Businesslife Magazine, Issue 79, August/September 2022 by BL Magazine

Taking the strain How the funds sector is adapting to volatile times • Future of funds • Private investment • Science-based targets • Property priorities • Investing in handbags • Board diversity • Digital developments AUGUST / SEPTEMBER 2022 funds EDITIONAUGUST79ISSUEBUSINESSLIFE / 2022SEPTEMBER BUSINESSLIFE BUSINESSGLOBAL : ISLANDSCHANNELTHEFROMVIEWA

Our professional services include: Fund administration & accounting Investor reporting SPV administration & accounting Domiciliation services ESGAIFMDepositarySPACs

YOUR FUNDS PARTNERSTRONGERTOGETHER jtcgroup.com CAYMAN ISLANDS • GUERNSEY • IRELAND • JERSEY • LUXEMBOURG • MAURITIUS • NETHERLANDS • SOUTH AFRICA • UK • US FUNDS | CORPORATE | PRIVATE CLIENT Information on JTC and its applicable regulators can be accessed via www.jtcgroup.com GL OBAL PLA TFORM C. PEOPLE1300BILLIONC.200USDFTSE 250 ISA 3402E CERTYPEIITIFIED

With a proven track record spanning more than two decades, JTC has the strength, quality and depth of experience to understand your vision. We deliver tailored solutions and oversight throughout the lifecycle of your fund, helping to ensure that it realises its full potential. Luxembourgkobus.cronje@jtcgroup.comGuernseymartin.punt@jtcgroup.comJerseyvictoria.gillespie@jtcgroup.comUKmarie.fitzpatrick@jtcgroup.comUKsimon.gordon@jtcgroup.comGORDONMARIEFITZPATRICKVICTORIAGILLESPIEMARTINPUNTKOBUSCRONJEVINCENTVANcomprehensive range underpinned by cutting-edge technology, extensive networks and our specialist sector knowledge. These are delivered from key international jurisdictions, across all fund types, asset classes and sectors.

UK SIMON

DEN BRINK vincent.vandenbrink@jtcgroup.com CONTACT Our

of solutions are

KEY TRENDS

TWELVE MONTHS IS clearly a long time in business and finance. Writing in the pages of our last Funds Edition, just a year ago, the world was finally ridding itself of the shackles of Brexit fallout and the restrictions placed on us by Covid-19, the outlook was bright and stability was the name of the game.

Fast forward 12 short months and the world economy has been rocked by the Russian invasion of Ukraine, leading to an energy supply and transition crisis; several nations are in the throes of a cost-of-living and cost-of-doing-business crisis; global supply chains have been hugely disrupted; markets have experienced record falls; cryptocurrencies have crashed through the floor; and investors are grappling for any kind of stability. As we take stock of these events and watch on as many of them continue to play out, in this year’s Funds Edition we explore the impact on the sector and how investors and wealth managers are adapting their strategies in the face of ongoing uncertainty.

According to figures from Jersey Finance, the number of registered Jersey Private Funds – marketed to no more than 50 qualified professional investors and covering the whole range of asset classes – jumped 70% between March 2020 and MarchGuernsey,2022.which set up a Private Investment Fund (PIF) regime in 2016 and restructured it last year to attract more investors, has also seen a rise in interest.

According to Guernsey Finance, PIFs have “increased in popularity each year and at the end of [2021] more than £14bn was invested in Guernsey PIFs”.

OTHER STRUCTURES EXPLORED Elsewhere in this year’s Funds Edition, we dive deep into trends in digital funds, diversity on funds boards, how real estate investors are working hard to demonstrate the ESG credentials of their investments and whether science-based targets can help alternative fund managers better scrutinise their investment activities. Of course, in such turbulent times, savvy investors will also be on the lookout for out-of-the-box ideas as they search for better returns. Our article on investing in luxury handbags – setting out how they are providing returns that far outstrip some investment classes – may be something they should get a handle on. Enjoy the issue. n Jon Watkins is Editor-in-Chief of Businesslife

Staying on top Welcome

As such, our article looking at the current and future state of the funds arena (p24) identifies some notable trends – not least the global appetite for access to alternative assets, which continues at pace. In the Channel Islands, there has been a huge increase in the net asset value of funds focused on private equity and venture capital in the past five years. Figures recently published by Jersey Finance show that in Jersey alone there has been a 249% increase. Guernsey is seeing growing interest, too. The article also shares the latest market analysis from Preqin, which reveals that, against the backdrop of the Russian invasion of Ukraine – and the ensuing sanctions on Russia, which have left a massive gap in global commodities markets, particularly energy –natural resources funds raised $51bn in Q2 2022, almost $20bn higher than in Q2 2021. This latest performance data shows stellar returns for the asset class, although, given that this is geopolitically driven, such performance may not represent a long-term trend. A clear shift from 12 months ago is the popularity of SPACs – special purpose acquisition companies. In last year’s Funds Edition, we heard how SPACs were “all the rage”, representing about 60% of all IPOs in 2020. This year, that picture has shifted considerably. The SPAC boom was fuelled by an extended period of low interest rates, which drove investors to riskier areas of the market to seek higher returns. As the economic landscape has altered, SPACs have suffered a massive uphill battle on recent valuations.

RISE OF PRIVATE FUNDS

Also in this issue, our article starting on page 30 explores in detail the thriving popularity of Jersey and Guernsey private funds – experts tell us demand in this area will double in the next two years.

The global appetite for access continuesalternativetoassetsatpace

Our article finds how investors are being drawn to private funds by their flexibility, cost-effectiveness and the chance to chase greater returns in volatile times – setting them out as one structure benefiting from the current economic turbulence.

www.blglobal.co.uk august/september 2022 3

BALANCE IS IN OUR NATURE Effectively managing fund governance, administration and accounting for a range of asset classes requires balancing responsibility with ambition, prudence with passion, and heritage with vision. We have the expertise to administer both closed- and open-ended funds across all sectors from our offices in Jersey, Luxembourg, the Bahamas, Cayman, the Isle of Man and the US. Our highly-experienced funds team provide tailored services to support the needs of fund managers and investors all over the world. Your Funds Partner To learn how we can enhance your business, please contact Ian Horswell – Global Head of Business Development Suntera Global Fund Services T: +44 (0)1534 635742 E: Bahamasian.horswell@suntera.com | Cayman Islands | Guernsey | Hong Kong | Isle of Man | Jersey | Luxembourg | Malta | United States For details of the regulatory licenses held across Suntera Global, please visit the legal and regulatory page on suntera.com EMPOWERINGsuntera.comRESPONSIBLE AMBITION

Property investors, keen to demonstrate the green credentials of the buildings they target, are reaping the benefits 56 passion investing In these turbulent times, vintage and designer handbags are proving to be worth their weight in gold – and then some 56

David rounds up all the latest trends and developments in the world of funds – as well as taking a look at investors’ intentions for the future and what those might mean for the Channel Islands.

DAVID STIRLING

© Chameleon Group Limited, all rights reserved. Reproduction in whole or in part without written permission is prohibited. Views expressed by our contributors are their own and do not necessarily represent the views or policies of Chameleon Group. While every effort is made to achieve total accuracy, Chameleon Group cannot be held responsible for any errors or omissions. Office: 7 Castle Street, St Helier, Jersey, JE2 3BT Businesslife is published quarterly by Chameleon Group, with special editions covering the City, Middle East and Asia +44 1534 615886 www.blglobal.co.uk

contributors 8 News Updates from Jersey and Guernsey 12 Appointments

The BL Global Discussion Forum Follow us @blglobalnews CEO, CHAMELEON GROUP Carl Methven carl.methven@blglobal.co.uk EDITOR-IN-CHIEF Jon Watkins ART DIRECTOR Angela Lyons SUB EDITOR Kate Wheal ADVERTISING sales@blglobal.co.uk NEWS AND EDITORIAL news@blglobal.co.uk GENERAL ENQUIRIES enquiries@blglobal.co.uk BLBUSINESSLIFE The knowledge Wheat in numbers, virtual rethinksMarianaupdate,worldplusMazzucatocapitalism 60 30 36

ALEXANDERGARRETT

www.blglobal.co.uk august/september 2022 7 Contents INSIDE

become investiblemainstream,assettypes are set to diversify as funds follow suit 46 board diversity Fund boards have been slow to follow the trend towards greater board diversity – so how can progress be speeded up? 52 real estate funds

SOPHIE McCARTHY

Amid increasing pressure to be AlexESG-compliant,exploreshow structures that invest in property are proving the green credentials of the buildings they have an interest in.

DAVID BURROWS

And in these volatile times, Sophie gets a handle on how some savvy investors are finding stable – and above-average – returns from an investmentunusualsource: luxury handbags.

Senior job changes across the islands 16 interview Peter Hughes, CEO and founder of Apex Group, on how the business has expanded and its plans for further growth 24 funds trends What’s hot (and what’s not) in the funds sector, where are investors looking, and what does it mean for the islands? 30 private investment Demand for private investment funds is set to double in the next two years as investors are drawn to their flexibility and cost-effectiveness 36 alternative funds As pressure builds for alternative fund managers to scrutinise ESG activities more closely, science-based targets could help 40 digital funds As digital solutions

Meanwhile, David takes a look at the particular popularity of private investment funds. He finds that their flexibility and cost-effectiveness mean demand is expected to double in the next two years.

don’t rely on luck, rely on Savills Jersey 01534 savills.je722227

The Jersey Funds Association (JFA) has elected a new committee, with Michael Johnson (pictured), Group Head of Institutional Services at Crestbridge, taking over as Chairman. Mourant Partner Joel Hernandez takes on the position of Vice Chairman, and Robin Wilson, Sophie Reguengo, Stephanie Hopkins, Clive Spears and John Riva are all joining the committee. Remaining in post this year are Richard Anthony, Mike Byrne, Steve Cartwright, Ben Dixon, Ben Honeywood, Dilmun Leach, Robert Milner, Tim Morgan, Simon Page, Martin Paul, Tom Powell, Peter Rioda, Ben Robins, Martin Rowley, Sarah Sandiford and ElliotJohnsonRefson.said: “There’s no doubt the landscape continues to pose challenges. Geopolitical developments have significantly worsened since the increased hostilities in Ukraine, and from a macro-economic perspective inflation rates, interest rate changes and other economic indicators are pointing to a significantly more challenging economic theirlookingmoreimpressiveanhaveJerseytoo.remainscompetitive“Jurisdictionally,environment.theenvironmentintenseandevolvingButthereisplentyfortobepositiveabout.Weacompellingproposition,industrygrowingatanrateandmoreandmanagersofsubstanceatJerseytosupportcross-borderneeds.”

Apex has completed its acquisition of Sanne, positioning Apex as a top-tier service provider servicing nearly $3trn in assets. Sanne adds 2,500 people into the group and six locations in Denmark, Japan, Serbia, South Africa, Spain and Sweden. Sanne adds product and experience in serving the closed-ended private equity, private debt, capital markets, loan agency and real assets markets, as well as expanding footprint in the US, central Europe, Africa and APAC.

Jersey private equity firm Rialto Investment Partners has acquired Purpose, a bookkeeping, accountancy and tax practice for local owner-managed businesses. Rialto was formed in October 2020 by Luke Smith and Oliver Mourant to acquire highperforming local companies. Rialto’s aim is to create a local pension fund. All staff will stay in the business and Purpose will retain its branding but become a Rialto portfolio company in the same way as Maillard & Co, which Rialto acquired last year.

JERSEY TO BE DRONE TESTBED Jersey has been chosen as the testbed for a £3.7m project that could lead the way for autonomous flights. Part of the UK-funded Agile Integrated Airspace System programme, drones will be used to test aircraft guidance technology to make the skies safer. This will enable autonomous unmanned aircraft, improving supply chains and connectivity to the UK and Europe. UK tech startup Volant Autonomy is leading a ninepartner consortium that includes Ports of Jersey and Digital Jersey. Volant has developed three products enabling safer flight through risk-aware flight planning and increased pilot awareness, and mitigates against airborne collisions. The technology can be used to enhance safety for manned/unmanned aircraft. Volant is developing the flight guidance technology for use cases such as unmanned logistics aircraft, which could lead to autonomous drones being used at low altitudes to transport items.

Jersey-based KIT Consulting has merged with management consultancy Elixirr to become the Jersey branch of the global business – Elixirr Consulting (Jersey). KIT Founder and CEO Emiko Caerlewy-Smith becomes a Partner at Elixirr, while Jane Flemmer and Amy King have joined as Principal and Manager, respectively.

10 august/september 2022 www.blglobal.co.uk

Next Generation IT and Alternative Solutions are merging, subject to approval, to form a full-service IT service provider across the Channel Islands. The new firm, Clarity, will be based in Guernsey and will also operate from Jersey and Romania to support clients in the Channel Islands, the UK and further afield. It will be run by an executive team led by Chief Executive Officer Neil Jordan, former MD of Alternative Solutions. n

n Follow our company page BL Global

The law and rules also cover fintech platforms operating crowdfunding and peer-to-peer platforms, as well as virtual asset service providers.

Registration of Non-Regulated Financial Services Businesses (Bailiwick of Guernsey) Law, 2008, and introduce instead the licensing and regulation of ‘financial firm businesses’. Responses are sought by 15 September.

@blglobalnews

Guernsey-based Vega Technology Group launched in July, providing turnkey fintech and regtech software products to international financial services clients. Formed following the merger of Fusion Acusoft and Vega Solutions, the new group will develop its portfolio of products to clients including private banks, wealth management firms, pension and corporate services providers, trust and fund administrators.

It introduces licensing for a wide range of activities related to crypto. Individuals holding crypto instruments solely for investment purposes will not need to be willActioncomplianttheGuernseylicensed.isintroducingrulespartlytoremainwiththeFinancialTaskForce.Thelawreplacethe

JOHNSON TO CHAIR JFA

Imperium Trust Company (UK) has completed its acquisition of Page Tax Consulting, a personal tax compliance services business based in Reigate, England. The acquisition bolsters Imperium’s UK offering and adds eight staff to its team, bringing the total in the UK to 17. Page Tax founder Tim Page will remain as a consultant to the business.

MERGERS ACQUISITIONSAND

matters

The first layer is above water; it is clear, unambiguous and visible to those looking for it. In the corporate governance world, this layer would reflect the board function, decision-making, the smooth management of board and committee meetings, and externally, the information that it publishes.

Hannah Luce has over 20 years’ experience in the financial services industry, across private wealth, corporate services and fund services sectors. Hannah is a qualified Chartered Governance Professional and a member of the International Compliance Association.

FURTHER INFORMATION TMGA Wealth Management is an independent and dynamic wealth management business which delivers investment management solutions via its flagship Discretionary Portfolio Management service.

Hannah Luce, Governance Director at TMGA Wealth Management, looks at the importance of ensuring that good governance is woven through every fibre of an organisation ethically and transparently. The ‘lifeblood’ of the Withoutorganisation.aculture of governance flowing into every task, every interaction, every decision, the top two layers of the iceberg cannot be supported.

THE GOVERNANCE ICEBERG

This could refer to the control framework that a business puts in place; how it deals with its clients and other stakeholders; how staff are expected to act, and the measures in place to ensure that its legal and regulatory obligations are met. While this second layer is unquestionably a key element of an organisation’s framework and is still somewhat visible within the business (and on occasion, outside of it), it is perhaps less of an obvious component of corporate governance.Thethird layer of the iceberg is deep below the water – entirely invisible from the surface, but more considerable by far than the rest. This is the governance culture of an organisation; the shared belief in its mission or purpose, and the desire to act

To find out how TMGA Wealth Management can support you, please contact our Senior Investment Directors: Email: greg.powell@tmgawealth.comtim.sanders@tmgawealth.commichael.caetano@tmgawealth.com

TMGA Wealth Management Limited (Registered Number: 132402) is authorised and regulated in Jersey by the Jersey Financial Services Commission for the conduct of investment business. Please note that the value of investments and the income derived from them may fluctuate from time to time.

Since the outset, TMGA has been built on strong governance principles. From its team of senior professionals with complementary knowledge and experience and a focus on creating transparent relationships with its stakeholders, to the early creation of a Governance Director role, TMGA has demonstrated its commitment to creating a solid governance culture. TMGA has also utilised the unique opportunities available to it: the ability to create a robust, yet nimble, investment governance and control framework from the beginning, based on the significant experience of its senior management team and unimpeded by challenges that can come with having to improve established practices. Put simply, TMGA was able to design its ideal environment from the start, with good governance at the centre. Just like the metaphorical iceberg, this careful creation of a governance focused culture allows the established investment governance and control framework to operate effectively. This in turn supports the board in the decisions it makes, all of which are focused on providing investment solutions to clients in a thoughtful and transparent way. n

governance

CORPORATE GOVERNANCE AND TMGA

Tel: 01534 748740 tmgawealth.com

The second layer is just below the water. It is still visible, but less so than the first, and harder to define.

To use an analogy, corporate governance can perhaps be compared to an iceberg.

GOVERNANCE CULTURE GIVEN ITS PLACE

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IT IS PERHAPS easy for the true meaning of corporate governance to become lost in the enormity of the ‘governance brand’. The need to define it can often lead us to confine it to a role, a job or a function, at the expense of realising the true extent of its reach. Corporate governance has long been seen by many as the responsibility of the board alone, with the support of a trusted governance professional to guide and adviseHowever,them. whilst the importance of the role of a board in implementing effective governance practices cannot be overstated, to be successful, governance must also be embedded into every particle of a business.

