated with the launch of new Guernsey but other jurisdictions. funds, but keeps regulatory standards high “For example, some of our Cayman to the satisfaction of the regulator. Islands private equity work will be handled From a funds perspective, one from here. We want to keep our substance initiative that demonstrates Guernsey’s and expertise here in Guernsey, which is responsiveness is the Private Investment important in the current environment, and Fund (PIF), which launched in November to continue to help develop the island,” 2016. The PIF is the perfect solution to those explains Shields. investment projects where the manager and “Technology does play a part in this. investors are known to each other and all We keep our eyes open for any new know what they want to achieve, but where technology solutions we think could benefit the participants would draw comfort from a our clients. Technology should make us relatively low-cost regulatory solution which more efficient and provide the client with a requires oversight from a regulated third- better overall experience. Ultimately, though, party administrator and an independent it comes down to relationships and that’s annual audit. something we at PraxisIFM pride ourselves Originally designed for start-up managers on. Technology is important to us and and club deals, the PIF has also gained a something we are heavily investing in but following with large private equity managers this does not detract from having a high who appreciate the reduced requirements quality team.” for marketing documentation (no information Ultimately, the raison d’etre of a small particulars are required) and the speed niche jurisdiction is to do things better than to market allowed by the fast-track GFSC anyone else. To achieve that, it needs to registration process, which takes one create a business environment where the fire business day. of innovation can burn bright. Over the years, The PIF is limited to no more Guernsey has proven its capability at pulling than 50 investors, but the number of together the right level of regulation and skill potential investors it can be marketed sets among industry practitioners to foster a to is not restricted. Every PIF must competitive, compact business ecosystem; appoint a Guernsey licensed manager one where everyone works together and who is responsible for making certain knows each other.

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as the best place to test the solution is testament to the island’s reputation. Since then, Northern Trust has extended the blockchain solution so that audit firms can now carry out audits of private equity lifecycle events directly from the blockchain. “We’ve got a number of funds here looking at fintech and technology-based asset classes,” observes Smith. “I would like to see continued growth in using those digital technologies for servicing the funds business. “Aside from the economic substance point, which might attract more people, we are a small island and we need to make the best use of our human resources. Blockchain technologies are key to that but it takes time to design and implement these new solutions. “Additionally, from an infrastructure perspective, we are looking to install 5G It is possible to walk from one end of the networks, which will be a big step and help financial district in Guernsey’s main centre, to increase broadband connectivity speeds.” St Peter Port, to the other in approximately 15 minutes. A pleasant coastal environs, Looking ahead along the way you will find the likes of Ogier It is still early days to judge how much of a and other international law firms located success the GGF will be, or for that matter cheek by jowl alongside the GFSC, The the extent to which UK managers opt to International Stock Exchange, Guernsey distribute new fund products out of Guernsey Finance and numerous accounting, in the wake of Brexit, but Guernsey has administration and trust firms. shown its resilience over the years, and Anyone who visits the island can easily there’s nothing to suggest this will change spend a day meeting with the GFSC, or going forward. the Economic Department of the States Low costs and speed to market make it of Guernsey, while its service provider an attractive option to fund sponsors keen to community are more than willing to open up secure investor funding, while the heritage their diaries. of Guernsey’s private equity industry, and its highly specialised workforce, provide a high Digital growth opportunities level of confidence. Digital technology is also high on Guernsey’s Smith confirms there is a move to grow agenda as it seeks to evolve and expand its its Class B open-ended fund universe by value proposition. According to Smith it is potentially extending it for use by more crucial to the island’s future. esoteric asset classes, “while with the GGF “As we see the industry evolving, we are seeing managers putting different technological developments will become fund structures in place. vital,” remarks Smith. “I think Guernsey has “Over the last couple of years we’ve already demonstrated its innovation and is been looking to broaden the range of fund a test bed, as it were, for new fintech ideas vehicles and diversify Guernsey’s investment and tools.” funds sector, because like with any A good example of this is Northern Trust, economy, you don’t want to have too many who introduced a blockchain solution for eggs in one basket. While we applaud and one of their private equity fund managers. push private equity, which we have excelled To construct the solution, Northern at over the years, we want people to know Trust selected IBM to provide the cloud there is a wider range of asset classes we infrastructure. That they regarded Guernsey can support as well,” concludes Smith. n

10 | www.hedgeweek.com GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 GUERNSEY FINANCE Guernsey – the specialist jurisdiction with the global reach Dr Andy Sloan, Deputy Chief Executive, Strategy, at Guernsey Finance, explains why Guernsey is a natural home for managers pursuing the trend of splitting fund structures for improved distribution and service

