Guernsey's core funds messages have been given a global boost with the publication of a new report on Guernsey Fund Services, produced with Global Fund Media. The report identifies Guernsey as a leading jurisdiction for both start-up managers and established funds. Here, Guernsey Finance Chief Executive Dominic Wheatley discusses Guernsey's expertise in alternatives.
Guernsey's funds sector has developed over the past 50 years, since the first funds were formed in the island in the 1960s and is now recognised as a leading centre of excellence for a range of aernatives. This process has been accelerated in recent years as shrinking returns from traditional investment fund strategies are making the alternatives sector more attractive to investors. Guernsey has built up and is now recognised for its expertise in alternatives, particularly private equity but also in infrastructure, Real Estate Investment Trusts, and alternative finance.
Private equity
Some two-thirds of the £260 billion of funds under management and administration in the island are private equity assets. Major private equity promoters who have established operations in Guernsey include Apax Partners, BC Partners, Mid Europa, Permira and Terra Firma, and Guernsey has long been recognised as a preferred destination for private equity outsourcing. In 2016 Permira raised €7.5 billion with its Guernsey-domiciled global fund Permira VI, the largest buyout fundraising in Europe in 2016. Other significant launches have followed.
Infrastructure
In recent years, the island's investment funds industry has helped both institutional and private investors deploy capital into a range of infrastructure projects across the globe, including education and health, ports and shipping, communications, electrical generation and transition, airports, roads bridges and tunnels, wind and solar power, and water.
The need for investment into infrastructure in both developed and developing countries continues to grow, with an estimated £12 trillion required for investment between now and 2030 just to meet the UN's Sustainable Development Goals. There are more than 25 infrastructure funds domiciled in Guernsey, valued together at more than £16 billion, managed by some of the world's best-known managers, including Aberdeen, EQT and Macquarie.
Real Estate Investment Trusts
Real Estate Investment Trusts have surged in popularity for real estate investment. REITs offer tax advantages and may prove more attractive to investors as they provide easier access to property than direct investment, offer diversification of holdings, and the benefits of a professional investment manager.
A REIT must be tax resident in the UK, but the island's experience and expertise in the administration of alternative assets, including real estate, makes Guernsey an excellent base to operate from. The International Stock Exchange, based in Guernsey, is now listing a quarter of all UK REITs, though Guernsey-based structures to date have been commonly listed in London.
Alternative finance
Opportunities for alternative finance have risen significantly in the decade since the global financial crisis as traditional lenders have contracted under regulation or risk appetite. Over that time, Guernsey's investment funds industry has seen growth in various types of financing arrangements including P2P, distressed debt, loan refinancing, social and student housing, collateralised debt, property, litigation and trade financing.
Guernsey has received a growing number of enquiries in the fintech arena, especially peer-to-peer lending, which is allowed under the island's flexible yet robust regulatory regime. The island has more than 60 debt funds, both closed- and open-ended, collectively valued at nearly £10 billion.
An original version of this article first appeared in The Global Fund Media special report on Guernsey fund services, July 2018. Click here to access the full report.
For more information about Guernsey's finance industry please visit www.weareguernsey.com.
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