The emerging acceptance of the importance of a good governance culture was demonstrated in 2018, when the UK Financial Reporting Council updated its UK Corporate Governance Code to include a new requirement for the boards of UK listed companies to “assess and monitor culture”, something that hadn’t been included before then. When done well, a culture of good governance can support a business in its aims: with the attraction and retention of talented employees leading to unrivalled corporate knowledge; with staff collectively pulling together to drive the business forward, and investors confident in the security of their investment. However, there is no ‘one size fits all’ solution to creating an effective governance culture, which can take many years to build, and a significantly shorter period to destroy. It must be continually assessed and improved, with the board setting an authentic and consistent tone from the top.

TrustQuay has appointed Lawrence Nash as Programme Director, based in Jersey. Lawrence, who has extensive experience in operations and financial control, joins TrustQuay from LGL Group, where he served as Head of Change and Transformation for almost two years. Prior to this, he was Programme Director and led strategic projects at Ocorian, having previously been Financial Controller at Sanne. In his new role, Lawrence will help TrustQuay customers maximise the value of their software by improving system usage, adopting new features and increasing customer satisfaction.

Standard Bank Jersey has appointed Andrea John (pictured) and Lisa Nelson to the board. Andrea joined Standard Bank Offshore Group as Head of Risk two years ago, overseeing the bank’s risk management strategy and policy. During her career she has served as Head of Banking for the Jersey Financial Services Commission and held senior roles at the Bank of England and Financial Services Authority in London. Lisa became Chief Financial Officer of Standard Bank Offshore Group this year, having held senior finance positions at HSBC and Bank of Bermuda. More recently, Lisa was CFO at Pacific Fund Systems.

Crestbridge has promoted Brian Jemwa to lead its multijurisdictional real estate funds team. With a career in cross-border financial services spanning 19 years, Brian has extensive understanding of real estate funds, financial and risk management and control assurance reporting. He continues to act as a Director on several boards of regulated and unregulated entities. He joined the firm in Jersey in 2015, having worked for Deloitte for 12 years as an Audit Manager in Harare, Zimbabwe, and then as a Senior Manager in Jersey. A qualified Chartered Accountant, Brian is approved as a Principal Person by the Jersey Financial Services Commission.

NatWest has appointed Stuart Foster as Managing Director of Financial Institutions in Jersey, which brings all institutional customers into one franchise. Prior to this appointment, Stuart led the institutional banking business at RBS International, part of NatWest Group, while also serving on the board of NatWest Trustee and Depositary Services. Stuart joined NatWest Group more than 20 years ago and has held a number of management positions in the firm. He serves as a Non-Executive Director for Big Society Capital, where he also acts as the UK Bank Shareholder representative and is a member of the board.

Appointments

PwC Channel Islands has promoted Alex Burne to Partner, with a focus on driving innovation and the technology transformation of the firm. On graduation from university, Alex relocated to Guernsey to take up a trainee role at PwC, qualifying as an auditor in 2003. He then completed a secondment to PwC in Sydney as part of the financial services audit team, returning to Guernsey with strong international connections. As a Director, Alex has played a key role in PwC’s resourcing strategy and audit transformation, serving as Transformation Leader since 2013.. IQ-EQ has recruited Helen Bougourd and Keren Bowen (pictured) as Directors in its private wealth team in Guernsey. Before joining IQ-EQ, Helen spent two years as a Client Relationship Director for Beauvoir Group. Prior to that, she worked for Trident Trust Company and NWH Global and as a fiduciary consultant in Guernsey. Keren joins IQ-EQ after 15 years with Guernsey trust company Artemis Fiduciaries, most recently as Director. During her 20 years in finance, Keren has worked with a range of ultra-highnet-worth individuals in various managerial roles for fiduciary providers.

12 march/april 2017 www.blglobal.co.uk News

Nitrisha Doorasamy has been promoted to Senior Associate in Walkers’ Guernsey office. Nitrisha has been with the firm as an Associate since November 2018. She trained in South Africa and spent more than six years working in the trusts team of South African banking group FNB Wealth and Investments. Nitrisha’s practice is based on supporting local trust companies and high-net-worth individuals with asset protection and succession planning issues. She also works with Walkers’ Guernsey corporate law team on trust and company law and issues involving companies’ underlying trust structures.

HSBC has hired Philip Kurtenbach as Head of Investments and Wealth Solutions, as part of its push to evolve its wealth and personal banking proposition across the Channel Islands and Isle of Man. Philip joined HSBC 14 years ago after working in Germany, and for the past 11 years has served as an International Manager in the UK, US and Hong Kong. Most recently, Philip has been Global Head of Wealth Structured Products in London. In his new role, he will oversee the investments and wealth product offering across Global Private Bank, Premier and Personal Banking for the Channel Islands, Isle of Man and HSBC Expat.

Collas Crill has appointed Senior Associate Ian Petherbridge to its corporate, finance and funds team in Guernsey. Ian joins Collas Crill from South Africa, where he was a specialist consultant for Eversheds Sutherland. He has a transactional practice covering banking and financing, as well as mergers and acquisitions. He has advised on projects undertaken in African jurisdictions, several European jurisdictions and offshore jurisdictions. Ian was admitted as a legal practitioner in the High Court of Namibia in April 2007 and as a Notary Public in the Supreme Court of Namibia in 2012.

Guernsey management consultancy CBO Projects has appointed Stuart Low as a Senior Consultant to deliver technology strategies and lead projects. Stuart has more than 35 years’ experience in Europe, the US and Asia. He has spent the past two years in Guernsey, most recently as a Programme and Change Director for TT&C Consultants, and before that a Portfolio Director for Agilisys. Before moving to Guernsey, he delivered change programmes for banks including HSBC. He has overseen strategy in manufacturing, and supported digital transformations in finance and motoring.

www.blglobal.co.uk march/april 2017 13 News

Oak Jersey has named Jo Gorrod as its Managing Director. Jo joined Oak in 2018 as Client Services Director, having previously held the same position at Equiom Group in Jersey. With more than 20 years in the Jersey financial services sector, she has vast expertise working with UK residents and non-domiciled individuals. She also has extensive experience managing high-value commercial and residential property structures, focusing on the private client sector and handling complex arrangements for high-net-worth multinational families. In her new role, Jo will support the business in delivering its three-year strategy.

Asset Risk Consultants (ARC) has appointed Stephen McMahon (pictured) to the role of Chief Executive Officer of ARC Group.

Stephen, who also remains Managing Director of ARC’s Jersey office, has worked for the company since 2008, when he joined from the Bank of England. He takes over from ARC founder Graham Harrison, who becomes Executive Chairman. In addition, ARC has named Andrew Pollock, formerly a Director at ABN AMRO Asset Management Guernsey, as Managing Director of ARC Guernsey, Wayne McArdle beomes ARC Chairman, and former IT chief David Bartlett becomes Group COO.

1. STAGFLATION – EQUITIES AND BONDS FALL AGAIN

S&P 500: 3,100 US 10-year yield: 4% Probability: 10% Fears that the Fed remains ‘behind the curve’ on inflation continue to dominate markets and bond yields rise. Higher bond yields make equities less attractive, and stocks fall.

Stagflation, reflation, soft landing or slump?

Volatility is high and it can feel overwhelming for many investors. Here are four simple scenarios that describe the potential outcomes for markets by year-end, along with how investors should position themselves.

How to invest Manage a liquidity strategy: We recommend a liquidity portfolio that meets around three to five years of cash flow needs, consisting of a combination of cash, bonds and structured investments.

Diversify with hedge funds: In times of high equity bond market correlations, hedge funds can help to diversify portfolios. Some hedge fund strategies –especially macro strategies – are designed to perform well in recessionary scenarios.

The question now is what story will drive the market over the second half of the year: ‘stagflation’, ‘reflation’, ‘soft landing’ or ‘slump’? And how will markets react?

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Paul French, Senior Client Advisor at UBS Global Wealth Management in Jersey, shares UBS’s view of potential scenarios that will drive the market in the second half of 2022 EQUITY AND BOND markets are driven by stories, hopes and fears about the future path of growth and inflation.

The story of the first half of 2022 has been one of ‘stagflation’, with fears that the Federal Reserve (the Fed) will need to hike rates faster and further to contain inflation-driving bond yields higher and equities lower.

Now that Fed officials have indicated how closely they are watching and reacting to monthly CPI prints, each inflation data point will likely cause volatility. Yet it will take several months of data, at a minimum, for the market to gain some clarity on what narrative will dominate the second half of 2022. Investors should be prepared for that volatility as it presents both risk and opportunity.

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S&P 500: 3,300 US 10-year yield: 1.5% Probability: 40% A significant drop in economic demand means growth and inflation fall sharply and investors start to expect a significant drop in corporate profits, hurting equity markets. The Fed considers interest rate cuts, supporting bonds.

How to invest Add defensives and quality: Investors can improve the resilience of equity portfolios by investing in quality income and defensive sectors like healthcare. We also recommend closing the gap in fixed income allocations with resilient credit. We also now prefer high-grade bonds. Make use of volatility: Capital-protected strategies may allow investors to use volatility to work in their favour and mitigate potential downside risks in case of a downturn in equity markets. Elevated volatility also presents opportunities to generate yield in FX, commodity and equity markets.

FURTHER INFORMATION Paul French, Senior Client Advisor, UBS AG, Jersey Branch 1, IFC St Helier, Jersey JE2 3BX Tel: 01534 701140 Email: paul.french@ubs.com

Investors should be prepared for volatility as it presents both risk and opportunity

How to invest Be selective in longer-term growth: An alleviation of market concerns about inflation could trigger a rally in growth stocks. We see opportunity for the long-term in growth stocks trading below long-term average valuations, in automation and robotics and in China. Invest in private markets: Investing in private equity following public market declines has historically been associated with strong returns. The average annual return on global growth buyout funds launched a year after a peak in the MSCI All Country World Index has been 18.6%, according to Cambridge Associates’ data since 1995. To learn more or find out how UBS Global Wealth Management can help you reach your goals, visit www.ubs.com or contact Paul French at UBS in Jersey. n

2. SOFT LANDING – MODEST EQUITY RECOVERY

How to invest Invest in value: Value stocks tend to outperform while inflation is above 3%. Evidence that corporate earnings can remain resilient would be particularly supportive of energy. We also like broad value with a quality tilt in the UK. Position for the era of security: As the war in Ukraine continues, governments and businesses alike are adapting to the new era of security – in terms of energy, cyber and food. Over the longer term, we think this will spur demand for carbon-zero, cybersecurity and agricultural yield solutions.

3. SLUMP – EQUITIES FALL BUT BONDS RISE

4. REFLATION – STRONG EQUITY RALLY S&P 500: 4,500 US 10-year yield: 2.75% Probability: 10% Inflation surprises to the downside, and a combination of a ceasefire in Ukraine, an end to zero-Covid policies in China and higher labour force participation, drive much investor risk appetite. Stocks rally sharply.

S&P 500: 3,900 US 10-year yield: 3.25% Probability: 40% Inflation stays elevated, but investors gain confidence that it is falling under control, and bond yields do not move significantly higher. Corporate profit expectations project neither significant growth nor decline. Stocks rally modestly.

▼ Words: Jon Watkins Apex Group was founded in 2003 to fill a gap in the market for a more tailored and ‘full service’ fund administration service. CEO and Founder Peter Hughes explains how the business has expanded – in terms of service offering and geographical reach – in the years since, and how it plans to meet the needs of a speedily evolving sector

I was born in Dublin and spent the first 10 years of my life in Ireland, before moving to the UK and going on to study economics at Bristol University. I spent a while working on a farm, which taught me that it is essential to have the respect of your team – and the value, as a leader, of leading by example and quite literally rolling up your sleeves.

The business has scaled hugely since its launch. Can you walk us through that growth and the expansion into wider delivery of products and services to the wider FS sector?

16 august/september 2022 www.blglobal.co.uk Interview

Tell us about your early life and your journey into the financial sector…

I’ve always been ambitious and I felt finance seemed as good a sector as any to prove myself and begin my career.

Where did those early years take you and how did your initial career affect your decision to launch Apex Group? I trained as an accountant in a mid-sized firm, which gave me a lot of access to every aspect of how businesses worked and a good grounding in the fundamentals. In the mid-1990s, I moved to Bermuda with KPMG, before joining a fund administration firm called Hemisphere Management.Ithenjoined one of my independent asset management clients as CFO. But I became frustrated by the quality of service and responsiveness we received from our service provider – and so I decided to do something about it by developing an organisation that truly puts the client first. You launched Apex Group in 2003 – what had you seen in terms of a gap in the market and what was the proposition when you launched? My vision was to develop a business that was valued by every single client, delivering a flexible and personal local service on a global scale. In the early days, we concentrated on delivering a consistent, responsive, personal and reliable service to our clients, regardless of their size or stage of their lifecycle – something we are passionate about retaining no matter how big we become. So today, those foundations remain at the core of our mission – which is to strive every day to push boundaries so we can be a better business and inspire others. That’s about listening to our clients so we can evolve our offering, putting people and experience at the heart of the journey.

We share our business success by rewarding high performers who work with energy and agility. Staying true to these founding principles means we have been able to scale and develop into a valuable service partner, able to help clients navigate increasingly complex global regulatory landscapes and intensified investor scrutiny. And, on the journey, we have gained the backing of some of the world’s most respected investors, which has enabled us to scale into an institutional-sized business that can deliver the broadest range of solutions across the full value chain for our clients – something we call our singlesourceWhensolution.you’re starting a business, you’re focused on the immediate future and building a reputation. We did this by being fully committed to doing the best for our clients – many of whom remain our clients to this day. The rapid growth came later, as our business and product set became more sophisticated. Our M&A strategy enabled us to scale with velocity by adding products and geographies to our capabilities, with a goal of being able to deliver any service a client might need, no matter where they are in the world.

In 2008, the global financial crisis struck, and we took the decision to diversify both geographically and in the types of clients we serviced. That was a big strategic decision for us.

In the past five years, the group has grown both organically and through more than 30 strategic acquisitions – including the recent addition of Sanne Group – taking us from $50bn to nearly $3trn in assets across administration, custody, depositary and under management. We now operate from over 80 offices in more than 40 markets worldwide, with over 10,000 employees.

Along the way, we have continually improved and evolved our capabilities to ensure we can continue to offer a singlesourceStartingsolution.outas a pure fund administrator, we built out our offering based on listening to our clients and their needs. That led to us developing and acquiring an unrivalled range of additional solutions, including a proprietary digital bank built specifically for the asset management space, depositary, custody, super-manco services, corporate and business services, compliance solutions and a pioneering ESG Ratings and Advisory solution.

The recent addition of Sanne marks an inflection point in our story, as we welcomed 2,500 new colleagues, added six new locations and expanded our presence in strategic jurisdictions such as the ChannelBringingIslands.Sanne into the group expands our premium book of clients and adds further weight to our experienced team.

What separates you from your competitors, and can you explain exactly how the single-source solution supports that differentiation?

It’s at the heart of how we approach everything we do at Apex Group –providing clients with all the services they might need, through one single relationship.

Interview Peter

interviewTheHughes

We have increasingly found that our clients appreciate the convenience, reassurance and efficiency of being able to access all the services they need through a single relationship. We are clearly very proud of what we have developed – but more importantly our clients are reaping the benefits.

The business has been on a big acquisitions drive. What’s the strategy? As I’ve mentioned, our growth strategy is underpinned by a simple concept: to provide our clients with an exceptional experience that makes their lives easier. So every acquisition we make is done to add value to our business, whether that be through additional geographies, products or expertise. The acquisitions don’t just add scale to our business, they add the technologies, capabilities, people and the footprint we need to be the best possible service partner we can. What are the keys to success when it comes to acquisition – especially in markets where there is pretty much a race to consolidation – and how have you ensured success in your acquisitions? The key is to remain disciplined in your approach to acquisitions – as we have done – including proactively seeking out wellrun businesses and avoiding overheated competitive processes. We have built a flexible but robust model for integrating acquisitions, and dedicated teams to run those integrations smoothly so we do not impact BAU or our clients’ experience. As a result, I am very proud that we have never lost a client as a result of an integration decision, and we have a more than 99% client retention rate globally.

What’s the growth trajectory for the business and what form will that take? Building on this excellent foundation with our supportive investors Genstar, TA Associates, Carlyle and Mubadala, and the right leadership team in place, we see no ceiling to what the business can achieve. We are proud to be disrupting the industry, both in the way we deliver service and in driving positive change in the areas that matter most to us. Now that we have reached this scale – we want to use our global platform for good. Not only have we developed a unique market-leading ESG Ratings and Advisory business to support our clients in achieving their ESG goals, we also walk the walk. We have purpose beyond being a financial services provider, and that is to drive positive change for our people, our clients, the industry and future generations. We are particularly committed to driving change across three key themes: women’s empowerment; the environment; and education and social mobility.

Private market assets continue to evolve and become more accessible, with greater transparency and better access to information for investors.

The market is seeing the benefits of this approach and, as such, we expect the competitive landscape to continue to consolidate in 2022 as providers seek to achieve greater scale and depth of product offering.