Fund managers are increasingly looking to a Guernsey roadshow trip to South Africa split fund structures in a bid for effective last year, the Guernsey delegation was global distribution with better service repeatedly told “we need UCITS”. and reduced cost – and Guernsey is the “But when you asked why, they couldn’t jurisdiction working for them. tell us. And they simply wanted an offshore In the past few years fund managers structure to sell back into South Africa – using Guernsey have been looking for UCITS was just a brand name, but it didn’t structures that would enable split distribution. give them what they needed,” he said. They have been looking for quality and South Africa is a growing market for efficiency of service, the opportunity to Guernsey funds, but Guernsey’s reach goes use new solutions, including distributed Dr Andy Sloan, Deputy Chief much further – to all four corners of the ledger technology, and products lending Executive, Strategy, at globe, in fact. Guernsey Finance themselves to split distribution. Guernsey Guernsey funds are able to reach 80 per was an obvious route to securing that, and cent of the world’s wealth – distributing from the Guernsey Financial Services Commission Guernsey means you can reach everyone has seen evidence of that, and responded you need to reach. It is not all about Europe with a new product suite. – three-quarters of Guernsey funds have At an event we hosted in London to investors in two or more regions – and discuss Guernsey’s global distribution they are not just Europeans: Guernsey is a potential, I spoke to Mark Le Page, a former conduit for global capital, including the US senior regulator at the Guernsey Financial and China. Services Commission who is now an The full extent of Guernsey’s distribution advisory director at EY in the island. capability only became evident fairly recently, “Guernsey is a crucible for ideas. They when research was commissioned by can get tested very quickly, and the split GIFA to examine the sector’s distribution distribution model is now something that scope. Over time lots of firms had been everyone is very familiar with. The rest of the doing their own thing, developing their own world is catching up with us,” he said. relationships and securing global access. It Just like the rest of the world is beginning was happening, but nobody had drawn it all to learn that the “default” UCITS is not the together. one-size-fits-all must-have fund structure to The research showed that the global satisfy their requirements. reach of a Guernsey fund was effectively Christopher Jehan, founder of funds the same as or better than other major consultancy Midshore Consulting and vice- jurisdictions claiming that they are global chairman of the Guernsey Investment Fund distribution specialists. Association (GIFA), told me recently that on Companies with funds in Guernsey

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for years are now looking to grow them splitting European and global distribution. significantly and we are helping them to Three-quarters had reviewed their grow their global footprint – Far East, Latin distribution arrangements in the past two America, South Africa and Middle East, we years, and 50 per cent were still looking at know what we can do and how to do it. this over the next 12 months. Our position is quite unique. We can do And as the “B” word continues to unsettle things that most others cannot, and we Westminster, nothing changes for Guernsey. should be seen as a specialist jurisdiction Our “third country” status to the EU remains with a big global reach. unchanged – we are a third country That reach applies to complex funds and yesterday, today, and tomorrow. And our multi-layered structures, including listing market access into the EU does not change. securities on the Guernsey-headquartered And there may be transitional International Stock Exchange. A combination arrangements for European funds selling of fund distribution and extensive stock into the UK, but once those conclude, an EU exchange recognitions combine to create a fund selling into the UK will be positioned powerful offering which really works for split exactly like a Guernsey fund. fund structures. Guernsey can provide asset managers UCITS may become more about with a single route to investors, and our “four European distribution, while with subordinate corners of the globe” distribution model – investment vehicles and a TISE listing, one proven, smarter and faster from Guernsey – underlying product can service both funds. needs to be more widely recognised. Guernsey can offer a solution even when we We are ideally placed to offer access do not host the fund. to worldwide markets, greater certainty for Guernsey Finance carried out a survey managers and promoters, and more cost- of asset managers and intermediaries at effective solutions with higher levels of service SuperReturn International in Berlin earlier this than many of our competitor jurisdictions. year, which gave us an insight into the views Many promoters think that they need on green finance, private capital servicing to have a UCITS or an AIF but, when they and global distribution. actually analyse who their target market is Our key takeaways were that managers and what they require from their fund, a were reliant on continued market access – Guernsey vehicle very often turns out to be they wanted jurisdictional choice and service a better regulatory fit, and offers a cheaper, was a primary driver of that choice. Half of faster solution with high levels of service, as those surveyed told us they would consider our survey discovered. n

12 | www.hedgeweek.com GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 GUERNSEY INVESTMENT FUND ASSOCIATION Guernsey’s certainty is the solution to Brexit uncertainty Interview with Guernsey Investment Fund Association

