Optionality key for managers as Jersey gets AIFMD passport recommendation from ESMA

Recognition for Jersey’s regulatory framework for alternative funds and the recommendation that the jurisdiction should enjoy future access to a Europe-wide passport under the EU Alternative Investment Fund Managers Directive (AIFMD) has been welcomed by Jersey Finance and the Jersey Funds Association.

The European Securities and Markets Authority (ESMA) recommended this week (30 July) that Jersey should be included in the first wave of ‘third non-EU countries’ whose managers can seek authorisation for a passport to market their alternative investment funds (AIF)  to professional investors throughout EU Member States.

The announcement means that, should ESMA’s recommendation be approved by the EU Commission, Parliament and Council, Jersey will be able to offer a broad range of marketing and organisational options to fund managers, whether they are targeting European or global investors.

Meanwhile, Jersey’s current marketing route into Europe via national private placement regimes looks likely to remain in place until at least 2018. This route, which only requires adherence to AIFMD reporting and disclosure requirements, continues to prove popular, with the number of Jersey funds marketing into Europe in this way recently breaking through the 200 barrier.  According to latest figures from the Jersey Financial Services Commission (JFSC), 84 fund managers have now received private placement authorisation, up 40% compared to December 2014, and 205 Jersey funds are now being marketed into Europe through private placement regimes, an increase of 10% over the past six months. Jersey managers and funds not actively marketing into Europe are not subject to any AIFMD regulation.

The news from ESMA follows a stellar annual performance for Jersey’s funds industry. Analysis carried out as at December 2014 showed the net asset value of regulated funds under administration in Jersey to have grown by around a fifth year-on-year to reach just over £228.9bn, the highest figure in seven years. Real estate funds business grew by 32% annually, private equity maintained a steady yearly increase of 5% and the value of hedge fund business grew by 46% year-on-year.

Geoff Cook, Chief Executive, Jersey Finance, commented:

“Jersey’s private placement route into Europe continues to be actively used, with AIFMD not appearing to have stymied fundraising activities for Jersey funds at all. Nevertheless, this announcement from ESMA is a ringing endorsement of Jersey’s alternative fund regulatory framework and reinforces just how important it was for Jersey to become the first offshore jurisdiction to offer an opt-in AIFMD-compliant regime back in 2013. Overall, this announcement opens up considerable options to managers so that, whatever their strategy and target markets, they can rely on Jersey as a hub from which to offer highly flexible routes to investors in Europe and beyond.”

Ben Robins, Chairman, Jersey Funds Association, added:

“This is a fantastic development for Jersey that could position it right at the forefront of domiciles serving the global funds industry and particularly underlines its role as a specialist centre for alternative funds benefitting European investors. Managers have long appreciated Jersey’s security and stability and its dedicated "Anglo Saxon" approach to client service as a high quality, rather than high volume, jurisdiction. ESMA’s announcement confirms the appealing optionality of our platform and reinforces why managers continue to have confidence in Jersey's appropriately flexible regime for alternative funds business.”