Forrester Consulting published an independent study earlier this year on the Total Economic Impact of Apex Group and found that clients leveraging multiple services from us – using our single-source solution – achieved a return on investment of 105% and cost benefits of $5.39m, with a net present value of $2.75m over a threeyearDespiteperiod.the exponential growth of the business, which has led to us becoming one of the largest independent service providers in our space, we will never become complacent or lose sight of why we have built it. We want to be the firstchoice provider for any client in our space, not because of our size, but because of the quality of service and the experience with our brand.

What trends are we seeing in the sector as a result of current macroeconomic issues?

18 august/september 2022 www.blglobal.co.uk Interview

We have some really great initiatives that demonstrate our commitment around these areas, such as our Women’s Accelerator Program, our global mobility program for employees, and the fact we were the first in our industry to offset our entire lifetime of carbon emissions this year. We are very aware of our responsibility as a global firm to ensure that capital flows to the right places, and that we must leave a good legacy that our children, and our children’s children, can be proud of. We see ourselves as far more than just a financial services provider.

And, in a complex and uncertain economic and geopolitical environment, now more than ever clients are looking for partners that can help them to simplify their operations, control costs, reduce risk and help them to achieve their growth objectives. We certainly feel that asset managers are increasingly appreciating the convenience, reassurance and efficiency of being able to access all the services they need through one single relationship.

Service providers must be equipped to support increasingly complex and ▼ our acquisitions don’t just add scale to our business, they add the weandcapabilities,technologies,peoplethefootprintneed

We expect existing players to continue allocating larger proportions of assets under management to private credit, alongside the diversification of established managers into new strategies.

What do you see as the big challenges in the funds sector moving forward?

There are a number of things in play right now. The past year has seen a maturation of a number of trends in the asset management and private markets.

How do you keep the business at the front and ensure you are constantly meeting clients’ evolving needs? We must not become complacent, and we must remain committed to investing in our services, technology and people so that we become even more agile in our response to evolving client needs. We maintain a flat-structured business with an open-door policy – so any client or employee is welcome to contact me directly at any time. That shows our level of commitment to listening to our clients and our people, and our willingness to continually evolve and improve.

Downward pressure on costs and fees, as well as a global talent shortage, continue to drive outsourcing and ESG has transitioned from buzzword to ‘nice to have’ and now fully into the mainstream.

It’s clear that the volatile equity markets, rising interest rates, geopolitical instability and the ongoing disruptions from the global pandemic have resulted in allocators turning to credit strategies to achieve their targets. In addition, at the start of 2022, the private equity industry was sitting on a significant amount of dry powder that needed to be deployed, and we have seen strong leveraged buyout activity, driving demand for capital markets and escrow solutions.

If you’d like to prepare for your financial future, talk to us. We’ve been helping islanders make the most of their money for nearly 20 years. ravenscroftgroup.com

The value of investments can fall as well as rise. Investors may get back less than invested.

Ravenscroft is a trading name of Ravenscroft (CI) Limited (“RL-CI”), which is licensed and regulated by the Guernsey Financial Services Commission to conduct investment business. RL-CI is also regulated by the Jersey Financial Services Commission to conduct investment and funds services business. For all Ravenscroft connected entities, please refer to www.ravenscroftgroup.com/disclaimer.

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OFFSHORE LAW SPECIALISTS BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS GUERNSEY JERSEY CAPE TOWN HONG KONG SAR LONDON SINGAPORE careyolsen.com With you wherever your business takes you With a network of offices spanning the world’s leading financial centres, we deliver a seamless service across the full spectrum of offshore law: ⁄ Corporate and finance ⁄ Investment funds ⁄ Dispute resolution and litigation ⁄ Restructuring and insolvency ⁄ Trusts and foundations ⁄ Private client ⁄ Family office ⁄ Taxation and economic substance ⁄ Employment ⁄ Property ⁄ Relocation

The fact Guernseythatand Jersey are not in the EU is not seen as prohibitive to structuringmanagers

www.blglobal.co.uk august/september 2022 21 Interview

The lines of communication between the industry, the government and the regulators are very strong, which allows the jurisdictions to adapt while retaining a flexible and robust regulatory framework.

here granular private debt portfolios with more sophisticated and demanding service requirements.Therealsocontinues to be strong momentum for managers to evaluate the effects of investing in the environmental and social context, particularly when it comes to climate change. However, it is surprising that there are still managers who have not yet considered what long-term effects particular investments will have. We see that there is still much to do in this space and an opportunity exists for service providers like us to help close that gap. Were there significant sector changes during the pandemic that you believe will have a lasting impact on the way the sector operates?

Do you think long-talked-about threats such as international tax really threaten the islands’ standing – or are there other benefits they offer? And are there other appeals, such as stability and a strong regulatory environment, that are proving a big draw right now? Jersey and Guernsey continue to play an important role on the global financial services stage, with an embedded ability to adapt quickly as jurisdictions.

Name: Peter Hughes Role: CEO and Founder, Apex Group Lives: Hamilton, Bermuda Eductaed: University of Bristol Interests: I try to make the most of my time away from screens by getting outside – conserving biodiversity and the natural environment has been a lifelong passion of mine and it is why ESG is at the heart of our purpose as a business.

The fact that Guernsey and Jersey are not in the EU is not seen as prohibitive to managers structuring here. The easy and cost-effective marketing offering through the National Private Placement Regime provides an attractive alternative to the AIFMD passport regime.

This deep collective knowledge of lawyers, administrators, accountants and the local regulator makes the Channel Islands a very compelling proposition – and will continue to do so.

How well positioned are the Channel Islands to meet the demands of the evolving funds sector? The Channel Islands’ funds industries continue to go from strength to strength, seeing double-digit growth, now with combined fund assets serviced standing at more than $1trn. Over the years, some of the world’s top managers, pensions funds, insurers and sovereign wealth funds have structured their funds in Guernsey and Jersey.

Among our clients, Guernsey is seen as a jurisdiction that is responsive to change and keen to embrace innovation.

The talent market remains as competitive as ever and we remain excited to find, train and retain the best talents, combining their local expertise with our global reach and resources. The pandemic has also refocused priorities for many of us, including a renewed focus on risks of all types – not just financial – and exposed much of the inequity in our economies and societies. That’s partly why we are so proud of our ESG Ratings and Advisory offering, designed specifically for the private markets and their investors. Now, more than 350 general partners in more than 45 countries are using our ESG services to report on their investments in line with ESG standards and regulations. ESG is a personal priority for me, and I see huge opportunity to support the flow of capital into businesses and assets that benefit people and the planet, now and for my children’s generation. As I said before, it’s important to walk the walk – so in addition to helping our clients improve their impact on the world around them, we are also looking inwardly.

Focusing on the people element, we are committed to diversity of thought and are always looking to improve our business and to create an inclusive environment. We are also aware that the financial services industry is not as diverse as it should be, and we are addressing these disparities across our own business through the launch of key initiatives for minority groups – including the Women’s Accelerator Program.

The Jersey Private Fund regime also remains very popular because of its flexibility and speed to market. Fund managers and investors want a regime that is robust and flexible, and that is what Jersey offers.

In addition to offsetting our lifetime of carbon emissions, each year we plant more than 200,000 trees – 10 trees for every client contact signed and a tree for every five years of employee service. We’re not finished there, though; we are also working to become ‘net positive’.

The Channel Islands continue to attract interest from global funds and businesses –and we are better placed than ever to meet their needs. n

FACT FILE

The ability – and desire – of clients to work flexibly and remotely has certainly continued, even as Covid-19 restrictions have lifted, so quality digital and technological solutions are essential. For service providers, continued investment in quality technology platforms and solutions is crucial. However, I strongly believe that investment in technology must be paired with investment in people.

This was demonstrated through the extension of the popular PIF regime in 2021, which offers increased flexibility and speed to licensing for promoters and family office groups.

Recent developments in global private capital the Channel Islands perspective

THIS YEAR HAS already presented its fair share of challenges for investors, but an area that continues to boom, for a number of reasons, is private capital. This is the broad term used for investments in assets not available on public markets, often structured through investment funds. Preqin, the leading provider of data on alternative assets, defines private capital as private investments in private equity (PE), venture capital (VC), real estate, infrastructure, private debt or naturalPreqinresources.estimates that assets under management (AUM) in the alternatives market will hit $23tn by 2026, a sharp rise from the $13.3tn recorded at the end of 2021.1

22 august/september 2022 www.blglobal.co.uk Advertising feature

Public markets have endured pronounced volatility over the past couple of years especially, whereas private markets have been less susceptible to external forces. Access to private capital, formerly an institutional preserve, is being democratised. As individual and family wealth levels have increased, they are looking to corporate-style structures for their investments, noting the attraction of often superior returns achieved in the private markets.

WHY HAS PRIVATE CAPITAL GROWN?

By Ben Robins, Partner and Global Practice Leader for Mourant’s global funds practice, and Geoff Cook, Chair at Mourant Consulting

Overall, high inflation puts the postpandemic recovery at risk, with the spectre of a recession looming.

This isn’t to say that there aren’t headwinds that could hinder private capital’s seemingly endless growth. The return of inflation, less accommodative central bank policy, rising interest rates, the prospect of market corrections and increased geopolitical tensions could all impact the market. Inflation especially was grabbing the headlines at the time of writing. Only time will tell, but fundamentals point to a significant reversal of the disinflationary and demographic forces that have suppressed prices and labour costs for threeInflationdecades.may peak and fall back, causing the pandemic-driven issues to abate, but the structural change in labour supply will mean that inflation will not return to the super-low levels of the past 30 years. Inflation tends to drive an unlevel playing field. If you are retired and living on your savings, high inflation reduces the actual value of your income – every pound, dollar or euro doesn’t go as far, as everything costs more. If you are poor, the surge in energy and food prices will immediately and disproportionately impact your cost of living. However, if you have borrowed substantial sums at fixed rates, you may not be too concerned as you see the value of your assets climb while your borrowing costs remain fixed.

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The environment is not an easy one for investors to navigate, but it does seem as though confidence remains high despite the inflationary pressures. Institutional trends especially are positive. The giant ($495.3bn) California Public Employees’ Retirement System (CalPERS), for example, has set new asset allocation targets to take effect in July 2022, with no less than 21% of funds allocated to real assets and private equity –an increase of $59bn.

Traditional asset managers are also joining the party, with groups as diverse as Blackrock, JP Morgan and Schroders increasingly active participants in private capital, further embedding the trend to invest in alternative assets.

HIGH INVESTOR CONFIDENCE

The challenge of high inflation for the business world is making business and investment decisions less predictable. As far as international finance centres and cross-border investment are concerned, there is the potential for a slowing of transactions while investors appraise the new environment and the impact on expectedHowever,returns.economic strains can also create asset management opportunity – for example, the need for enhanced debt and credit fund finance and distressed asset investment opportunities. Often the best private equity returns are experienced by funds established and acquiring assets in a downturn.

Real estate deal activity (mainly in UK offices, retail and logistics) also rose sharply last year, as have transactions funded by our distressed debt and credit opportunities fund clients. We see these trends continuing through 2022 and beyond.

Significant new funds are being formed to tap private capital investment into energyrenewableprojects

Jersey and Guernsey are ideally placed to facilitate access to private capital, and at Mourant we have seen no let-up in 2021’s flow of instructions in the first half of thisThisyear.has not been the year that any of us expected, but once again the islands’ agility and expertise are the constants that can be relied on. n

Of course, even private capital had to face up to the challenge posed by the pandemic, but the response was both resilient and resounding. Strained public finances and escalating national debt, now at record levels, will have far-reaching consequences. This backdrop will see increased demand for private capital, which will play a key role in economic recovery, as well as proving crucial to the new public-private partnerships that we anticipate will emerge in the coming months and years. A striking example is the development of Covid-19 vaccines. Governments have extensive responsibilities for health legislation and services, but not for the production of medicines and vaccines, which lie in the pharma sector, given the vast capital costs involved in developing vaccines and the risks of failure. Before the pandemic, vaccines could take decades to produce. Still, due to the innovation of companies such as PfizerBioNTech, they have developed much faster and rapidly deployed around the world in partnership with governments. In 2022 and beyond, we can expect to see more examples of private capital put to work in a very new environment, where shortfalls in recovery funding encourage new public-private partnerships. Significant new funds are now being formed, for example, to tap private capital investment into renewable energy projects and help fund the important COP26 transition to more sustainable energy sources.

august/september 2022 23 Advertising feature

CHANNEL ISLANDS’ ROLE

There are forces that we expect will counteract the impacts of rising inflation. Institutional investors have substantial equity, and the impetus for putting that to work is even more significant in an inflationary environment.

FIND OUT MORE Mourant is a law firm-led, professional services business with more than 60 years’ experience in the financial services sector.

ESG is high on the agenda to assuage investor concern, investment in the best talent is increasing, and efforts to meet ever higher governance and international regulatory standards have wide support. Those continuing efforts will help the islands build on successful histories in this area. In the Channel Islands in 2021, fundraising and deal activity were buoyant in the PE and VC spheres, across a wide variety of asset types, but with technology, sustainable investment and renewables proving popular themes.

The race to harness private capital is on, and the Channel Islands have an important role to play. The jurisdictions as a whole, and their leading firms, are already repositioning for the new environment.

Investors will want to ensure the value of their capital isn’t eaten away by inflationary forces and will be even more motivated to invest.

PRIVATE CAPITAL, ECONOMIC RECOVERY

1 https://www.preqin.com/insights/2022-preqin-global-alternatives-reports

Funds trends

The future of funds

24 August/September 2022 www.blglobal.co.uk

As change grips the financial world, the future of funds is not immune to progress. So what’s hot and what’s not in the funds world, where is investor interest headed – and what does it mean for Jersey and Guernsey?

the upward trend for investors globally to allocate to alternative asset classes is a sustained one, with Preqin forecasting total global alternative assets topping £17trn by 2025, up from just under $11trn in 2020,” he says. “That trend has been mirrored in Jersey, with the total value of funds serviced in Jersey growing by a fifth over 2021, driven by a rise in alternatives – predominantly private equity and venture capital.” Indeed, Preqin analysis – which offers an in-depth breakdown of trends across the sector – supports the view that the private infrastructure asset class is experiencing an ongoing fundraising furore. Infrastructure fundraising has maintained an unprecedented pace, according to its analysis, with as much capital raised in the first six months as one would expect in a record year. But deployment is what matters, and with large deals falling over due to overpricing, Preqin says the deals market needs to find an equilibrium for the recent raft of mega funds to get capital to work. For venture capital, Preqin suggests activity in the industry is holding up comparatively well, but it remains to be seen how much of that was already in the pipeline. It forecasts slower deal activity going forward as the market begins to adjust to lower valuations.

“Although private equity continues to drive growth, some investors could be Funds trends tempted away from potentially volatile PE investments or fixed-rate bond investments, which could leave them out of the money as interest rates continue to rise.

“Instead, they are favouring debt funds, where returns are linked to floating rate loans within the funds’ portfolios, which can generate increased income as interest ratesMacleodincrease.”also believes that hybrid funds will significantly increase in popularity, with the turbulent macroeconomic environment and rising interest rates also driving their appeal.

Fund managers are turning to hybrid funds as a way to innovate and offer sophisticated investors a greater degree of choice, flexibility and returns, according to Meanwhile,Macleod. a wider range of investors are showing interest in hybrid funds as they seek access to the higher risk-adjusted

Looking forward, Johnson argues that economic recovery around the world is going to need significant amounts of private capital to support business and infrastructure growth. He believes Jersey is well placed to support that in terms of expertise, experience and structures. Macleod believes debt funds will also become more popular in this high inflationary environment. “Rising prices, supply challenges and an excess of cash in the economy driven by pent-up consumer demand during the Covid-19 pandemic have all contributed to rising inflation. In response, interest rates are increasing globally,” he says. These macroeconomic factors are influencing asset allocations, he explains.

The Russian invasion of Ukraine and the ensuing sanctions on Russia have left a massive gap in global commodities markets, particularly energy. Preqin reveals that, against this backdrop, natural resources funds raised $51bn in Q2 2022, almost $20bn higher than in Q2 2021. The latest performance data shows stellar returns for the asset class. However, given that this is geopolitically driven, such performance may not represent a long-term trend.

Words: David Burrows THE FUNDS ARENA has seen some notable trends in recent times, not least the global appetite for access to alternative assets, which continues at pace. In the Channel Islands, there has been a huge increase in the net asset value of funds focused on private equity and venture capital in the past five years. Figures recently published by Jersey Finance show that in Jersey alone there has been a 249% increase. Guernsey is seeing growing interest, too.

Malcolm Macleod, Head of Funds and Institutional, Jersey, at IQ-EQ, explains: “This demand is not only from institutional investors, but increasingly from highnet-worth individuals (HNWIs) and family offices, who are diversifying their asset allocation away from traditional investments towards alternative assets. “While some HNWIs and family offices choose to invest directly, most prefer to use a private fund structure in order to access talented asset managers with strong track records in high-quality deal origination.”

“These are private investment vehicles that have attributes of both hedge and PE funds – thus offering investors the diversification that comes with exposure to public and private markets, with the flexibility to invest in a range of assets and deliver various liquidity options,” he adds.

Mike Johnson, Chair of the Jersey Funds Association and Group Head of Institutional Services at Crestbridge, takes a similar “Undoubtedly,view.

www.blglobal.co.uk August/September 2022 25 Preqin valuationstothegoingslowerforecastsdealactivityforwardasmarketbeginsadjusttolower ▼

EYE ON THE FUTURE

“It’s a fantastic example of Jersey showing innovation to meet a very real demand in the market.”