Guernsey’s long-established constitutional [that UCITS is the only real option for fund position and expertise in funds makes structures sold in Europe] and prove the the island ideally suited to support global AIFMD passport is not all it is promoted as. investment funds post-Brexit, according to “The National Private Placement Regime members of the Guernsey Investment Fund (NPPR) has been successfully used many Association. times for marketing into Europe and is a In an era of unprecedented uncertainty, well understood path used by managers and Guernsey offers a steady jurisdiction based promoters for distribution that is supported upon a constitutional relationship with the UK by Guernsey-based service providers. stretching back over 800 years, more than “NPPR is an effective alternative, 50 years of experience as a finance centre particularly where a manager has a targeted of choice for funds business, and more than list of marketing jurisdictions. Guernsey 40 years of experience as a third country provides quick, effective NPPR access to operating outside of, but in close partnership more than 70 per cent of the nominal GDP with the EU – something that the UK will across continental Europe.” aspire to post Brexit. Much has been said about Brexit over the past couple of years and the issue is still far from being settled. Brexit has posed much uncertainty in the financial services sector both in the UK and the EU and it is likely that this uncertainty will prevail at least into 2022. Opportunities to use the well-established AIFMD and UCITS route for fund marketing in the EU are likely be lost to UK promoters, and fund experts in Guernsey say that the island is ideally positioned to take up this business – and debunk some funds myths at the same time. “From the European Commission’s own March 2018 figures, 70 per cent of all EU funds, as measured by assets under management, are registered for sale in just one Member State, and only 37 per cent UCITS and just 3 per cent AIFs are registered for sale in more than three Member States,’ said Paul Wilkes, Group Partner at law firm Collas Crill. “These figures expose the UCITS myth

GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 www.hedgeweek.com | 13 GUERNSEY INVESTMENT FUND ASSOCIATION

their fundraising over at least a five-year period, should recognise Guernsey as the place to be. Funds based in Guernsey are distributed globally and the fundamentals upon which Guernsey’s fund industry is built are as solid as the granite the island is made of. These include a service-driven, comprehensive infrastructure, stable and internationally- respected laws, stable government, and internationally-recognised regulations. Guernsey, as a small jurisdiction, has developed its own relationships with the UK, Europe and internationally, not only for distribution, but also for global standards of tax transparency and ultimate regulatory “While funds based in Guernsey equivalence with EU standards. The island is leading the way in are distributed to investors globally, compliance with anti-money laundering Guernsey has also been a significant recommendations and tax transparency, conduit for inward investment into and has been recognised by the EU as an equivalent jurisdiction for alternative the UK and Europe. We are ideally investment funds and its data protection placed as a jurisdiction to provide regime is seen as equivalent to the certainty to managers, promoters EU’s GDPR. Guernsey also offers certainty, speed and placing agents when they are to market, accessible infrastructure, planning their next fund.” experienced locally-based providers, and a pragmatic and approachable regulator. The Paul Smith, Guernsey Investment Fund Association island’s service providers offer a bespoke, service-orientated service to clients, unlike Christopher Jehan, principal of funds the slower, bureaucratic and more factory- consultancy Midshore Consulting, said that like approach experienced in many of the Brexit would require the UK to go on a larger fund jurisdictions. learning curve which Guernsey has already “While funds based in Guernsey are gone through. distributed to investors globally, Guernsey “While Guernsey is and will continue to has also been a significant conduit for be a good neighbour to the UK, the UK will inward investment into the UK and Europe. have to learn to be a third country in relation We are ideally placed as a jurisdiction to to the EU. Guernsey is a mature third country provide certainty to managers, promoters and as such will not have the learning or and placing agents when they are planning positioning the UK will need to go through in their next fund,” said Paul Smith, Chairman re-establishing itself as a non-EU jurisdiction. of the Guernsey Investment Funds “The UK and Europe are working on Association. some temporary measures, but this does not “NPPR via Guernsey is faster, more provide a long-term cross-border solution for efficient and more cost-effective than fund managers. If it is certainty you require going the full AIFMD or UCITS route. Many then these temporary measures, although promoters think that they need to have a welcome to UK managers, promoters and UCITS or an AIF but, when they actually placing agents, do not provide the stable, analyse who their target market is and what proven solution that has always been they require from their fund, a Guernsey available in Guernsey.” vehicle very often turns out to be a better Managers, promoters and placing agents regulatory fit, and offers a cheaper, faster needing some level of certainty in planning solution.” n

14 | www.hedgeweek.com GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 Celebrating 30 years of The Guernsey Investment & Funds Association

A WORLD FIRST

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E: [email protected] weareguernsey.com T: +44 (0)1481 720071 The International Stock Exchange provides a responsive and innovative listing and trading facility for investment vehicles. TISE is home to more than 300 investment securities, including open and closed ended funds, as well as a quarter of all HMRC approved Real Estate Investment Trusts (REITs). The green market segment, , enhances the visibility of those investment vehicles making a positive environmental impact.

