Guernsey, leading the field in innovation
Guernsey Finance announced a new streamlined three day registration process for closed ended funds last week, in London, with a host of fund promoters present to hear the news. (An example of a closed ended funds would be investment trusts in the UK)
Quized within an inch of their life by the audience, Peter Niven of Guernsey Finance, Horace Camp of Kleinwort Benson CI, and Nigel Farr of Herbert Smith fielded questions on the stage.
The main messages were: yes fees may rise in this new process but will not outstrip other offshore jurisdictions; the process really will take three days as long as you are 'audit ready' and burden of due diligence will shift more to fund organisations and their advisers. Guernsey Finance will do a final stamp of approval rather than being deeply involved and potentially holding up the process.
Nigel Farr of Herbert Smith revealed that he always uses
Guernsey for fund work. He said the new registered fund process was essential in his work with fund promoters because they were always working to strict deadlines. Guernsey Finance also launched a new look and one cheeky chap suggested it was a financial investment in itself.
Interested in the developments in Guernsey, I interviewed some leading lights in the jurisdiction. This is what they
had to say.
Gavin Farrell is a partner at Ozannes and works in the corporate department. He does a large amount of fund related work in terms of set up and ongoing regulation around the funds. His first legal qualification was at the Paris Bar before working for Simmons & Simmons in both Paris and London. His average day just like City firms spans twelve hours with a 8-9pm finish.
He says he’s doing a lot of work with close ended listed funds, London listed funds, private equity and aim traded funds that are Guernsey registered. He says private equity companies are using offshore to buy assets they’ve identified. Gavin comments “There has been a widening of asset classes. It’s not just venture capital deals, there is a lot more infrastructure (PFI) as well as property funds work.
He says that although this type of work has developed slowly, there is a much greater involvement in the earlier stage of deals than previously. He puts this down to the regulatory regimes changing quite dramatically.
Gavin says the role of the offshore adviser has come of age with more reliance on them than ever before. He comments “the trend is to involve us from fund set up to bring an extra pair of eyes to documentation.”
He also identifies a wave of US work hitting Guernsey following a stunning KKR structure set up in the island. (Kohlberg Kravis Roberts & Co, a New York private equity firm with single deals ranking
at $30bn in size). Gavin explains “KKR set a trend which has resulted in a lot of instructions from US law firms dealing with Euronex, Amsterdam’s stock exchange.” He says this work has developed pretty much from nowhere in the last year.
He acted for the underwriters and managers on the KKR deal. Gavin comments “Guernsey has really captured the private equity business on the fund admin’ side, becoming. We do a lot of PE structures and have developed highly specialised fund administration services.”
I ask for some local recommendations. Put on the spot he thinks hard then comes up with a hot list: “Kleinwort Benson, Northern Trust, Artemis, Aztec, RBC and IPES.” He adds “Connie Helyar at IPES started the PE fund admin trend.”
Gavin is also working on funds with Indian and Chinese managers. I ask how they are finding him. He says word of mouth works well and past advisers come back for more. He says his biggest source of referrals are from Clifford Chance in Hong Kong, Herbert Smith, Lovells, SJ Berwin (referring a lot of private equity work) and Linklaters.
According to Gavin, there are two different types of involvement from people who come to Guernsey, firstly managers within banks and secondly Eastern European property companies.
The main area of work for Guernsey has historically been the UK but Gavin says as well as American instructions increasing, there is also more work emerging from with Russia.
Of the Guernsey registered
fund initiative, Gavin says although it’s very new, he has a lot of work in the pipeline. He confirms: the new fund is really a hybrid between Guernsey, Cayman and the UK system. Its similar to CIMA but also following the UK model. He comments “there is less attention on the product but more on the provider.”
Of Ozannes, Gavin says they’ve recruited four lawyers in corporate over the last couple of months and are incredibly busy with no let up in sight. He says for ‘Guernsey Plc’, capacity is going to be an issue. He explains “Fund administrators are flat out but everyone has just got to work harder, we don’t want to give out the wrong message to the outside world.” He says there are a number of new mid size fund administrators who have been able to clean up the smaller ticket work.
One significant fund domiciled in Guernsey is the AEEP, the Ashmore Emerging Economy Portfolio.
Another big name on Guernsey is Kleinwort Benson with two hundred staff working from their Guernsey offices. Sandra Platts is MD and COO of Kleinwort Benson and recently moved to Guernsey after a promotion to the high flying role of MD. She was previously in the Jersey Kleinwort Benson operation for twenty years. Kleinwort Benson offer private wealth management as well as corporate fiduciary. The break down is sixty percent private client to forty corporate.
She fills us in on the company “We operate between Jersey, Guernsey and London and our client offering is very similar across all jurisdictions although Guernsey is stronger on the corporate fiduciary side because of the fund and private equity business here.”
Of the clients using Kleinwort Benson, Sandra says “we see a lot of real estate funds but are also seeing different sorts of fund ideas like wine or timber funds.” Sandra agrees that fund administration is a growing area of business and something they are concentrating on. She comments “we are very focused on developing it and are quite proud of what we’ve done so far.”
As with Ozannes, recruitment is a hot topic and something that will restrict capacity if organisations in Guernsey can’t find or retain staff. Sandra shares her plans “We’ve increased headcount in Jersey and Guernsey
but it’s difficult to hire in a tight labour market and with there are only 65,000 people in the island to choose from.”
In their fund admin’ business they’ve hired eighteen to twenty people in the last six months. Sandra says they do extensive training and look at developing personal opportunities for staff to increase retention rates.
Sandra believes her twenty years at Kleinwort Benson have given her a great overview. She’s had the opportunity to work in every part of the business and get to know the products. She highlights a Kleinwort Benson fund DEVA 80 which was recently commended for innovation.
I finish the interview by asking about personal mentors and Sandra is quick to nominate a name. She puts forward recently retired Kleinwort Benson CEO, Richard Robbins. She explains why “he worked here for thirty years and was responsible for building up the organisation to what it is now. He is very well respected.”