JURISDICTION OF CHOICE

Henderson adds that there will likely be an increased focus from property fund managers on specific investments in the sector, such as data centres and large warehousing facilities.

Looking at jurisdictions rather than products, Johnson explains why the Channel Islands continue to have such strong“Theappeal.combined appeal of stability, certainty, experience and premium service quality have all combined to create a really compelling proposition for managers and investors,” he says. “It’s about being entirely comfortable with domicile choice – and there’s no doubt that Jersey offers the reliability and peace of mind that managers and investors want.

Henderson, although this interest might come from different sources.

The real estate market will continue to attract investor interest, according to Fund managers are turning to hybrid funds to innovate and offer greaterinvestorssophisticatedchoice

Meanwhile, Johnson adds, the incentive is to maintain that approach in the ESG sphere, with Jersey Finance launching its sustainable finance strategy last year and the Jersey Financial Services Commission introducing new codes of conduct around disclosure and reporting to combat greenwashing.“It’saclear indication of the islands’ intent in the growing ESG space,” he concludes. n

The SPAC boom was fuelled by an extended period of low interest rates, which drove investors to riskier areas of the market to seek higher returns. Last year, the SPACs market was flying, but the economic landscape has changed since.

Ross Youngs, Group Commercial Director at Belasko, also sees opportunities for private capital on a turnaround agenda. “When I talk to special situations managers, they tell me that market volatility and geopolitical uncertainty is creating stress within corporates,” he says. “There are opportunities for private equity to come in and support these companies. I think 2022/23 will be quite an interesting year for new capital raising.”

Youngs says venture capital in tech has been super-strong over the past few years but, unlike Henderson, he sees things cooling off a little. “Tech is at a crossroads now – it has certainly been hot, but I believe we are in a change period,” he says.

SPACS COOL-OFF

26 August/September 2022 www.blglobal.co.uk Funds trends returns generated by private market assets. According to data from Preqin, tech companies have accounted for more than half of the total public-to-private deal value in the past 18 months. Top of the shopping list have been business-to-business software companies Citrix, Anaplan and Zendesk.

He stresses that while the residential market for homebuyers is a different matter altogether, commercial property and specific prime-location investing will likely see good business volumes.

“Once managers have established their first funds in Jersey and they have been a success, we’re seeing them come back for second, third and multiple fund launches, and that sort of confidence seeps out across the industry. It’s a reputational dividend.”

As to what is definitely not hot right now, Youngs picks out special-purpose acquisition companies (SPACs), which he says have suffered a massive uphill battle on recent valuations.

“Even if interest rates continue rising and suppress some demand, overseas investors with a long-term investment horizon might see lower valuations as a good opportunity rather than a cause for concern, particularly if exchange rates are in their favour,” he explains.

Youngs sees cryptocurrency as an interesting proposition. “I think exchangetraded funds are a safer entry into crypto – and there are still a lot of people supporting this space.”

There is a more challenging listing climate right now but, as Henderson explains, when public markets struggle, there is an opportunity for companies to be identified as undervalued, attract PE interest and go private again. Essentially, the markets can feed off each other.

It’s about familiarity too, Johnson argues.

But he adds that it’s also about staying relevant and innovative – and the Jersey Private Fund (JPF) is a great example of that, he “Thissays.year marks the fifth anniversary since the JPF was launched as a structure for limited numbers of sophisticated investors,” he says. “Since then, it’s grown to become really the vehicle of choice for institutional investors and a great vehicle for co-investment among family offices.

Alex Henderson, LP Partner at Mourant, agrees that technology as an asset class is flourishing. “We are not just talking about pure software companies, but any portfolio company operating in an industry that can use technology to become more efficient,” he Sosays.istechnology almost a defensive play now? “Yes and no,” responds Henderson. “Market conditions have made it harder for companies to create value, and private equity firms have perhaps moved away from the traditional model of cutting costs to be more “Technologyefficient.canactually create significant value in numerous sectors, so there are good opportunities there.” Henderson notes that larger institutional investors have exposure to both public and private markets. “It’s not an either/or option for institutional investors; private capital exposure forms part of their diversified portfolio,” he explains. “Private markets offer an opportunity for strong returns but also some protection from the market volatility that can accompany listed investments, so can’t be ignored by those managing a large portfolio.”

The mantra in financial markets for the past 40 years has been ‘don’t fight the Fed’.

28 august/september 2022 www.blglobal.co.uk Advertising feature Period

On 22 June, the Bank of England stated: “Since December 2021, we’ve increased our key interest rate, Bank Rate, from 0.1% to 1.25%.” So is the ‘easy money’ period coming to end?

Belal Al Bonni, Senior Manager in Audit & Assurance at Deloitte Guernsey, takes a look at how debt managers are responding to a period of uncertainties – and the implications for investors

THE WORLD IS experiencing a sharp increase in inflation rates, with Covidrelated supply shortages and the turmoil of the energy market being cited as two key contributors to the rises. Monetary policies have been tightened across the world, and the collateralised loan obligation (CLO) market, as well as the stock market, have witnessed a deterioration in prices over the past several months. So are we experiencing ‘the period of uncertainties’?

Currently, the US market is experiencing the biggest interest rate rise in almost 30 years; Australia, India and many other countries have similar instances of rising interest rates; and the European Central Bank is not immune.

anduncertaintiesofreflectionsondebtinstruments

During a rising interest rate environment, savings products such as high-yield savings accounts or certificates of deposit might look more attractive to risk-neutral and risk-averse investors. In contrast, investors seeking more risk/ return would require higher returns to compensate for the level of risk taken on top of maintaining the real value of their investments.Aswitnessed in European corporate bond market activities, there was a shift in fundraising activities during the current period toward investment grade bonds and less on the high-yield bonds. But will this shift be for the short term or the longer Inflationterm?ismost damaging to the value of fixed rate debt instruments because it devalues interest rate payments as well as repayments of the principal. If inflation exceeds the interest rate, lenders are losing money in real terms. Looking back to historical information and comparable inflationary periods, most of the outperforming risk-averse asset managers and hedge funds avoided investing in fixed income instruments during such periods. On the flip side, fixed income instruments were the favourite of risk-seeking managers, who invested in high-yield instruments, including distressed debts, to compensate for the underlying risk as well as the nominal inflation rate.

Deloitte’s market-leading reputation is grounded in marquee debt sector clients including LSE and TISE listed debt funds.

However, on fixed rate instruments, future cash flows are not expected to change, with an increase in the related discount rate to reflect the market changes that will usually lead to a decrease in the fair value of the instrument. n

• Debt instruments at fair value: Generally, the fair value of a debt instrument is determined by discounting future cash flows that are expected to be received from the instrument by the relevant market yield to maturity.

IMPLICATIONS FROM AN ACCOUNTING PERSPECTIVE • Debt instruments at amortised cost: In a rising interest rate environment, it is more likely for debt instruments to be held to maturity rather than being prepaid/ refinanced by borrowers. This might not be consistent with the forecast cash flows’ timing when the instrument was originated – which could lead to changes in the amortised cost value because standards require these to be dealt with prospectively as a change in estimate. Higher interest rates also affect impairment reviews of debt instruments. There will likely be an increase in the probability of default, as well as the discount rate in determining the exposure at default and the loss given default.

The market interest rate is one of the key factors in determining the market yield to maturity. Generally, increasing the interest rate will increase the market yield to maturity and ultimately decrease the fair value of the debt instrument.

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Deloitte’s Debt Fund Services team spans audit, advisory and tax experts in the Channel Islands, the Isle of Man, Gibraltar and Deloitte’s NSE network.

Preqin predicts that private debt assets under management will rise to $2.69trn by 2026 –making it the fastest growing asset in private capital

DELOITTE’S DEBT FUND SERVICES

Deloitte is the winner of the 2019, 2020 and 2021 Alt Credit European Awards for Best Audit Service. The award-winning team has developed a level of competency, experience and expertise which is unique in the financial services market, and our client experience and technical knowledge of all debt asset types means we can deliver an expert and insightful audit.

HOW HAS THE DEBT MARKET RESPONDED TO THESE UNCERTAINTIES? The debt market continued to perform strongly in the post-Covid-19 recovery period – during the fourth quarter of 2021 through to early February 2022, when these uncertainties started to crystallise. The European corporate bond market had a strong performance during 2021, with 1,322 deals being closed with an aggregate value of more than €800bn. This was also the theme for January 2022, when fundraising exceeded the same month in However,2021.inFebruary 2022 there was a significant drop in fundraising activities, followed by a swift rebound post-February, with a shift in the type of debt instruments from high-yield to investment grade as a short-term response to the uncertainties. The private debt sector had a similar experience, with very strong fundraising activities during 2021. Like the bond market, there was a deterioration on fundraising activities during the first quarter of However,2022.Preqin predicts that private debt assets under management will rise to $2.69trn by 2026, achieving a compound annual growth rate of 17.4%. This would make private debt the fastest growing asset in private capital.

HOW HAVE DEBT MANAGERS RESPONDED TO SUCH UNCERTAINTIES?

On floating rate debt instruments, future cash flows are updated to reflect the changes in interest rates similar to the change in the market yield to maturity and, as such, the fair value is expected to be at or close to the principal amount.

Privatepower

“In more traditional collective investment funds, to become authorised and regulated through either the Jersey or Guernsey regulators, the manager and sponsor typically need to undergo an application process with the regulator. That can be a long process,” he says. “With private funds, the application process has been considerably shortened. That is a real incentive for those wanting to come to the islands and launch a fund.”

“The launch of PIFs in 2016 was a response to investors seeking more flexibility than a typical open-ended or closed-ended fund,” he says. “Not having to prepare a prospectus means you can get the fund to market even more quickly.

“Now, with the new PIF rules introduced in 2021, the PIF product has become even more flexible and given PIFs universal appeal. For Route Two and Route Three PIFs, no longer having the requirement of a Guernsey-based fund manager reduces cost and further increases their attractiveness. The manager can be based anywhere, such as Zurich or London.” Indeed, the one-day registration process in Guernsey compares favourably with the several weeks for authorised funds and three-day approval process for Guernseyregistered funds. Cleary also highlights the benefits of speed and flexibility.

The general rise in the cost of complying with the ever-increasing regulatory burden for funds may also have focused fund managers’ minds, argues Sam Sturrock, Group Partner and Head of Funds in Collas Crill’s corporate, finance and funds team in Jersey.

Private investment funds august/september 2022 31 With the flexiblebecometheintroducedrulesin2021,PIFproducthasevenmoreandgivenPIF

SEEKING OUTPERFORMANCE

“The current environment has really made managers reflect on whether they need to pay a higher cost for their funds to be all things to all people, or if they can be quite surgical about the complexity of their funds, the location of investors and where they are marketed,” he says.

a universal appeal ▼

Demand for private investment funds is expected to double over the next two years as more investors are attracted to their flexibility, cost-effectiveness and the chance to chase greater returns in volatile times

Dylan Latimer, Partner at Bedell Cristin in Guernsey, highlights cost, flexibility and one-day registration as strong PIF advantages, as well as the Words: David Stirling relatively lighter regulatory touch applied to them. Guernsey PIFs can be open- or closed-ended and established as a company, partnership or unit trust.

Cleary believes that private investors who are seeking alternative sources of returns in difficult markets have also helped the surge in “Theredemand.hasbeen a general reduction in private assets going public through an IPO, and that means the universe of investible assets is smaller than it has been historically. Investors also have more dry powder, which has continued to build up during the pandemic,” he states.

PIFs have traditionally proved popular with venture capital and private equity fund managers, according to Guernsey Finance, because they frequently have smaller numbers of large, sophisticated and specialist investors. They can also be attractive to first-time fund managers who are moving from an asset management or corporate finance

GUERNSEY AND JERSEY private funds are flying. According to figures from Jersey Finance, the number of registered Jersey Private Funds (JPFs) – marketed to no more than 50 qualified professional investors and covering the whole range of asset classes (see panel overleaf) – jumped 70% between March 2020 and March 2022.

“If a fund manager doesn’t actually need a wide spread of investors geographically or a high volume of investors, then JPFs can be far more cost-effective than a public, more regulated fund.

THE NEED FOR SPEED So, what other factors are driving the success?

“Investors from all over the globe are looking for newer sources of returns in private markets. Private funds can provide the structure and appropriate regulation to facilitate this.”

Mark Cleary, Director at fund services provider Zedra, believes this is only the tip of the iceberg, forecasting a 100% jump in the number of JPFs by 2024. “Private funds have been a real success story to date, and they will continue to be,” he says. “They are at the 500 mark now in Jersey, but in a couple of years that number could feasibly double.” Guernsey, which established a Private Investment Fund (PIF) regime in 2016 and restructured it last year to attract more investors, has also seen a rise in interest. According to Guernsey Finance, PIFs have “increased in popularity each year and at the end of last year [2021] more than £14bn was invested in Guernsey PIFs”. While both islands are demonstrating impressive numbers, Cleary says the “velocity off the launchpad” has been starker in Jersey than Guernsey. That, he suggests, could be the result of quirks such as slightly more complex regulation for PIFs in Guernsey – there’s a hard requirement to audit private investment funds annually, which is not a requirement in Jersey. Regardless, it is clear that both islands, benefiting from being well regulated jurisdictions with broad management and administration experience, have tapped into burgeoning demand for their private funds products.

“We’ve seen many different uses of private funds and their strategies are not at all homogenous,” Cleary adds. “For example, we’ve worked with managers who raise money from institutional investors and invest in companies with a view to transforming their business and operations through genuine ESG strategies and services. “The core belief again is that investors can earn real outperformance through innovative and more focused strategies.”

“The Route Two PIF is not aimed at retail investors but rather qualifying private investors who are either professional investors, experienced investors or knowledgeable employees,” he says. “They will need to understand the risks involved and be able to bear the consequences of investment in the PIF.

Channel Islands Private Funds: a quick guide career and are eager to set up a new fund of their “Perhapsown.someone outside the fund space has a good idea and is keen to monetise it. Maybe they have an informational advantage on some type of asset that they believe could attract other investors,” Cleary says. “These could be friends, family or through institutions.”

EUROPEAN BRIDGE

“Jersey and Guernsey are attractive because we are best in class. But the availability of fund management and administration talent on the islands could limit our ability to meet demand,” he says. “We need to be mindful of this as they Nevertheless,develop.”Latimer is confident that any hurdles can be overcome, given the boost that private funds can continue to give the islands.

The PIF is still managed by Stonewood, with the conversion allowing the management role to be transferred to its UK-based manager, Stonewood Wealth Management.Inaddition, according to Guernsey fiduciary firm HFL, PIFs can enhance corporate governance and wealth management. The business recently set up a PIF as a long-term succession planning vehicle. According to the firm: “Where family trusts are investing in a PIF, estate planning using a centralised regulated vehicle that will drive growth is a smart approach.”

Jersey

The Guernsey Private Investment Fund (PIF) structure dates back to 2016 “as a simple and cost-efficient route to market for managers with close relationships to smaller numbers of sophisticatedFundamentalinvestors”.changes to the regime were made last April with the creation of a ‘three routes’ structure, all of which offer fasttrack registration of one business day:

The Jersey Private Fund (JPF) regime began in March 2017 and incorporates funds with 50 or fewer offers or investors. They can be established as a number of different types of vehicle (companies, limited partnerships, unit trusts are most common), as Jersey or non-Jersey vehicles (for example, as an English limited partnership for which a Jersey company acts as general partner) and can be closed- or open-ended. These funds can only be invested in by professional/ eligible investors who have acknowledged in writing the receipt and acceptance of an investment warning and disclosure statement. A key feature is light regulation, with no requirement to appoint an auditor (unless a company is a public company) or have an offering document. However, every JPF must appoint a regulated full-substance designated service provider in Jersey and carry out the appropriate due diligence. Speed and ease of establishment are crucial, with a typical 48-hour regulatory turnaround.

• Route Two – This new route for qualified private investors does not require the appointment of a Guernsey Financial Services Commission-licensed manager but does require a designated administrator. The initial investment must be no less than $100,000.

“They can take better advantage of these opportunities by getting to market quickly,” says Latimer. “But we are also seeing established managers who are running traditional funds now looking at PIFLatimeroptions.”also has high hopes for family office demand via the new Route Three scheme. “As family offices become increasingly sophisticated, they are observing that PIFs via Route Three can be run in parallel with, or as an alternative to, family trusts. They are an effective means of deploying capital,” he says.

Guernsey

• Route One – PIFs can be open- or closed-ended collective investment schemes limited to 50 people and only 30 new investors in the preceding 12-month period. They must have a licensed Guernsey-based fund manager.

• Route Three – Another new route, this opens up PIFs to family structures. Only the family office members and employees can invest.

Bedell Cristin recently advised the Stonewood Wealth Management group on converting an existing PIF from Route One to Route Three by simultaneous deregistration and registration.

Private investment funds

Latimer is also seeing first-timer interest. “Before PIFs, first-time managers who didn’t have sufficient scale were at risk of being squeezed out of the market. Now, they are building up track records with investors using PIFs, which often lend themselves to investing in niche or innovative trends including ESG, technology or even cannabis.

“The continued success of the PIF will be helped by the fact that the Guernsey Financial Services Commission has listened to industry bodies and professionals about how PIFs can evolve and improve.”