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» Trading companies » Total Market Value: > £300bn » Responsive approach T: +44 (0) 1481 753000 » Specialist debt » Listed securities: > 2,500 » Competitive pricing E: [email protected] » Investment vehicles » International marketplace » Global standards www.tisegroup.com » SPACs » Globally recognisable clients » Wide international recognition follow @tisegroup » » Growing product range » Premier location follow us on LinkedIn

TISE is a registered trademark of The International Stock Exchange Group Limited (Guernsey registered company number 57524). It wholly owns The International Stock Exchange Authority Limited (Guernsey registered company number 57527), which is licensed by the Guernsey Financial Services Commission to operate an investment exchange under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. The registered office of The International Stock Exchange Group Limited and The International Stock Exchange Authority Limited is at Helvetia Court, Block B, Third Floor, Les Echelons, St Peter Port, Guernsey, GY1 1AR.

2551-TISE GFM GSY A4 ADVERT-MARCH 2019.indd 1 27/03/2019 09:03 TISE GROUP Expanding the capital pool By Mark Oliphant

More international recognitions and a green the latter meaning that TISE-listed products market segment have further expanded are automatically eligible assets as part of the potential capital pool available to the listed investment allocation of German entities listed on The International Stock insurers and German UCITS funds. Exchange (TISE). TISE-listed products are already eligible A common aim for investment managers listed assets for UCITS funds established in is ensuring that their product is available several EEA jurisdictions. UCITS funds from to the widest range of, and can secure another 19 EEA jurisdictions, including France, the largest possible capital allocation from, Ireland, Luxembourg and the UK, can treat potential investors. As a result, they will look TISE-listed products as eligible listed assets by at establishing and running their investment Mark Oliphant, Head of disclosing TISE within the fund documentation vehicle taking into account one of more Communications, The as a potential source of investable assets. International Stock Exchange of a range of factors, including their own Group (TISEG) Growing concern for the environment preferences, the demands of the underlying in the wake of climate change means investors and regulatory/legal/tax requirements. that there have been increased governmental and Investors, including institutions such as pension funds regulatory measures as well as underlying investor and insurance companies, are often mandated to only demand, for example from asset managers, which have allocate, or allocate a larger proportion of capital, into led investment managers to focus on sustainable and listed products (as opposed to unlisted). This is because responsible investment. a security listed on a recognised stock exchange is TISE has introduced a green market segment, TISE subject to a greater level of scrutiny and because a GREEN. It is open to bonds, funds or REITs, or trading listing drives greater transparency through the additional companies from any jurisdiction. A security must be disclosures required. For example, a listing ensures that admitted to TISE’s Official List but there is no additional there is at least a minimum amount of disclosure to the fee for entering TISE GREEN, although there needs market and equality for investors as the information is to be third party verification of the investment’s green made available to all at the same time. credentials against a globally recognised standard. These requirements drive good corporate governance, Being on TISE GREEN provides recognition for, and which itself creates value within the structure for investors. enhanced visibility of, investments which make a positive An investment can still carry any level of risk but it is the environmental impact. The scope of the segment will transparency of disclosure and the governance which widen in the future to cater for broader social and impact allow the investors to make an informed decision. investing where there is less industry standardisation HMRC deems TISE to be a recognised stock at the moment but which seems likely to occur as the exchange. This enables investment into TISE-listed market develops. products by Self-Invested Personal Pensions (SIPPs) There were 865 new listings on TISE during 2018, and Individual Savings Accounts (ISAs), which is key which was an increase of 23 per cent on the previous for many institutions who invest on behalf of their year and it represented the largest number of securities clients. Additionally, it means that TISE is considered newly listed in a calendar year. There are now more than a recognised stock exchange and listing venue under 2,800 listed securities with a total market value of more HMRC’s UK Real Estate Investment Trust (REIT) regime. than £300 billion. These listings comprise a mix of equity A report from Grant Thornton published in the middle and debt being issued by trading companies and more of last year noted that TISE was home to more than than 300 securities issued by investment vehicles. a quarter of all UK REITs and since then, we have Investment managers often cite TISE as being a cost continued to grow our market share. effective and convenient venue for listing. However, TISE has a number of other recognitions, including in addition, the Exchange’s increasing number of from the US Securities and Exchange Commission (SEC), international recognitions and growing range of market the Australian Stock Exchange (ASX) and the German segments mean that a TISE-listed product can benefit regulator, BaFin. Each of these recognitions adds to the from an expanded potential pool of capital from an international distribution of securities listed on TISE, with increasingly diverse investor base. n

GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 www.hedgeweek.com | 17 YOUR PARTNER TO YOUR PARTNER TO ENHANCE YOUR GLOBAL ENHANCE YOUR GLOBAL OPERATIONS OPERATIONS

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tmf-group.com/enquiry tmf-group.com/enquiry tmf-group.com/enquiry TMF GROUP Private equity fund raising in Guernsey Interview with Mark Hooton

