On the investment strategy front, there has been a measured increase in the allocation to alternative investments, a long term decline in public equities and an increase in the availability of non-traditional sources of debt funding. In 2017 there were 942 companies listed on the London Stock Exchange’s Main Market, compared to 1890 companies in 1999. It has been reported that there were 23% US-listed public companies in 2016 than there were in 1976. Counter that with the rise of the “unicorns” – private companies valued at more than USD 1 billion. While traditional banking groups have pulled back from lending in light of increasing regulation, the space has been filled by alternative debt providers, including debt funds. Preqin predicts the private debt market will double in size by 2023. Preqin also reports that the alternative assets category will increase by 59% by 2023, with substantial majorities of investors consulted confirming they will increase allocations to the sector.
Another theme is that of increasing globalisation and tax compliance. Whilst in recent years the politics of certain developed economies has given the impression that the decades long trend towards globalisation may have reached a peak, this is really about allocation of resources. Globalisation is not going away; it is merely changing and with it the international movement of capital is merely being re-directed. As conduits for international capital flows, small IFCs will continue to play a role. Increasing tax and regulatory compliance is a cost of participation, but unless globalisation comes to a grinding halt, they will still form part of the financial “plumbing”. Rising middle classes globally, increasing consumerism and the search for wealth creation all contribute to this trend.
Issues we face in the coming year include concerns about the stage of the economic cycle, both globally and regionally. There are already indications of economic slowdown in the USA, Europe and China. Will recession hit globally, regionally or locally? If so when? It is safe to say that the current cycle will end and a new one will start but today signals are mixed as to the timing and the impact. However, it’s not all about economics. Brexit and the UK political environment may have a profound effect on businesses on Jersey, both in the short and long term. The contest for geo-political dominance between the USA and China will continue and whilst this is more of a theme, the immediate impact of trade tensions is an issue to consider in planning for the year ahead.
And so what does this mean for us? Jersey’s fund and fund management sector reflects these themes and is well placed to embrace further developments. A long term and fundamental shift from retail funds trading in the public equity and debt markets to alternative assets and specialist investment funds; a sector that is highly compliant with international standards and adopts developments as a first mover; long term economic and political stability in a fast changing world, that is encouraging of value creation and embraces new entrants with diverse expertise; an international outlook pursuing new and developing markets including technological innovation. All these characteristics should be recognised and the growing and thriving funds sector in Jersey, enhanced by new participants from the USA and other markets, are signs that Jersey is well placed to prosper over the year.
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