32 august/september 2022 www.blglobal.co.uk

Private funds can also be marketed in an easy and cost-effective way to eligible investors in the UK and the European Economic Area through national private placement regimes. “We are well placed to be a bridge between the UK and the key European financial hubs post-Brexit for alternative investment funds – particularly given the ongoing uncertainty in relation to financial services between the UK and EU,” says“WeSturrock.canalso expect to see more interest in the relative stability of Jersey and Guernsey compared with other jurisdictions impacted by geopolitics or dramatic regulatory change. That may mean more non-EU-facing private funds being established here with a nexus to US and developing markets.” Such growth, however, could prove challenging to the islands, warns Cleary.

Latimer concludes: “The three routes emerged from collaboration between the regulator and the funds industry. Private funds will go from strength to strength. It is where the growth lies.”

Offshore legal structuresFundsservicesandinvestment We provide BVI, Cayman Islands, Guernsey and Jersey legal advice in relation to funds and other investment Ourstructures.specialist teams provide innovative and bespoke guidance to sponsors, asset managers and funds investing in a variety of asset classes. Clients recommend us for our technical expertise and commercial approach, many working with us through the entire lifecycle of their structures, from inception to Visitexit.www.bedellcristin.com/funds to find out more. LEGAL SERVICES bedellcristin.com BVI | CAYMAN ISLANDS | GUERNSEY | JERSEY | LONDON | SINGAPORE

Commission found that the entity failed to:

“Some errors appear to be as a consequence of ‘fat fingers’ (for example, extra zeros or miscalculation of currency

The approach of the GFSC towards inaccurate data was clearly outlined in its 2021 Annual Report and Accounts: “We have been disappointed at the accuracy of data received by the Commission from licensees. Errors are found in regular reporting and in responses to thematic reviews.

• Provide relevant and targeted management information • Ultimately drive revenue. Management information is one of the ways for entities to avoid the failings of poor senior management and board oversight.

IN BOTH OF the Channel Islands, preparation for the Moneyval evaluations is increasing at a great pace, with no chance of the Jersey or Guernsey Financial Services Commissions taking their foot off the gas until the evaluations have taken place in 2023 and 2024. What does this mean for entities operating in the fund sectors in both islands?

Emma Bailey, Advisory Director, and Alexandra Reip, Associate Director, at KPMG in the Crown Dependencies, discuss the importance of data integrity and board oversight in light of the current focus of the Channel Islands’ AML/CFT regimes

It’s important that this information is based on a single version of the truth.

In Guernsey, fines have also been high and the GFSC is equally focusing on data.

LOOK AFTER YOUR DATA

34 august/september 2022 www.blglobal.co.uk Advertising feature

• Deliver better customer service

CIVIL FINANCIAL PENALTIES

The momentum of economic crime regulation shows no sign of slowing

• Have its business affairs adequately monitored and controlled at senior management and board level (Section 3.1.1.5 of the TCB Code)1. These two points are evidence of the importance placed on data integrity and board oversight.

• Keep adequate and orderly customer due diligence (CDD) records (10.4.2.28 of the AML/CFT Code)

The maintenance of data is crucial in all aspects, not just CDD. Data that is ordered and easily accessible will:

For many compliance officers and money-laundering reporting officers (MLROs), it must feel like they have wandered onto a Formula One track but are driving an affordable hatchback with their L plates still on. So let’s take a look at the recent accelerators that are supercharging the pace of the change:

• Meet regulatory requirements

Inconsistencies in data submitted to regulators are sure to be a red flag.

Boards are reminded that simply receiving the information is never enough; they need to question it and act on it to ensure their entity does not hit the buffers. Just as in F1, the drivers and the mechanics will only ever be as good as those leading them.

There is a price to pay for non-compliance. Both regulators continue to flex their powers in fining entities for regulatory breaches. In a recent example, the JFSC imposed a heavy penalty (circa £803,000 reduced from circa £1.6m for early settlement) on a licensee. The findings, which were outlined in a public statement, will interest many firms across the islands, especially those that have undergone a period of rapid acquisitions. Of the 11 key findings, two are of particular note to all entities. The Boards are reminded that simply receiving information is never enough; they need to question it

IMPORTANCE OF TAKING A PIT-STOP

2 1962 GFSC Annual Report & Accounts 2021 (web).pdf 3 Financial Crime Examinations Feedback from 2021 examinations — Jersey Financial Services Commission (jerseyfsc.org)

If you wish to seek advice or would more like more information, please visit our website: home.kpmg/cds or contact Emma Bailey (Emmabailey1@kpmg.com) or Alexandra Reip (alexandrareip@Kpmg.com). exchange), while other errors persist annually, making validation checks at the Commission difficult. “Accuracy of data is going to be an ongoing area of focus for the Commission; put simply, if we need to question if the data provided to us is incorrect, what else is?”2 DATA INTEGRITY AND BOARD OVERSIGHT Fund service provider boards will be more than aware of the time and money invested in complying with AML/CFT regulations. When significant resources have been spent on reviewing and updating CDD data in both islands, it is galling for all involved for that tremendous effort to be wasted. Now is the time for entities to ensure that the clean data is maintained through a robust framework leveraging technology to implement measurable controls. It is key that boards recognise the importance of the task. New approaches around data management can have the added benefit of releasing pressure on resources, which in an increasingly competitive market for compliance staff can only be a good thing.

• Take prompt action where appropriate to remedy any deficiencies identified.”3

• Consider their own arrangements against the matters set out in feedback papers

The GFSC held a series of workshops to provide feedback on the findings from its thematic on sanctions screening. Data integrity and board oversight featured heavily here, too, with boards urged to ask questions such as: “Are we confident that all relevant data is screened?”4Theauthorities in both islands continue their engagement with industry. For example, the GFSC’s industry seminar scheduled for the autumn is titled Working together to combat financial crime. On top of that, the JFSC jointly with the Government of Jersey recently held an event, Combatting Financial Crime Together – the road to Moneyval and beyond, followed by an event titled Regtech: A missed opportunity

STAY ON TRACK WITH KPMG

4 GFSC Sanctions Thematic presentation_1.pdf guidance notes published by us from time to time

JohariShutterstock/Hafiz

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With the speed of requirements being introduced and the deluge of sanctions following the Russian invasion of Ukraine, it is not hard to see why compliance staff must feel a pit-stop is a luxury. However, if entities do not take the time to evaluate the effectiveness of their processes and procedures, significant deficiencies may go unnoticed. In other words, if you don’t take the time to service the engine and check the suspension, then the wheels can fall off or you may be taken off the road.

In addition to public statements, over recent months the JFSC has published its report on its 2021 financial crime examinations. A total of 146 findings were identified, including, again, the themes of corporate governance (board oversight) and customer due diligence measures (data integrity). This led the JFSC to comment: “A number of key themes and detailed findings in this feedback paper are similar in nature to those contained within previous feedback papers issued by us. We expect the board and senior management of all supervised persons to: • Monitor for feedback papers and similar 1 2022-07-01-enf-1410-iq-eq-public-statement-final.pdf (jerseyfsc.org)

FIND OUT MORE

TAKE ADVANTAGE OF FEEDBACK In the run-up to Moneyval, both Commissions are increasing their feedback to industry. While the pit-stops may be time consuming, these opportunities should be given attention.

SPOTTING THE SIGNS OF CHANGE Horizon-scanning offers the protection of the ‘telemetry’ in F1 cars. Knowing what’s coming, while potentially scary, is far better than being caught unawares. Any consultation is worth a review, even if it does not look relevant to your firm or sector at first Horizon-scanningglance. is a vital part of regulatory compliance and it should stretch beyond country-specific regulation and also consider near-shore and supranational trends.

Through data integrity and board oversight, fund services businesses should aim for a place on the podium or at least keep on track and not steer off the course. Our KPMG professionals can provide you with a concise step forward in guiding you to safeguard your business. If you simply need a more precise understanding of data governance or you would like to optimise your CDD processes and existing technology, we are here to help you. n

Filling the void Amid criticism that the financial sector has been slower than most to embrace ESG, pressure is mounting on alternative fund managers to scrutinise their investment activities. And science-based targets (SBT s ) could be poised to fill the gap left by the lack of a universal framework in the sustainable finance space

Words: Gill Wadsworth funds

Alternative

The bank surveyed 125 key influencers in the AIF industry to understand the extent to which they are adopting sciencebased targets (SBTs), which provide companies with a clearly defined path to reduce emissions in line with the Paris Agreement goals. The results show that more than fourfifths (82%) of AIFs claim SBTs are important to their fund today, yet take-up amounts to just two-fifths (42%).

If they make sustainable decisions, they can utilise that influence to accelerate our path to net zero. They have fallen behind [corporates in adopting SBTs] but they still have an incredibly important role to play.” Davidson says AIFs can provide the catalyst needed to achieve net zero by driving capital to clean energy projects, greening the commercial real estate sector and funding innovation. He adds: “The influence of private equity funds that target small and medium enterprises for growth is incredibly impactful.”

www.blglobal.co.uk AUGUST/SEPTEMBER 2022 37 Alternative funds

Lack of Maymanagementinternalbuy-inbeovertakenbya competing standard Lack of investor Legal/regulatoryUnprovensupportROI concerns

According to research conducted by RBS International, this inertia of climate change typifies the alternative investment fund (AIF) sector.

Takes time to implement Difficulty measuring SBTs Drain on business resources

Source: Pressure is mounting: can alternative investment funds accelerate the transition to net zero?, RBS International

There’s a huge fight for ESG talent because this hadn’t been a focus for the majority of funds previously ▼

The challenges for AIFs in taking a more scientific approach to sustainability are many and varied (see chart above), according to the RBS International research. However, a clear commonality between respondents was the lack of inhouse expertise needed to adopt SBTs. “The lack of in-house skills or expertise creates a serious challenge in the market. There’s a huge fight for ESG talent because this hadn’t been a focus area for the majority of funds previously. It takes time to train up individuals and for new talents to flow through, so of course it’s going to be a sticking point,” the report states. Davidson advises AIFs to invest in educating their entire workforce on ESG issues to ensure sustainable strategies are successfully implemented. “AIFs need to make sure they are not just looking at a small set of employees, but What do you see as the three main barriers to setting sbt s for your firm?

“I don’t think you should underestimate the level of scrutiny that your ESG credentials are going to come under,” she says. “If KPIs are based on science-based

0 10%

FEW CHANNEL ISLANDERS will have failed to notice the extreme temperatures reached so far this summer. July 2022 was the hottest ever experienced in Jersey, while Guernsey is predicted to beat all records as the mercury passes August 2003’s 32.4ºC. But while such stifling conditions are a shock to the system when they arrive, they are not unexpected.

MEETING THE SKILLS CHALLENGE

The results also show the AIF sector to be significantly lagging the companies in which they invest; seven in 10 respondents say net-zero targets are more focused on corporates than AIFs. Bradley Davidson, ESG Lead at RBS International, says it is imperative that AIFs raise their game if the world is to limit warming to “Financial1.5ºC.institutions are the lifeblood of the economy through capital allocation.

Further, the majority (58%) are still in the planning process and nearly a quarter (23%) do not yet have a timescale.

However, that comes at a cost, and more than a third (38%) of AIFs say adopting SBTs is a drain on resources, while 18% say there is no proven return on investment.

CURRENT STATE OF PLAY

The 2021 Intergovernmental Panel on Climate Change (IPCC) report stated: “The world had experienced the 10 warmest years on record since 2005.” And it made clear this was “directly linked to an increase in atmospheric greenhouse gasses, driven primarily by the extensive burning of fossil fuels and other industrial processes”. Last November, financial institutions, captains of industry and policymakers participated in Glasgow’s COP26 climate conference, establishing myriad initiatives and alliances designed to mitigate climate change by advancing the transition to a net-zero carbon economy by 2050. Yet, according to consultancy the Environmental Defense Fund, one major segment of the financial sector was “conspicuously missing” from the debate, and it accused the world’s largest private equity firms of “staying silent”.

He also suggests hiring external advisers for specialist support.

Lack of in-house skills 20% 30% 40% 50% are investing in all of their employees, so they’ve got the skills to really apply their knowledge towards their strategy.”

Yet Caroline Phillips, Partner at law firm Slaughter & May, believes that failure to invest in SBTs is a false economy.

38 AUGUST/SEPTEMBER 2022 www.blglobal.co.uk Alternative funds targets, then that can be really helpful to give investors confidence.” This view is upheld by Henry Morgan, Sustainable Investment Lead at alternative fund manager Foresight Group, who told RBS International: “The greater level of scrutiny on sustainability and ESG in the investment and fund management space is largely led by the institutional investors. They are in turn led by their own stakeholders.”

Science Based Targets initiative (SBT i )

Davidson acknowledges the issues with data gathering but says regulation – the Sustainable Finance Disclosure Requirement, green taxonomy introduced by the EU, and the UK’s mandatory climate reporting in line with the Task Force on Climate-Related Financial Disclosure – makes it more straightforward for financial institutions to implement SBTs.

Without verification and consistency, science-based targets for eliminating carbon emissions and other harmful greenhouse gasses offer limited credibility.TheScience Based Targets initiative (SBTi), set up in 2014, defines and promotes best practice in science-based targets, and independently assesses and approves companies’ targets in line with strict criteria. The initiative offers target-setting resources and guidance, including those particularly designed for alternative investment funds.

Despite all the commercial and climate imperatives in adopting SBTs, AIFs must still navigate inconsistent data sources.

Caroline Phillips, Partner at Slaughter & May, adds: “The advantage of using science-based targets is that they have validation through the Science Based Targets Initiative. So, if you’re going to get a third-party opinion, that can really help speed up the process and make you one step ahead of the game.”

“There have been significant strides from policymakers and regulators to make quantifying climate risk much easier,” RBS International’s Bradley says. “We aren’t fully there yet, but the pursuit of perfection should not get in the way of progress.” n

Bradley Davidson, ESG lead at RBS International, says SBTi provides a consistent framework and verification of ESG strategies that add“Usingcredibility.theSBTi framework actually empowers market participants and investors to make responsible investment decisions because they compare targets that are consistent across the alternative investment fund market. “The more transparency that we have for investors to make educated decisions, the more efficient the market will be.”

POWERED BY DATA Phillips also points out the importance of SBTs to driving future ESG strategy. “[SBTs are] not just a day-one benefit; they are also a benefit when you look forward. If you have a science-based KPI and your strategy changes, or the science develops, then an amendment process will be facilitated by using the sciencebased targets – either avoiding a consent threshold altogether or having a lower consent threshold among your banks, because they have confidence in the targets that you’re selecting,” she says.

Elisabeth Hermann Frederiksen, Head of Sustainability at real estate manager NREP, says: “We have several hundreds of assets in our funds and each of these assets needs to be set up to give the right data and documentation.“Sometimesthe data doesn’t belong to us but belongs to our tenants, so then we need to work through tenants to get access to data.”

AIF s can provide the catalyst to achieve net zero with clean energy projects, greening the commercial real estate and funding innovation

SIGNIFICANT ENHANCEMENTS TO Jersey’s limited partnership legislation have been approved by the States Assembly, and promise to further develop Jersey’s regime as ‘best in class’ among rival jurisdictions.

These changes represent the culmination of a significant project involving industry and government, and will contribute to ensuring that Jersey remains a foremost funds domicile. n

Several more administrative or modernising changes are also included.

The changes will add further flexibility and clarity to elements of the Limited Partnerships (Jersey) Law 1994. This law provides the framework governing a large proportion of Jersey investment funds and related asset holding structures, joint ventures and employee incentive arrangements, in particular in the private equity and venture capital sectors, as well as other alternative asset classes. Investors will welcome the additional certainty concerning the ‘safe harbour’ provisions. These are a (non-exhaustive) list of activities that limited partners may expressly undertake, without risking their limited liability status, by being deemed to participate in the ‘management of the partnership’. The expanded safe harbour list includes activities such as calling or participating in meetings of partners, entering into or performing contracts with other partners in the partnership, and extending loans to the partnership. It will include voting on a wider range of specified matters, including on acquisition

The terms of a limited partnership agreement may now limit or restrict limited partners’ statutory right to inspect or take copies of the partnership’s records. Such information – particularly in carry partnerships – is often commercially sensitive, so the ability to include bespoke information rights will be beneficial in manyThecases.amendments will specifically provide for the enforcement of terms of the partnership by third parties who are not party to the partnership agreement itself. For instance, many partnership agreements contain indemnities in favour of third parties, such as investment advisers or individual directors or employees involved in the business of the partnership. This addition will add clarity for beneficiaries on how these rights may be invoked, without more complex drafting in the partnership agreement, given that Jersey law does not provide for the enforcement in general terms of third-party rights.

The changes also add further reason for non-Jersey limited partnerships to consider migrating to the island – Jersey introduced a statutory regime for eligible foreign limited partnerships to move seamlessly into Jersey in 2020.

DISSOLVING A PARTNERSHIP In addition, the statutory process for dissolving a limited partnership will be overhauled, resulting in a clearer process at the end of the partnership’s term. The limited partnership will only be cancelled (and therefore formally dissolved) once the winding up of its affairs is complete. This will allow the more orderly winding up of partnerships in line with the specific provisions of the partnership agreement, as well as more clearly preserving the limited liability status of limited partners during this process.