The last two years have been a boon for relationships with a smaller number of global private equity managers. In 2017, total managers but that comes with its own net new assets reached USD552 billion challenges for managers. If they have a according to Preqin, and although slightly dominant investor in the fund (in terms of down in 2018, the asset class still attracted percentage of Fund AUM), they might exert USD426 billion. With close to USD1 trillion in more of an influence over the manager than net inflows, it seems investors can’t allocate they would have in earlier fund vintages,” to private equity fast enough, snapping up suggests Hooton. co-investment and secondary opportunities In respect to jurisdictional fund raising, to supplement their primary allocations as from his vantage point in Guernsey Hooton they seek to maintain healthy long-term Mark Hooton, Director, TMF confirms that people are choosing to use the returns in what remains a low-rate, low-return Group (Guernsey) island to raise new funds but admits that the environment. uncertainty from Brexit negotiations between Large managers have dominated the the UK and Europe hasn’t helped. fund raising environment, with Carlyle Group “We are having to educate managers closing the largest fund, Carlyle Partners VII, and investors that the Channel Islands lie with USD18.5 billion. In Europe, PAI Partners outside of the EU already and therefore, secured a EUR5 billion raise, Triton Partners Brexit doesn’t have any real impact on targeted EUR3 billion for its fifth flagship how sponsors set up and launch Guernsey fund, while Inflexion Private Equity Partners investment funds to market them across LLP, secured GBP1.25 billion for the Inflexion Europe. The same regulatory mechanics Buyout Fund V. as we use today will still apply, once Brexit “We continue to see investor interest in is concluded, so launching a fund amidst private equity,” says Mark Hooton, Director, all the political uncertainty should present TMF Group (Guernsey). “It’s fair to say no particular concerns to PE managers,” though that while investors have capital to explains Hooton. deploy, they are being a lot more careful According to Guernsey Finance, the total as to who to allocate to. In this current net asset value of Guernsey’s funds under environment, given uncertainty over global administration reached a five-year high last economic growth, they are focusing heavily June, at GBP276.2 billion. Private equity was on managers’ track records and experience.” central to this growth trajectory, growing Although the fund raising dynamics are GBP6 billion through the first quarter of 2018 likely to remain strong in 2019, it remains a to GBP112.7 billion. The closed-ended sector significant challenge for smaller and mid- overall, increased by GBP4.2 billion in Q4 sized managers to attract investor interest. 2018, to GBP176.3 billion. Private equity funds Institutional allocators will often flock to high made up 59 per cent of that total, equivalent pedigree, well-established names when to GBP115 billion. market conditions start to get choppy. As “Guernsey’s private equity industry such, 2019 could be a period of even more continues to grow,” says Hooton. If you concentrated positioning, with fewer GPs look at the local marketplace a lot of the featuring in PE portfolios. administrators have capability in multiple “Some of these investors are willing jurisdictions and if a manager wants to to write significant tickets to build closer raise a fund where the right answer is to

GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 www.hedgeweek.com | 19 TMF GROUP

use a different jurisdiction to Guernsey, we who have strict ESG guidelines, it’s a nice will issue the necessary instructions to our product as it allows them to tick the right global network. boxes for their specific investment criteria,” “But for those who do choose Guernsey, explains Hooton. they can enjoy good speed to market when Under the Guernsey Green Fund Rules, raising new funds. The Guernsey Financial Green Funds must invest 75 per cent of Services Commission have very clear timings their portfolio in investments meeting the that they work to in order to approve fund green criteria. They include: low-carbon applications. We have a variety of different technologies, renewable energy, lower routes. One being the administrator-led ‘fast carbon and efficient energy generation. track’ regime. As an administrator, we carry “From a general investment point of out due diligence on the fund manager, and view, there is growing interest in this will make an application to the GFSC on the area of impact/green investing. There are basis of our findings.” numerous emerging technologies and it is Under this arrangement, the manager providing something slightly different for fund can be authorised within 10 days. Funds managers to consider in the marketplace. registered under the Registered Collective The GFSC has put in place strict criteria (to Investment Schemes Rules 2018 (‘RCIS’ avoid misuse of the GGF) for investment funds) will be approved within three working managers to get one of these funds days, while applications for those who opt approved,” says Hooton. for a Private Investment Fund (’PIF’) are He admits that although there is still approved within just one working day. work to be done educating fund sponsors “We are working on a couple of fund on how to launch funds and understanding launches at present as well as a few the constitutional rights of the jurisdiction, it managed account vehicles. One is a offers a stable funds environment. registered fund for an existing client and the The GFSC is very approachable, he says. second is a registered fund for a new fund If one wants to launch something that looks promoter. The regulatory regime has been a bit different to other fund strategies, the designed to be simple and can be applied to regulator is happy to have a conversation with a broad range of investments. the manager to understand how it will work. “The island has a workforce that’s “We’ve had some very positive comments been working in the funds industry for from clients in the past about the GFSC, and many decades. There is a deep source of how accessible they are,” says Hooton. knowledge and expertise and that allows “The island is very much geared towards for a very practical approach to helping the funds industry and we’ve always had managers set up their funds and get them to access to the EU through National Private market,” adds Hooton. Placement Regimes, which we’ve been doing With ESG/sustainable investing becoming for the last six years under AIFMD without a an important trend among institutional problem. Everything is tried and tested. We investors, those who can offer fund vehicles know what we are doing and AIFMD works with green credentials could be well placed for all of Guernsey’s regulated fund products. to attract new assets in 2019. Cognisant “The UK, by contrast, has yet to go of this growing awareness to invest more through that whole learning experience when responsibly, for the good of the planet, last it finally leaves the EU. We hope NPPR will year Guernsey introduced a new regulatory continue to remain an option for managers wrapper called the Guernsey Green Fund. to market their Guernsey funds to UK and “It has attracted a fair bit of new interest. European investors.” It is basically a regulatory overlay to our Regardless of the outcome of Brexit, existing funds regime that allows the Guernsey will continue to work closely with manager, if they meet certain criteria when the EU via NPPR regimes, and in that sense, investing in green technologies, to apply the it will continue to be business as usual. label to their fund and market it to investors Having that certainty will be important for as an ethical investment vehicle. For pension managers when looking to actively fund raise funds and other large institutional investors in the EU. n