The changes add further reason for non-Jersey limited partnerships to consider migrating to the island

Partnership agreements will be able to provide for circumstances in which a limited partner may be liable for the debts or liabilities of the partnership, in addition to the specific circumstances under the law.

In some cases, changes to partnership agreements may be worthwhile to take advantage of the greater flexibility.

FURTHER INFORMATION Matt McManus is a Managing Associate in Ogier’s Investment Funds team in Jersey. Ogier’s Matt McManus on how the update will deliver greater certainty or disposal of an investment by the partnership or on the participation by a limited partner in a particular investment. Holding an office or other interest in a general partner (or acting as a partner in a ‘GP LP’, a partnership which itself acts as general partner) are also among the extended safe harbours. The list includes a number of other activities, and more additions may be made swiftly if further clarity is desired in future. Investors (or their representatives) who sit on LP committees will benefit from an express statement that they owe no duty to the partnership, partners, other committee members or third parties.

PARTNER RIGHTS

Jersey’s updated limited partnership legislation

Investors and GP s alike will welcome

www.blglobal.co.uk august/september 2022 39 Advertising feature

In a number of respects, these changes will instantly enhance the operation of existing partnerships once they come into force (expected in Q3 2022, following Privy Council approval).

The statutory six-month ‘clawback’ period (for repayment of amounts received by a limited partner at a time when the partnership proved to be insolvent) will be capable of being modified in the partnership agreement. The test will also be simpler to apply (simply requiring that the partnership was insolvent on and following the payment to the limited partner).

Words: Steve Falla filing for bankruptcy,” says Alex Smyth, Director at Oakbridge Fund Services (Jersey). “But it is very much thought that crypto – and particularly the blockchain technology that powers it – is here to stay and that it may also begin to revolutionise traditional finance. We Digital funds

DIGITAL BENEFITS While some in the investment sector are evangelical about the benefits of digital assets as an investment fund asset class, others remain nervous of the risks involved, the volatility of the digital markets and the lack of regulation. “There are risks associated with digital assets, as we can see from some players

Diving theincreasinglyAsdigitalintoassetsbusinesses,investorsandconsumersembracedigitalsolutions,diversityofinvestibleassettypesis

set to increase significantly – with funds wading into the digital asset universe THE MARCH OF digitalisation continues unabated, although in many quarters nervousness remains around the emergence of digital solutions as a new investment class. But with new applications relentlessly being developed, it is important for investment professionals, their clients and regulators to become better educated about digital investing. Like most developing sectors, early growth in the digital investment space continues apace. It’s time for regulation to catch up with what is likely to be an unstoppable investment phenomenon. Cryptocurrency, following the arrival of Bitcoin in the late noughties, is now an everyday word. And it’s already prevalent in the investing space to some degree. A Stradivarius violin was sold via Sotheby’s using a multimillion-dollar Bitcoin contract in 2014, for example; El Salvador was the first country to accept Bitcoin as its official legal tender in 2021; and the use of digital tokens underpinned by blockchain technology is maturing. Meanwhile, countries and major banks including the Bank of England and the People’s Bank of China are looking at developing their own digital currencies to facilitate the drive towards completely cashless business.

Richard Doyle, Managing Associate at Ogier in Guernsey, observes: “People have voiced concerns regarding the value of all cryptocurrencies – in other words, a systemic risk to the entire concept of cryptocurrencies – but the risk of something as cataclysmic as this coming to pass is highly unlikely.”

Doyle adds: “I think the mainstream appeal of DeFi is currently somewhat limited as a result of very high mining fees – primarily due to congestion on the Ethereum network – so DeFi currently favours high-value lenders over smallerSmythplayers.”says:“Some large financial institutions – from investment banks to stock exchanges to central banks – are considering blockchain-based solutions in order to stay on top of this innovation. “For example,” he adds, “it is thought that the clearing processing time could be drastically reduced using distributed ledger technology.”

▼ currently support five crypto asset-focused funds that are live.”

FUND LAUNCHES “We are seeing a number of crypto funds launching, or in the process of launching, with a focus on various strategies and uses for the technologies behind them,” Smyth continues. “It is felt that developing regulation will help to increase the mainstream confidence in cryptocurrencies. Many funds are looking to attract institutional players that wish to hold digital assets in a secure environment that provides alternative liquidity options.

Shutterstock.com/PixieMecredit:Editorial

So, where does the appeal lie for financial services and investment funds in particular?

Doyle explains: “The area of DeFi (decentralised finance) – an emerging financial technology based on secure distributed ledgers like those used by cryptocurrencies – is one where we are seeing substantial growth, both in terms of funds and other financial product providers. “The broad concept is that anyone can act as a lender and anyone can act as a borrower and the transaction can complete via participating exchanges in a matter of minutes. “The transaction details are immutably stored in the blockchain and are usually heavily collateralised, providing a substantial level of security.”

www.blglobal.co.uk AUGUST/SEPTEMBER 2022 41 Digital funds Crypto is here to stay and it may also begin to traditionalrevolutionisefinance

CRYPTO COLLATERAL

REGULATORY CONCERNS A more circumspect view is held by Carmen Tyler, Director and Head of Investment Solutions at Spring IM. “We have taken the position that these types of assets are not suitable for our portfolios due to their heightened volatility and lack of regulation. Until we see a materially more stabilised market, we would not look to change our position.” She cites fraud, hacks and heists in other justifications as reasons for the cautious view adopted by some investment management firms. “There are further elements that could threaten the use of cryptocurrencies. Governments could take steps to crack down on crypto activity. Last year, the Chinese government banned cryptocurrency trading and mining, in an intense crackdown,” she adds. “Crypto markets have also been likened to the dotcom bubble. Both promised major economic change driven by new tech and saw a sharp rise in prices that have since dramatically fallen. “And so, the camp appears to be split between those who believe that blockchain technology is of great value and that users of blockchain need a digital currency to function, and those who are sceptical either of blockchain’s importance or the need for a digital currency.”

We make it our business to know your business We understand the opportunities and challenges for Jersey businesses in today’s fast-moving world. Our corporate team are locally focussed, commercially aware and provide clear, pragmatic and top quality legal advice in a friendly and cost-effective manner. If you have any questions on how we can support your business, please get in touch. www.viberts.com +44 (0)1534 632255 | corporate@viberts.com Corporate Law

www.blglobal.co.uk AUGUST/SEPTEMBER 2022 43 Digital funds

While such threats give rise to the need for more robust regulation in this area, Doyle believes that this will be fairly straightforward. “Some additional education in the basics of blockchain and cryptocurrency will certainly be helpful for regulators to get more comfortable with the concept and the asset class,” he says.

“As long as there’s a consensus among people that it has a value, that’s going to ensure it does have a future.” n Investors are not just buying virtual assets to make a bit of money, they are buying the longer term value of its underlying technology

“Many investors are not just buying virtual assets to make a bit of money here and there, they are buying the longer term value of its underlying technology as well. “It is thought that the traditional financial system will evolve, with blockchain technology playing an important role. If you take that view and research these areas fully, it’s quite exciting and can be a positive investment.

“The recent crash in cryptocurrency values has received a huge amount of media attention and maybe made regulators more cautious than they need to be,” he adds.

“If you consider traditional investment markets, in the UK and globally – where regulations require financial service providers to obtain information about their customers when they open an account and to verify their identity – this practice is not applied to decentralised digital asset markets. “There’s also been a lot of financial fraud activity with initial coin offerings, the method in which new coins come to market,” she “Furthermore,continues.digital asset exchanges can be, and have been, hacked, whereby a further risk is posed by electronic wallets. Users have been tricked into giving away their private keys and their assets stolen.”

“The dark web allows users to buy and sell illegal goods without being tracked, making illegal purchases in Bitcoin or other cryptocurrencies,” she explains.

“I don’t think regulators should be viewing crypto products in a different light to other asset classes with regard to products and funds aimed at such investors.”

“Most investment professionals that we speak to keep a close eye on crypto market developments – a case of fear of missing out – but one should approach digital investments with an open but educated, risk-aware mind rather than with a closed, sceptical ‘traditional assets are the only way to invest’ mind,” he says.

“While there’s no denying that blockchain – and crypto in general – has its fair share of complexity, the fundamental concepts are not as complicated as people might“Beyondthink.a fundamental understanding, regulators are not required to become experts in any specific asset class – and I would question why crypto should necessarily be treated any differently.

Smyth, for one, can see the whole investment community coming to the digital table eventually – but he advocates an objective approach.

“While I think that retail investors should have perhaps received greater levels of protection, many sophisticated and institutional investors are fully aware of the risks, and potentially large upside, inherent in crypto products.

Doyle says: “People are attracted to it because of security, speed, efficiency, global reach and decentralisation. It allows access to finance and financial transaction for people who may otherwise have been locked out of the traditional finance system, especially in developing countries.

RETICENT INVESTORS Despite that, Tyler expands on some of the risks that have prompted reticence from a whole section of the investment community. “Blockchain has come under fire for its use in illegal activity, the most notable example being Silk Road, an online dark web illegal drug and money laundering marketplace that was shut down by the FBI in 2013.

“There’s also a trading view where, for example, typical hedge fund models will try to outperform certain indices through algorithmic trading of different assets and instruments, using arbitrage strategies.”

So, my own personal challenge for this Funds Edition of Businesslife is to share my top five trends and implications for VC, as we roll through the rest of this year and beyond.

Crystal balls and DeLoreans aside, as an administrator, we work closely with many VC limited partners (LPs) and general partners (GPs).

Simon Page, Global Head of Fund Services at Hawksford, examines the evolving venture capital landscape those supporting it. We will all need to remain on our toes and stay alert to the challenges and opportunities as they arise.

I don’t know what the future holds, but what I do know is that it will continue to surprise us and ultimately have an impact on the venture capital (VC) world and all

Trends, implications and crystal balls

Back in 2018, if you had laid your hands on a copy of the news almanac 2019-2022 – perhaps blown from the window of a passing DeLorean – you would have mistaken it for a dark and dystopian work of science fiction.

THE WORLD CONTINUES to be full of surprises and, although few of us would argue that the past few years have been completely unprecedented, a lot has happened that has made us shake our heads in disbelief.

44 august/september 2022 www.blglobal.co.uk Advertising feature

Our job is to continually listen to our clients, observing the market and evaluating what support and value we can add, both now and in the future.

IN CONCLUSION…

TECH For some, VC and tech are two sides of the same coin. As a sector, tech has proven itself to be resilient, representing an increasing, and some might say disproportionately large, chunk of global market capitalisation. Many traditional industries remain ripe for significant technological innovation and disruption – for example, in the retail, finance and healthcare sectors. There’s no doubt that venture capital will continue to shape and drive innovation and growth in the broader technology sector. Ten years ago, 20% of unicorns were venture-backed; now this figure is more like 80%. On the flipside, there is potential for tech valuations to come under scrutiny as the broader macro picture becomes more challenging.

Don’t dwell on what might be, because if the past two years have taught us anything, it is that nothing is for certain.

If market conditions become more challenging, then it is likely we’ll see managers elongate their raising cycles at the same time, as institutional investors pull back on sector allocations – thus providing further opportunity for family offices to invest in the sector.

HOW WE CAN HELP Our funds team provides flexible administration, compliance and governance services for a wide range of alternative asset classes and fund structures.

Challenging conditions will drive distressed situations, close IPO exit windows and heap pressure on liquidity; all of which may constitute fertile ground for secondaries to acquire seasoned assets at attractive prices.

Tel: +44 (0)1534 740344 Email: simon.page@hawksford.com

At the lower end of the market, information may not be as deep – impacting valuations and pricing and increasing the complexity and success of secondary deals.

One thing is for sure, however: we can expect to see more secondary activity and strategies in the market.

“The slow one now will later be fast, as the present now will later be past,” said Bob Dylan. In an ever-changing world, yesterday’s news is just that. As new challenges and opportunities arise, my top five may well look very different in a short space of time. Whatever the future holds, the key to success is to remain nimble and stay in tune with the market and adapt to changes –those who don’t generally get left behind.

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FAMILY OFFICES

With more than 500 people based across key locations in Asia, Africa, Europe and North America, we also provide an extensive range of corporate and private client services to a global client base. n European venture capital has come of age in recent years, largely driven by a techsuperchargedsector

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non-cash-generativeLoss-making,techbusinesses have commanded high valuations in frothy markets. When cash is king, they could be impacted. Clearly, the other challenge is to ensure that cash requirements within tech portfolio companies are sustainable. Much of this will be about communication between GPs and their portfolio companies, with a healthy dose of financial management thrown in too.

As an administrator, anything involving valuations, cashflow reporting and forecasting has implications for us. We also need to keep on top of increasing complexity, transparency and regulatory requirements, all of which continue to evolve at phenomenal pace. EUROPE European venture capital has come of age in recent years, largely driven by a supercharged tech sector. Europe’s tech ecosystem surpassed $3tn for the first time in 2021, with the same capital deployment in Europe as in California – the home of Silicon Valley and, to many, the centre of the venture capital universe.

Europe has established its credentials as a mature venture capital ecosystem, successfully attracting capital at all ticket sizes. Therefore, it shouldn’t come as a surprise that we are seeing more global tech ‘winners’ coming from Europe than ever before. Today, there are more than 300 European ‘unicorns’, compared with around 20 in 2010. The big, predominantly US, players who may have invested opportunistically in the past, are now establishing deeper strategies and substance in the region.

Family offices continue to be attracted to the superior returns in private markets and remain a growing capital base for managers and founders to tap into.

Secondary markets will also become an important part of the ecosystem as a liquidity release mechanism.

At the top end of the market, where information is more complete, secondary activity transactions will be smoother.

LIQUIDITY Most commentators are predicting more challenging market conditions ahead. If that transpires, then liquidity will be near the top of most managers’ agendas. Expect to see time and resources being spent on riskassessing portfolio companies – and capital allocations following those assessments to ensure that portfolio companies can weather the storm. Cash will be king. Depending on the extent of the runway, we may see some strategic rounds at down or flat valuations. We’ve already seen examples of this, most notably Klarna in its latest round of fundraising. Financial governance will also be crucial, and there may well be a need to build in some deployment risk hedges. As administrators, we will be focused on fund governance, cashflow monitoring and other bespoke reporting to ensure that managers have the necessary space and support.

If you would like to discuss anything VC or fund-related in more detail, or find out how Hawksford can support you, please contact Simon Page, Global Head of Fund Services.

SECONDARIES

“When it comes to many fund boards, this is not as regulated an area as, for example, listed businesses,” says Mirek Gruna, Chief Commercial Officer, Jersey, at IQ-EQ. “In that sense, the public interest in board diversity is not as big a factor as it is for larger organisations. “But, irrespective of that, the key principles of diversification apply in the same way, whether it is a founding board or the board of a FTSE 100 company.

There has been a stronger focus on board diversity in general over the past decade, but fund boards have been slower to evolve. So what are the benefits of driving diversity among these groups – and how can progress be speeded up?

ONLY MONTHS AFTER the Financial Conduct Authority published measures to improve the diversity of company boards, the world of finance is continuing to step up efforts to broaden the thinking and experiences represented on fund boards.

Words: Alexa Robertson

46 AUGUST/SEPTEMBER 2022 www.blglobal.co.uk Board diversity

Mixing it up

However, while progress is being made, the difference in regulation between listed and unlisted funds has meant that some boards have taken longer to bring about change than others.

www.blglobal.co.uk AUGUST/SEPTEMBER 2022 47 Board diversity

WHAT’S IN A WORD? The definition of a diverse board – and exactly what that encompasses – is evolving.BrianBurkholder, Managing Director in Cayman of HF Fund Services, an Equiom company, has seen a dramatic shift in the way that diversity is being considered at board level today. “Five years ago, the topic of board diversity in terms of gender, race and other factors was never discussed, but it’s starting to become a topic of focus,” he says. “At one time, when talking about diversity, we just focused on skill sets – do you have an accountant, do you have a lawyer – but now it’s extending beyond that.

“If you think about a board, it’s expected to have a balance of skills and experience, and be able to exercise sound judgement,” says O’Sullivan. “Those are fundamental concepts of corporate governance. “To do that, a board needs to be fully aware of a broad range of issues that could be impacting the business, along with the requirements and expectations of its investors and wider stakeholders.

▼

So what are the benefits of driving diversity among fund boards? And – perhaps more pressing – what are the dangers of failing to view diversity as a priority?

“Diversity, to me, includes representatives of the community to reflect the nature of the investors in the fund, which is most likely a diverse group of Normapeople.”O’Sullivan, Managing Director of TMGA Wealth Management, warns that diversity can be thought of in too limited a way. “When people say diversity, particularly in the context of boards, there can be an assumption that what you’re talking about is female representation or ethnic minority representation. But there are other ways to look at diversity.

Diversity improves decision-making, strengthens corporate governance and makes the fund or company more resilient

A CLEARER VISION

“There’s neurodiversity, for example, and age diversity, which can provide different generational perspectives, and socio-economic diversity. “It’s not just about female and ethnic minority representation on boards –although that’s a good starting point. By being successful in that, you are more likely to increase the aspects of diversity on the board.”

“Diversity improves decision-making, strengthens corporate governance and effectively makes the fund or the company more resilient.”

“There has to be diversity in order to increase awareness through greater clarity of thought. Increased clarity – through that breadth of thought and experience – allows more effective decisions to be made.” While diversity is vital for strategic decision-making, it’s also increasingly important for investors, who are becoming more and more discerning about the ESG impact of new funds. “If you have investors who are measuring ESG, especially the governance and the social aspect of ESG, and are

“By looking ahead to 2040, what we’re really doing is targeting the next generation. It’s about outreach, it’s about reaching out to girls in high school and college, providing programmes to inspire them and showing them there is a clear pathway for them into careers in finance.

looking at platforms to invest in, they will themselves be asking tough questions on that,” says BurkholderGruna.agrees, and says we are at a point where the values of failing to prioritise diversity are, in themselves, why this must be driven forward across the“Somesector.asset managers will eventually start to have trouble attracting money to their funds if they don’t adopt and embrace this diversity factor,” he says. “It’s simply the right thing to do.

Asset managers will start to have trouble attracting money to their funds if they don’t adopt and embrace diversity

“I’ve been appointed to a board and it’s made up of three accountants – all middle-aged males – and you think: ‘Well, what is that going to do in terms of bringing a diversified skillset and diversified experiences to the board?’

MAKING INROADS

“A board like that is not well positioned to handle all of the issues that come up over the lifespan of a fund. A lot of different things happen over the lifespan of a fund, and you want people who bring different experiences to each situation – and it won’t be three accountants or three people with experiences that are all the same.”

FROM THE GROUND UP While diversity is improving at board level, there remain short-term – as well as longer-term – challenges to building truly diverse fund boards. Monette Windsor, who is a Director at HF Fund Services and a former Co-Chair of the Cayman branch of campaigning

48 AUGUST/SEPTEMBER 2022 www.blglobal.co.uk Board diversity

“It’s also about providing mentors for women either already in the industry or thinking about a career in the industry, no matter what stage they’re at, so women can help raise each other up.”

It’s clear that much remains to be done on diversity. But for Windsor, who is based in Cayman, the change in the finance landscape over the past 10 years is a source of great hope and optimism.

“Although the Cayman Islands has a big finance industry, it is a small island,” she says. “Ten years ago, when we founded 100 Women in Finance here, we needed to have 100 members signed up and we were scratching our heads trying to think of senior women in the industry at that time and whether we would be able to get enough signed up. “But here we are 10 years later and we have more than 700 members, on an island of only 65,000 people, which is quite something. We’re definitely going in the right direction.” n group 100 Women in Finance, believes that, although women are becoming better represented in the finance sector, achieving real diversity involves change at grassroots level. “Of course it’s good to have diversity on fund boards, but if there are not women at that level in their career who can fill those positions, you just can’t fill those positions,” she says. “At 100 Women in Finance, we have a global campaign called Vision 30/40.

The goal is that, by 2040, 30% of senior investment and executive committee member roles will be held by women.

Sometimes you need to challenge the status quo to get the best outcome. At Collas Crill, we take the time to understand your goals and will break the mould to help identify simpler, smarter and faster ways to achieve them. Anyone can give you an answer, but we’ll find the answer that’s right for you. For bold legal advice, visit collascrill.com Fortune favours the bold WE ARE BOLD | WE ARE OFFSHORE LAW | WE ARE COLLAS CRILL BVI | Cayman | Guernsey | Jersey | London Private Client | Dispute Resolution | Corporate | Risk & Regulatory | Property

To stay ahead of the competition, an integratedandbeinfrastructureorganisation’smustlean,innovativeseamlessly

Automation isn’t the future, we are already here.

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No Mondaymore blues

Daniel Holgate, Chief Technology Officer at Agile Automations, shares the benefits of using a specialist intelligent automation provider to unleash the full potential of your workforce and cut out repetitive work processes THE POST-PANDEMIC business landscape is constantly shifting. It requires businesses to adapt their service models and stay agile so that they can change as fast as market situations or customer expectations change. To stay ahead of the competition, an organisation’s infrastructure must be lean, innovative and seamlessly integrated. Intelligent automation (IA) is the next stage in this evolution of how we work. It refers to the integration of robotics with multiple components from different emergingRoboticstechnologies.andautomation are transforming the efficiency of every organisational function – from finance, tax, human resources and technology infrastructure to supply chain, governance andCombiningrisk. the skills of human workers with a digital workforce is at the heart of IA. This will allow business processes to operate more quickly and efficiently than ever before.

50 august/september 2022 www.blglobal.co.uk

What is RPA and why do I need it?

Automation solutions such as robotic process automation – or RPA – allow organisations to automate their processes without the need for complex, strategic changes to their core infrastructure – or indeed changes to databases and methods of RPAworking.isthe application of technology that involves a software application – a ‘robot’ that captures and interprets a transaction or process, manipulates the data, triggers responses and communicates with systems and humans, including staff and customers. It does this with outstanding efficiency, while offering enhanced risk and governance controls with end-to-end audit trails. It can operate 24 hours a day, seven days a week – with some processes eliminating the need for human engagement altogether.

• Agile and scalable – We have the experience in software automation to remove your blockers. We have developed a huge library of APIs, allowing us to automate almost any system with remarkable speed and accuracy. With artificial intelligence built in, these solutions learn from their use while remaining agile and scalable.

“The robotic process automation solution built by Agile Automations has helped us reduce errors and improve customer service by processing orders faster, without errors. We achieved a more than 50% saving in our human resources, allowing us to switch the resource to more value-add services for our customers.

The data extracted, once in a digitally structured format, can be used to process the request in various systems, while keeping the sender informed.

This solution continuously runs unattended on a robust server, scanning a shared folder and Outlook email inbox for new document requests.

Case study: cutting processing time by 50% with Intelligent Document Processing Automation

“We continue to form a long-term strategic partnership to that end.”

“The solution is versatile and scalable. We are so happy with the solution that we are considering further areas within our organisation that would be able to benefit from automation solutions from Agile Automations.

• Modular and adaptable – We proactively build and maintain robust APIs that target industries’ major systems, so that when there is a need for a change we do not need to rebuild the entire solution. n

The solution is so versatile that, with minimum configurations, it can read any document, extract the data and use it to achieve the desired outcomes for any purpose.

• System, process or industry agnostic –Our solutions are applicable to any rulesdriven process involving any size of data. With complex but easy-to-maintain APIs, our solutions can automate any datadriven process in any industry.

These documents come in a variety of formats, including Excel, Word, PowerPoint, email body and PDF (both scanned and true PDF). Our robust Optical Character Recognition (OCR) module can read the scanned documents with remarkable accuracy.

These machine-learning algorithms match with many known and unknown scenarios.

• Audit and reports processing for regulatory risk and reporting divisions.

According to the 2022 Gartner Magic Quadrant report, RPA is the fastest growing area in the software market and the most suitable choice for operational efficiency. However, the market remains fragmented, with several providers offering solutions that are hard to maintain and often not fit for purpose soon after the implementation.Forasmall-to-medium-sized business, the challenges involved in trying the innovative technology include limited time or budget, operational risk or lack of skilled resources for ongoing maintenance.

• Fully supported – Our unique proposition is designed to help SMEs who may not have skilled resources to maintain the software. We support and maintain RPA projects for our clients from start to finish, covering all aspects of the project, including discovery, scoping, development, implementation, testing and training, with return-on-investment evaluations.

• Invoice and remittance processing for finance divisions

All data-driven, customer-facing or finance-related businesses face challenges, including having limited time or budget and higher risk of maintenance overload when they think about implementing an innovative technology. Agile Automations’ custom-coded solutions offer a way through these challenges, while also offering businesses the ability to scale. What type of RPA solutions are available?

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• Account maintenance for customer relations • Payslips, P60s, tax processing for payroll and HR divisions

• Efficient and targeted – Our solutions are custom-coded, AI-powered and designed for a specific requirement that is defined by our own Agile Scrum and Prince2-qualified scoping consultants.

Tel: (+44) 0161 804 1399 or 0203 912 0882 Web: www.agileautomations.co.uk/contact

Kevin Attwood, Operational Manager, Kent County Council Commercial Services, says: “Prior to the automation solution built by Agile Automations, we used to process each email order manually, by verifying customer details and product order details. “This process was not only timeconsuming but even with a highly trained team, the volume led to some errors and inevitable order delays.

A forgame-changerclientKCS

• Order processing for supply and procurement divisions

WHERE TO START

The market sector can also be confusing for the purchaser, with providers repurposing or relicensing off-the-shelf RPA solutions made by one or two industry giants. These solutions either fall short of the required automation or must be maintained by a skilled workforce, meaning extra investment in people. However, Agile Automations’ solutions have the following key features, making them unique, yet versatile:

Whether you are new to intelligent automation or you have tried it in your organisation but perhaps feel that you might not be experiencing the full benefit, contact Agile Automations to see how we can take you to the next level of automation. We also specialise in working with existing solutions, as we will build and maintain further modules to complement them and improve efficiency, accuracy and customer satisfaction, such as with SAP and other key infrastructure.Ourproof-of-concept solutions can be tried without the need for significant investment or long-term commitment.

FIND OUT MORE Email: businesslife@agileautomations.co.uk

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“Agile Automations supplemented the solution with full management information to support our business decisions. We particularly like that it maintains end-to-end audit trail and allows exception handling so that all orders can be traced back if required.

The specific uses of this solution include:

• Cost effective and independent – We do not use any third-party licences or off-the-shelf products. Our skilled Manchester-based engineers design and develop the RPA solutions specifically to meet the client’s complex requirement.

Amid increasing pressure to be ESG-compliant, structures that invest in property are taking up the challenge to prove the green credentials of the buildings they invest in – and there are benefits to be had in terms of returns

Real estate funds 52 august/september 2022 www.blglobal.co.uk

Building sustainability

Words: Alexander Garrett

THE CONCEPT OF climate change usually conjures up images of extreme droughts, floods or weather events such as the heatwaves that have swept across the UK this summer. We don’t tend to think of high-rise office blocks and packed-in housing developments. But there is one unavoidable statistic that demonstrates real estate’s crucial role in the global fight against climate change: 40%. That is the share of all the world’s carbon emissions that is estimated to be caused by buildings. More than 28% is accounted for by their operation, including heating and air-conditioning, and the remainder embedded in their construction andThemanufacture.battletoprevent global warming has no chance of success unless we can create buildings that are carbon-neutral or as near as possible to being so. Environment is not just the E in ESG, it is also now, arguably, the most important component in the case of property investment. But social and governance – the S and G – also have a part to play at a time when the real estate world is increasingly recognising the need to meet standards and report ESG performance if it wants to compete for investment.

Awareness of the environmental impact of buildings has been around for a long time and that has resulted in a plethora of standards around the energy performance of BREEAM (Building Research Establishment Environmental Assessment Method) and the US-based LEED (Leadership in Energy and Environmental Design) are two of the most common systems relating to commercial buildings and have been steadily gaining traction over three decades. Increasingly too, the screws are being turned by governments for residential buildings. In the UK, from 2025 all rental properties must secure an Environmental Performance Certificate of level C or above.

Real estate funds www.blglobal.co.uk august/september 2022 53 ▼

Improving the performance of existing buildings – for example, through cladding or other forms of insulation – represents an epic challenge for the building industry –and one that is still in its relative infancy. Victoria Gillespie, Director, Funds and Corporate Services, at JTC, is responsible for the group’s ESG services. She points out: “Because there are so many components in the real estate sector, it’s quite a convoluted process.”

40% of the world’s carbon emissions are said to be caused by buildings, with more than 28% accounted for by their operation in their investment processes for at least 50% of the company’s total assets under management.Some96% of the world’s top 50 asset managers had adopted PRI by the end of 2020, and real estate is a key focus. Gillespie says: “Our approach when we work with clients such as real estate funds

Much of the work that has been done in the sector isn’t always visible, she says, so any perception that the sector is late to the table on ESG is a little unfair. A key issue for any property fund, real estate investment trust (REIT) or other structure investing in property is the multiplicity of regulations and best practices to adhere to. In many countries, listed companies – which usually include REITs – are already mandated to provide some ESG information in their annual reports. And that is extending to other structures, too. In the EU, for example, the Sustainable Finance Disclosure Regulation (SFDR) requires all fund managers – including those in real estate – to disclose how sustainability risks in their investment processes could potentially have a negative impact on the financial return of an investment.IntheUK, the Task Force on ClimateRelated Financial Disclosures (TFCD) is setting a new reporting standard on climate risks that will be mandatory for all fund managers in 2025. Then there are the Principles for Responsible Investment (PRI), a UNbacked initiative that requires investment managers to incorporate ESG criteria

PERFORMANCE PRESSURES

Thebuildings.UK-originating

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Green homes are with us to stay – and that means those who can support ESG reporting in the sector are going to be kept on their toes. n

Last year, Transport for London was given the green light to build a 17-storey hybrid timber office building above Southwark Station in south London, one of the first such buildings to be approved. The 75-metre building is a crosslaminated timber design, allowing it to also achieve industry-leading embodied carbon reductions of 40%.

It is even possible for asset owners to reduce the carbon impact of buildings that alreadyGillespieexist.cites one example: “One particular building had been built but the client wanted to engage with us to look at the ongoing carbon footprint of that building, as well as its carbon footprint, over the 10 years since it was built. They are looking to invest with some carbon credits and utilise that as a tool to offset their carbon emissions.”

Jersey and Guernsey are keen to press their ESG credentials – the latter most notably with Guernsey Green funds.

But ESG is not just about the environment; social is an ever more Buildings that achieve higher environmental performance standards also perform better in investment terms important consideration for the real estate sector, as Gillespie explains.

According to CBRE, affordable housing and wellness are two of the key real estate considerations today.

In the coming years, there should be ample opportunity for them to capitalise on new opportunities, whether that be the installation of electric vehicle charging points or the retro-cladding of homes to make them more energy-efficient.

There are a number of drivers for those managing real estate assets to adopt a stronger environmental stance. “You’re more attractive from an investment perspective if you align yourself with good practice that results in environmental buildings – or you’ve repurposed or helped communities,” says“That’sGillespie.amore attractive proposition because it seems to be a higher priority on investment criteria today.” Put simply, buildings that achieve higher environmental performance standards also perform better in investment terms.

The converse is also true. In the UK market, for example, buildings with a poor energy certification are said to carry a ‘brown discount’. As a result, there is a strong degree of self-interest for property funds and other real estate owners to become engaged with the ESG agenda.

Real estate funds is to get them to focus on several specific things – where do they operate and where are they domiciled? And where are the decisions being made, where are their investors based, and where are their assets based?” Consideration then should be made of the regulations and expectations in each of those different countries and jurisdictions. “You could have a UK fund manager, for example, that invests in specific types of buildings within different European locations, and they would therefore need to be mindful of the local regulations – because when they’re operating in that environment, there could be additional regulatory requirements to doing so.”

www.blglobal.co.uk august/september 2022 55

CURB APPEAL

According to US real estate services company CBRE: “Green buildings will command higher rents and higher capital values, while incurring lower monthly operating and maintenance costs.”

The strategies adopted by real estate funds and investment managers with respect to ESG can be diverse. Some focus on avoiding risk by not investing in buildings or assets deemed to perform poorly or be harmful to the environment. Others take a more proactive approach and invest in the best performing buildings. Where new buildings are concerned, the materials used in construction are increasingly an issue.

“I break that down into two bits – how a building is built and how it is operated,” she says. “On the first point, are you working with local builders? Are you paying a fair wage? “And then, when it’s there, what is the impact on the local environment and on the community – are you adding transport links? On balance, does it provide more than it takes as a result of its existence?”

Rents for LEED-certified office buildings in the US are 5.6% higher than those for non-certified office buildings, says the organisation.Andthehighest certified buildings demand 0.51% more annual rental growth than non-certified properties – which in turn leads to higher capital growth.

FUTURE-PROOFING

Last year, Hermès bags increased 17% in value –more than any other luxury item including art, wine and collectible cars. In these turbulent times and amid volatile stocks, can vintage and designer bags really surpass market returns? and what’s the outlook?

Handbags and gladrags

long-term

Words: Sophie McCarthy Passion investing

According to the BBC, football shirt collecting is surging in popularity. Dutch football fan Arjan Wijngaard is thought to have one of the largest personal assemblages in Europe, with an entire room in his house dedicated to the 3,000 tops he has spent 25 years sourcing, each of which is logged in a comprehensive online catalogue.

A HANDLE ON THE MARKET

Previously, it was a top worn by Brazil’s Pelé – considered by many as Maradona’s rival for the coveted title of the greatest of all time – that held this accolade, selling for £157,750 back in March 2002. This shirt actually had a list-price at Christie’s of £30,000, so it came as something of a shock when it was sold for five times that.

www.blglobal.co.uk AUGUST/SEPTEMBER 2022 57 Passion investing EVERY INVESTOR KNOWS the key to a stable portfolio is diversification. Traditionally, this meant holding different asset classes and securities. But today, more and more people are branching out and putting their faith in highly soughtafterHigh-endaccessories.watches have long been considered collectors’ items – think Rolex Submariners or Cartier Tanks – but Birken, Dior and Chanel are the brands currently on the connoisseurs’ lips. There’s a host of reasons why people are currently opting to invest in handbags. First and foremost is the state of the economy. Fears of a global recession are growing, and this is pulling the market downwards. At the time of writing, inflation in the UK had hit a 40-year high of 9.4%, while in the US, this figure had climbed to 9.1% – the largest increase since November 1981. This has spooked investors and the markets have suffered significantly. Here’s where many believe that smart purchases can prove beneficial. In February, The Telegraph reported that the price of a Chanel 2.55 handbag had increased by 50% since 2019 – from just under £3,104 to £4,583. That’s a bigger percentage rise than houses in the Cotswolds, which rose by 23% during the same period. In the same article, Rachel Reavley, Director of high-end resale site Hardly Ever Worn It, reported that 15% of its 200,000 registered users now make some or part of their living “playing the bag market”. This doesn’t look to be a flash in the pan trend, either. In fact, over a 10-year period, handbags have more than doubled in value. They are up 108% – seriously outpacing gold’s 29% return.