20 | www.hedgeweek.com GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 ogier.com

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Legal services in British Virgin Islands Cayman Islands Guernsey Hong Kong Jersey London Luxembourg Shanghai Tokyo OGIER Why Guernsey bridges the gap By Craig Cordle

It’s no secret that new investment company Commission (the ‘Report on the Operation of listings have been relatively sporadic of the Alternative Investment Fund Managers late – I won’t say this is entirely down to Directive, 10 December 2018’) says that Brexit (see below recent successful initial “statistical evidence indicates that the EU public offerings which Ogier Guernsey has management passport is working well, acted on), but it’s clear to me that Brexit has but the EU marketing passport is lagging stalled a number of fundraisings which have behind and is suffering from the different gone out to market. Fortunately, the word approaches taken by NCAs [National is that as soon as we have a bit of clarity Competent Authorities]” which “results on the way forward, there may be a race in additional costs for the industry and to market. Craig Cordle, partner in investors, and undermines the benefits Taking a longer term view, data from Ogier’s Guernsey Investment of the AIF passport and therefore the the London Stock Exchange to the end of Funds team Single Market.”. January 2019 shows that Guernsey is home The report goes on to state that “it has to more non-UK incorporated companies therefore been of EU added value that listed on the LSE than any other jurisdiction national private placement regimes (NPPRs) globally. Guernsey won’t be directly impacted are permitted to operate. Some interviewees by Brexit – we are not part of the EU, and called for the non-EU passports to be never have been – and so if the structure introduced and a significant number, from a works now, it will almost certainly work range of Member States and third countries, after Brexit. called for the NPPRs to be retained, even if That’s not to say that we’re unaffected by the non-EU passports are introduced.”. the EU – the news that EU finance ministers It’s clear that for some the passport signed off on Guernsey’s substance laws will likely be a good choice, but for the confirmed Guernsey’s status as a fully significant majority of new managers compliant jurisdiction for the purposes of private placement will still likely be cheaper tax transparency and tax co-operation. This and simpler. is great, if not unexpected news (so if your Meanwhile, we continue to advise on offering documents have risk factors which funds listed on stock exchanges such as say otherwise, please amend them now) the London Stock Exchange including the and has had the knock-on effect that the Main Market, AIM and the Specialist Fund European Investment Fund is once again Segment, The International Stock Exchange permitted to invest into Guernsey funds. (TISE), Euronext Netherlands, as well as The EIF, which has invested into Guernsey structures listed on other European and funds previously as part of 147 billion euros non-European exchanges. Most recently invested across Europe, provides risk finance our team assisted on Baillie Gifford’s first for small and medium-sized enterprises Guernsey registered fund, The Schiehallion across Europe, backed by the European Fund Limited. Investment Bank, European Union, and Last year also saw Ogier advising on the a range of public and private banks and initial public offerings of Hipgnosis Songs finance institutions. Fund Limited, Merian Chrysalis Investment The offering to the EU extends further – Company Limited and Trian Investors 1 the latest report on AIFMD by the European Limited. The list goes on… n

22 | www.hedgeweek.com GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 Expertise in action. Globally.

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Guernsey: +44 1481 737600 praxisifm.com PRAXISIFM Guernsey substance and benefits of the mature NPPR Shaun Robert outlines why Guernsey is a serious contender as a domicile of choice

Guernsey has long been recognised as a we are continuing to prepare ourselves to mature, highly experienced non-EU financial strengthen Guernsey’s relationships within the centre. It continues to be known as a tax EU after the UK has left”. transparent jurisdiction, working extensively in With Brexit uncertainty in the financial co-operation with the European Commission, sector both in the UK and the EU to continue among others, to ensure it does all it can at least into 2022, opportunities to use the to co-operate on all transparency and well-established AIFMD and UCITS route for appropriate regulatory matters. fund marketing into Europe are likely to be In 2017, the EU Code of Conduct Group lost to UK promoters. Given that our current ‘Code Group’ undertook a screening exercise access to market into Europe via National to assess various jurisdictions on their tax Shaun Robert, Director, Private Placement Regimes ‘NPPR’ will be transparency, anti-BEPS and fair taxation International Fund unaffected, we see this as an opportunity for Management Ltd measures. Guernsey was found to be Guernsey which, in 2015, was one of only six compliant in the first two areas. However, [email protected] jurisdictions to be considered by ESMA, and concerns were raised around the lack of www.intfundmanagement.com one of only two to be approved for the third- statutory substance requirements, which country passporting regime without condition. could have led to a risk that the profits of companies With Guernsey’s non-EU status and existing registered in Guernsey may not be commensurate with cooperation agreements, it will continue to be able to offer their activities in the jurisdiction. NPPR marketing into Europe, to more than 70 per cent In response to the concerns raised by the Code of the nominal GDP across continental Europe. With the Group, Guernsey, Jersey, and Isle of Man (the Crown existence of this well established process, Guernsey’s Dependencies ‘CDs’), along with 10 other jurisdictions, ability to market into Europe will be unaffected by the committed to introduce new legislation requiring resident UK’s departure. On the contrary, the UK will have to companies to demonstrate a link between the economic follow in Guernsey’s footsteps and negotiate cooperation activity carried out and the economic substance agreements with the EU jurisdictions. supporting the activity. Guernsey is a mature, highly experienced and The work involved in a relatively short timeframe transparent jurisdiction, operating in cooperation with should not be underestimated, but working closely the European Commission, ensuring this is clearly together, the governments of the three CDs achieved understood and acknowledged. their aim to each have their own legislation in place by Particularly where a manager has a targeted list of the end of 2018, effective 1 January 2019. marketing jurisdictions, NPPR via Guernsey can be On the 12 March 2019, Guernsey’s reputation as faster, more efficient and more cost-effective than the a transparent and compliant jurisdiction, in line with full AIFMD or UCITS route. With Guernsey being a non- international standards was further enhanced, as the EU jurisdiction, pre and post Brexit marketing plans to Code Group and European Council of Finance Ministers market into Europe via the well trodden NPPR which confirmed that the Island has satisfied its legal substance Guernsey have established, will remain untouched. requirements for entities operating in or through the International Fund Management Limited provides jurisdiction. a fully compliant, licensed and independent non-EU Guernsey’s Government continues to work extensively Manager (AIFM) service. It has demonstrable substance and in co-operation with the European Commission, in Guernsey, including its own balance sheet, a discrete with its Policy and Resources President, Gavin St Pier, executive board and employees and independent systems previously having stated “with the current political and reporting. It is part of the PraxisIFM Group. n uncertainty within the UK, and the ongoing work to prepare International Fund Management Limited is regulated by the Guernsey Financial Services Commission and licensed under the Protection of Investors (Bailiwick of Guernsey) Law, for different possible outcomes in the next few months, 1987 (as amended).

24 | www.hedgeweek.com GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 CORPORATE FUNDS TRUSTS BERMUDA BVI CAYMAN ISLANDS GUERNSEY HONG KONG ISLE OF MAN JERSEY LUXEMBOURG MALTA MAURITIUS UNITED KINGDOM

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Regulatory information is available at estera.com ESTERA The route to going green By Kevin Smith

The introduction of the Guernsey Green prospectus, along with the criteria for the Fund (‘GGF’) has given both investors and spread of risk. managers a transparent product through Seventy-five percent of the funds assets which investments into green initiatives can must meet the chosen criteria – the be made. Most significantly, it effectively remaining 25 per cent can be invested creates a ‘kitemark’, assuring investors that elsewhere but ‘must not lessen or specific green criteria have been met and reduce the overall objective of mitigating that their investments are having the desired, environmental damage’ and also shouldn’t positive environmental impact. invest in certain excluded asset classes. Unsurprisingly, there are certain factors The GFSC endorses international that a manager or sponsor needs to take Kevin Smith, Director at Estera standards known as the Common Principles into account when establishing a fund that International Fund Managers for Climate Mitigation Finance Tracking. These (Guernsey) Limited will be designated a GGF. These are the key internationally accepted standards mean that points as we see them. a broad spectrum of environmental funds could gain GGF certification. Choice in setting up a Guernsey fund One of the biggest advantages of the GGF Choice of how the fund is certified is that any type of Guernsey fund structure The purpose of certification is to provide can receive certification – be it authorised, certainty to investors that the GGF is registered or private investment funds, invested in accordance with the recognised closed or open-ended, or manager-led. This green standards. The Green Fund Rules gives sponsors and managers the flexibility allow funds to be established using one of of establishing the most effective structure to two routes: meet their specific requirements. • ‘Route 1’ funds require certification from A further major point worth noting here a suitable independent third party that is that funds applying to be designated as the prospectus meets the chosen green GGFs don’t need to be newly established criteria – examples would be qualified structures. Existing funds are able to apply, audit firms or ratings agencies. providing they prove they meet the Rules. • ‘Route 2’ allows certification by the Guernsey-licensed administrator or Compliance with GGF Rules manager for the fund. There are a number of rules that funds Again, this provides the fund with flexibility in must comply with in order to be designated the way it is established. as a Guernsey Green Fund. The Guernsey Investors are now increasingly Financial Services Commission (GFSC) lists concentrating on making investments with a these as: positive environmental impact – and the GGF • Notification requirements; makes it easier for those investors to see • Disclosure and reporting requirements; that a fund meets specific green criteria. • Compliance with the elected green criteria. In allowing different types of Guernsey The latter is arguably the most important as fund to apply for certification across a this is at the heart of what a GGF is. broad range of specific green criteria, in Schedule 2 of the Guernsey Green Fund a straightforward manner, the GGF has Rules has a list of green criteria endorsed made itself not only flexible, but very by the GFSC as qualifying green standards. attractive to managers and sponsors alike. A Guernsey Green Fund has to comply with In providing certainty, it positions Guernsey one of the criteria listed and must set that at the forefront of the growing demand for out in the notification to the GFSC and in the environmental investing. n

26 | www.hedgeweek.com GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 GRANT THORNTON Guernsey has reason to be optimistic By Cyril Swale

Earlier this year Grant Thornton published a “Despite increasing downside global economic report. We interviewed 5,000 risk, economic fundamentals mid-market business leaders – the feedback revealed a more downbeat outlook for 2019. remained strong and Global optimism was a net 39 per cent, opportunities exist, even 15 per cent down on where the sentiment was in the summer of 2018, and the weakest in a global economy where optimism score since Q4 2016. growth may be slowing, but But we said it was not all bad news. Yes, it is still growing.” the headlines appear daunting, but there are good reasons for business leaders to hold Cyril Swale, Director at Grant their nerve. Despite increasing downside risk, Thornton decades, and is already one of the top economic fundamentals remained strong jurisdictions for South African offshore and opportunities exist, even in a global funds. The island has been described as economy where growth may be slowing, the “perfect stepping stone to international but it is still growing. Our recommendation markets”, with global distribution capabilities was that businesses should think creatively which come without the burdensome about international markets. Only 11 per cent regulation and cost of a UCITS product. of the business leaders interviewed expect We are also working hard closer to home, a decrease in exports in the coming year. to promote the benefits of a Guernsey fund And new technologies can enable access to rather than the European “default” of a these new markets quicker, less expensively UCITS or alternative investment fund (AIF). and with less risk. The distribution of Guernsey funds While uncertainty is rife, growth is far from throughout Europe is undertaken through impossible in dynamic organisations. We National Private Placement Regimes. are focusing both on and off-island in the Apart from managers who wish to market development of investment funds in 2019. An securities to investors in more than a handful external focus for our funds team this year of EU member states, NPPR is likely to is South Africa. There is a lot of positivity in provide a cost and time-efficient method of this market for Guernsey. marketing, and managers can benefit from a South African fund managers are seeking degree of regulatory optionality and avoid the to satisfy investor demand for offshore more onerous aspects of AIFMD. diversification – driven by geopolitical NPPR for Guernsey funds is tried and uncertainty and a weaker rand – and tested, has unrivalled speed of execution, competition in that market is growing. and offers significant cost savings over the They are seeking stability and security lifetime of a fund. and a strong reputation for international Combined with Guernsey’s offer of compliance, cooperation and transparency tax neutrality and certainty, expertise and – all classic Guernsey attributes. The island experience in alternative investment funds, trades on a reputation for being faster, less highest standards of compliance, and a expensive and more flexible. breadth of product range, the island has The island also has a history of financial a compelling investment funds offer when services dealings with South Africa over positioned against key European rivals. n

GUERNSEY FUND SERVICES Hedgeweek Special Report Apr 2019 www.hedgeweek.com | 27 Identifying opportunities. Enabling growth.

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