Jersey boys and girls

As with any asset, when it comes to handbags it pays to educate yourself and occasionally be a bit risky. Take Bottega Veneta: following three years of new creative leadership, the brand has produced seriously desirable handbags such as the Pouch and the Cassette Crossbody. If this success continues, luxury resale retailer Rebag’s Clair Report predicts that the Italian fashion house could inch closer to the status of Dior, Hermès, Chanel and Louis KnowledgeVuitton.such as this could pay dividends by informing savvy shoppers of who they should be keeping a close eye on. Distinct changes in direction are worth paying attention to, as well. There are, for example, signs that Tiffany & Co is set to become a much more coveted brand. The reasons behind this include the luxury ▼ retailer’s recent acquisition by LVMH and, vitally, Jay-Z, Beyoncé and British tennis star Emma Raducanu being named as its new Collaborationsfaces. are often noteworthy, too. Take Louis Vuitton x Murakami, which appeared on the Spring/Summer 2003 runway. The bags were instant hits. Later collections included the Cherry Blossom in 2005 and the Monogramouflage, which launched in 2008. The latter had a retail price of around $1,500 but today, 13 years on, resells for more than $9,000. It’s well worth investigating which brands regularly spearhead partnerships Famous and match-worn sports shirts are another vintage item becoming big money. In May, Maradona’s Hand of God shirt – the jersey the late Argentinian football legend wore in the famous game against England at the 1986 World Cup – sold for £7,142,500. This made it officially the most expensive piece of sports memorabilia of all time.

It’s well worth investigating which brands regularly spearhead partnerships and how much they increase in value

Shutterstock.com/ph.FAB

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Unless you are planning to amass a vast number, items of clothing or accessories are a great deal easier to store than other passion items – you certainly don’t need an entire garage, mooring or cellar to house handbags, watches or football shirts. Here are some high-level tips for keeping your collectibles in pristine condition.

• Hermès Birkin. The Holy Grail of handbags. Created in 1984, it was originally designed for, and then named after, actor Jane Birkin. It has since ascended to nothing short of cult status and has a price tag and wait list to prove it.

TLC: the key to preserving value

If you’re less willing to gamble and are buying purely for investment, classic items are almost always the best route. Buying at auction is also highly recommended. As a result of the expertise available, you’ll be all but guaranteed an authentic item. You’ll also benefit from absolute transparency, so you shouldn’t encounter any nasty surprises when it comes to quality.

• For clothing, including football shirts, avoid wire hangers, which are riskier when it comes to pulls and could leave marks or creases on more delicate items.

• Chanel’s 11.12 Bag, otherwise known as the Chanel Classic Flap Bag. Based on Coco Chanel’s 2.55 design, this bag was created by Karl Lagerfeld when he arrived at Chanel in 1982.

• Supreme shirts, hoodies, shoes and accessories. Supreme is a cult streetwear brand known for its extremely limited releases and artist capsule collections. Pieces from the 2017 Fall/Winter Supreme x Louis Vuitton collection have already sold for double their retail value.

Ultimately, given the performance of certain brands over the past 10 years, it’s a good bet that the right bags offer a viable investment opportunity and will continue to do so. And while you might have no intention of putting them on the market in your lifetime, they could make ideal items to pass on to your heirs, especially if you’ve put sufficient research into your purchase.

• All items should be kept out of direct sunlight and, if you’ve bought them second hand, they should be cleaned – professionally in the case of handbags – before storing.

• Keep items in soft, breathable dust bags that are large enough for the item in question and so don’t warp the shape when stored.

• Again, consider dust bags – older shirts are made of cotton or other organic materials that could attract moths.

Three timeless big hitters in 10 years handbags have more than doubled in value, up 108% and seriously outpacing gold And don’t be afraid to occasionally use these items, albeit with care. Yes, quality will be hugely important if you opt to part with them in the future – so try to rotate bags – but experts believe that small flaws and wear and tear will be forgiven for the right investment piece. That certainly sounds like money in your wallet – or clutch. n

• Handbags should be stuffed – preferably using acid-free tissue paper, a small pillow or bubble wrap.

SkeensJackandersphoto,Chugai,YuliiaShutterstock.com/

Even if you aren’t buying with selling in mind, wherever you get the goods from, be sure to keep the original packaging and documentation.

www.blglobal.co.uk AUGUST/SEPTEMBER 2022 59 Passion investing and how much they rise in value over time. The same logic can be applied to highstreet fashion collabs too, such as Nike x Off White, Adidas x Gucci, Vans x Karl Lagerfeld or the Hermès Apple Watch.

• Wrap any exposed hardware (buckles, zipper pulls) in a piece of tissue paper to keep them from making imprints on your bag over time.

• If you’re using plastic zippable wallets or boxes, add a pack of silica gel to help absorb any moisture that might build up over time.

Here are the bags to top your investment wish list:

A new study has concluded that using robots in surgery can dramatically improve the outcome for patients. A first-of-a-kind clinical trial by UCL and the University of Sheffield compared the results of robot-assisted surgery for patients with bladder cancer against those carried out using conventional methods. The patients operated on using robots spent 20% less time in hospital, their chance of readmission was reduced by 52% and they experienced a 77% reduction in the chance of blood clots. Doctors are now urging the use of robot-assisted techniques for all major types of abdominal surgery.

On the pill Numbers of grey squirrels could be controlled by giving the animals hazelnut butter laced publishedtopills,contraceptivewithaccordinganewpaperbythe group UK Squirrel Accord. The organisation believes that a novel contraceptive produced by the Animal and Plant Health Agency (APHA) would be effective in reducing fertility among grey squirrels and would allow the UK’s native red squirrels to stage a comeback. APHA has also designed a hopper to dispense the bait that is species-specific; the weighted door of the hopper prevents all but the largest red squirrels from accessing it. The UK is home to an estimated three million grey squirrels, which cause extensive damage to trees as well as taking over habitats from red squirrels.

The connection between being hungry and being angry is a real thing, according to research by a social psychologist at Anglia Ruskin University. Professor Viren Swami recruited 64 adults aged 18 to 60 to record their emotions and feelings of hunger five times a day for three weeks. They provided overwhelming evidence that hunger was associated with stronger feelings of anger and irritability and less pleasure. “It turns out being ‘hangry’ is a real thing,” said Swami.

Two Swedish companies, POC Sports and Autoliv, have teamed up to develop a cycling helmet with an integral airbag that could save many cyclists from serious head injuries. The airbag can enhance the helmet’s shock absorption, the two companies say, and their initial findings suggest the addition of an airbag would reduce the risk of a cyclist sustaining moderate to fatal head injuries from 80% to 30% in an impact at 20km per hour or above. They have been testing the new helmets using dummies in simulated collisions between cars and bicycles. On impact, the airbag inflates to protect the sides and crown of the head. One impetus for the research was the higher speeds travelled by many cyclists on e-bikes.

60 august/september 2022 www.blglobal.co.uk

pointsTalking

Bags of sense

A Finnish start-up company has built the world’s first sand battery, with the promise that the new technology could be used to store the power generated by solar and wind, and make a major contribution to tackling climate change. The company, Polar Night Energy, has built a tower filled with 100 tonnes of sand, which can be heated by blowing hot air through it. The sand stores the heat, which can then be used months later – it could save heat generated in summer, which would be used in winter when it’s most needed.

Dr Robot

The sand is stored at around 500ºC and is a much more sustainable option than other battery sources such as lithium. Brain food for the busy business professional The Knowledge is compiled by Alexander Garrett

Hanger pangs

Sand power

TheKnowledge

One theory is that the negative emotions are caused by a drop in blood sugar. In any case, people who tend to get hangry are advised to ensure that they eat a balanced diet – and don’t skip meals.

What role does the IoD play in boosting opportunities in Guernsey?

The pace of change has sped up enormously over the past few decades, and one of the most effective ways of dealing with this is to pursue lifelong learning. In addition, continuous learning is essential to our wellbeing and existence, just as food nourishes our bodies.

You are the Director of your own firm, a Schroders

Wendy Dorey, Director of Dorey Financial Modelling; Chair of the Institute of Directors, Guernsey

www.blglobal.co.uk August/september 2022 61

Why do you believe continuous learning is important to everyone’s career?

I really enjoy the different challenges each role brings and thrive on learning something new in each organisation.

In your day job you employ actuaries. Is that a career you’d recommend?

How do you relax outside work?

For someone starting out in the Channel Islands in finance, what is the best route map?

In Wheatnumbers: 1 Worldwide consumption of wheat during 2020-21, in million metric tonnes Source: Statista Forecast drop in global wheat production during 2022 due to Ukraine war, Indian drought etc Source: Food and Agriculture Organization of the United Nations metricproductionWorldwideofwheatduring2021-22,inmilliontonnes Source: Statista Ranking of Ukraine among top 10 2020countries,producingwheat Source: PopulationWorldReview 8787.4748.5%778.60% Rise in global wheat prices from June 2021 to June 2022 Source: Food and Agriculture Organization of the UN

NED, GFSC Commissioner and IoD Chair – what’s the benefit of wearing different hats?

Wearing different hats has given me broader knowledge and insight into how interconnected each role is and, in a small island like Guernsey, how joining up the dots between government and industry is so important.

Yoga and sea swimming. I also love growing my own fruit and veg.

For anyone with an analytical mindset, who loves solving problems and is passionate about decoding large data sets, being an actuary can be very rewarding. Our work involves building economic models for local governments, looking at risk and asset allocation for wealth managers, and even exploring the economic benefits of building a tunnel to Jersey!

aheadGetting

The IoD seeks to raise standards of directorship and governance through education, advocacy and leadership development. As well as supporting local directors, IoD Guernsey also supports local students through our Future Leaders and Leadership Shadowing schemes.

Business leaders on making it to the top

From internships to the IoD’s Leadership Shadowing scheme and the High Potentials Programme run by the Digital Greenhouse, young workers have unprecedented opportunities to connect and network with business leaders in the finance sector.

IMazzucatoMariana

ALSO NEW IN WORLDTHE OF Finfluencer

n the wake of the pandemic, the breakdown of US/China relations and Russia’s stand-off with the West, Mariana Mazzucato argues powerfully that innovation is the key to prosperity and that the state can play a pivotal role.

Mazzucato, who holds joint Italian and US citizenship, is Professor in the Economics of Innovation and Public Value at University College London, and Founding Director of the UCL’s Institute for Innovation and Public Purpose. Her thinking has been articulated in three books: The Entrepreneurial State: debunking public vs private sector myths; The Value of Everything: making and taking in the global economy; and most recently, Mission Economy: a moonshot guide to changing capitalism

In 2021, she adopted the metaphor of moonshots, which have made great achievements in space and other fields, to make the case that only a collaboration between private and public partners can break through to respond to the most pressing issues of our time.

62 august/september 2022 www.blglobal.co.uk THE KNOWLEDGE

Mazzucato remains a combative figure; in June prior to the G7 summit she argued publicly that the seven leading governments should make much more strenuous efforts to help debt-distressed countries. And she’s argued that the mooted Green New Deal in the US needs to be even more radical if it is going to make real progress against climate Policymakerschange.ofallpersuasions ignore her at their peril.

Now we’ve all discovered we can work from anywhere, why not work on vacation? For workaholics, presenteeists and greasy pole climbers, the workation is a dream come true. No need to set up one of those lame autoreply messages – you can take your laptop with you and carry on working on the beach while everyone else sunbathes and swims. Apparently workations are an extension of hybrid working and the new working patterns we’ve got into. Research by Europ Assistance shows that no less than one in five Belgians planned to take a workation this summer. Insurer William Russell has even come up with a ranking of the world’s top workation resorts based on a range of factors – accommodation costs, internet speed, safety and fun. It placed Koh Pha Ngan in Thailand in the top slot, followed by Gran Canaria and Lisbon. Deciding to work on holiday does, of course, come with health warnings. One is it’s not good for your health. Second is that Zoom meetings with scantily clad people playing volleyball in the background may not go down well with a new client. And third, if you’ve flown long-haul, you may be dragged into a meeting at 3am.

JARGON WorkationBUSTER

Someone who goes on Instagram to talk about money Revenge travel Burning up your carbon footprint because you weren’t allowed to go anywhere for the past two years

The first of these, published in 2013, argued that governments have played a far more significant role in the innovation of successful countries than generally thought, going far beyond creating the conditions for innovation to thrive. In the US, for example, she pointed out that the algorithm that led to Google’s success was funded by a public sector National Science Foundation grant. Sometimes, she said, it is necessary for governments to take a risk by backing new ideas and industry. Green technology, for example – those who back it in the early days will reap rich rewards down the line. Her book Rethinking capitalism built on these ideas in the wake of the financial crisis, and looked at how a more inclusive, interventionist form of capitalism was needed.

governments“Leadingshouldmakemuchmorestrenuouseffortstohelpdebt-distressedcountries”

WATCHGURU

BUZZWORDS…

According to one recent market forecast by US researcher Frost & Sullivan, the market for hardware and software will increase 11-fold in the next six years, from $14.55bn in 2021 to $160.14bn by 2028 – a compound annual growth rate of more than 40%.

Investment in the new technologies will cover a wide range of sectors: media and entertainment, manufacturing, retail, health and wellness and education to name a few. On the hardware front, two big product launches are in the pipeline. First is Meta’s top secret VR headset, believed to be called the Quest Pro, which is being developed under the codename Project Cambria. It’s expected to feature seriously upgraded graphics compared with existing headsets, as well as high-resolution cameras, eyetracking and other enhancements, and to come in at a price of more than $1,000. Meta already owns Oculus, pioneer of VR, which is being phased out as a brand. Second up is Apple, which is reliably expected to be launching its inaugural offering, a VR and mixed reality headset, in January next year. It is expected to be fitted with a variety of cameras and sensors, which enable those wearing the headset to interact with the real world, and is being touted by many as a potential game-changer. Until now, many VR headsets have been designed to be tethered to gaming devices, and early devices were based on connection to a phone, an approach that has largely been dropped. There’s also a bunch of headsets designed specifically for AR – or mixed reality – which means you can see through them and the virtual component is layered onto the real world.

HOTWHAT’SDRINKITWHILEIT’SHOT

“There is a two to three times higher chance of someone developing a more serious condition like depression, alcoholism or even suicide as a result of leaving an anxiety disorder untreated,” said tech entrepreneur Adam Hutchinson. Another therapeutic use for virtual reality has been developed by Chelsea and Westminster Hospital NHS Foundation Trust. It aims to reduce anxiety in women who’ve suffered a miscarriage by transporting them to calming environments such as a starry night or a beach by the sea.

When Mark Zuckerberg changed the name of Facebook’s parent company to Meta, he kicked off an explosion of interest in virtual reality and its cousin augmented reality, the key technologies used to enter the so-called metaverse.

Meanwhile, HBO is screening what it says is the first movie shot entirely in VR. Called We met in Virtual Reality, it is a documentary about people’s lives during the pandemic. Then there are VR apps for classroom learning, for training police, treating gambling addiction, learning to paint and experiencing the Yosemite National Park, to pick just a few random examples. No wonder some are already billing 2022 as ‘the year of virtual reality’. The new technology may not be suitable for every purpose, however. Research by Coburg University in Germany, reported in the New Scientist, found that volunteers who spent a week working entirely in VR suffered anxiety and migraines – and were less productive as a result.

Virtual reality KEEP UP, KEEP UP… THE MASTERS OF THE ONLINE UNIVERSE JUST KEEP GETTING MORE AND MORE SOPHISTICATED AND POWERFUL. HERE’S A BRIEF LOOK AT WHAT’S COMING DOWN THE LINE, BROADBAND OF COURSE…

www.blglobal.co.uk august/september 2022 63 The Knowledge Top tech

Microsoft’s HoloLens and the Magic Leap One are among the key players here, and again Apple is expected to make a significant entry into this market with its Apple Glasses, which will synchronise information from your phone screen in front of your eyes. On the software side, barely a day goes by without an innovative new VR or AR app being launched – and the possibilities they offer are remarkable in scope. In New Zealand, a new app called oVRcome promises to help people with phobias to conquer their worst fears, by gradually exposing them to the thing they’re scared of – be it spiders, needles, flying, heights or dogs.

The Ember Mug2 smart mug keeps your drink hot for up to 80 minutes and allows you to control comhttps://uk.ember.£129.95,remotely.temperaturethe GOOD,LOOKINGBABY The monitor/c525-video-baby-baby-monitors/co.uk/kodaksmarthome.https://£159.99footage.astilt,andconnectedbabyCherishKodakC525Pmonitoristowifiallowsyoutopanandzoomwellasstore

At Agile Automations, we do not use any robotics platforms, which allows us to offer a complete, yet flexible solution, for our clients; each automation is bespoke, designed to their unique individual requirements, without any need to compromise. This results in an enhanced Return on Investment.

KPMG in the Crown Dependencies is a leading professional firm that delivers audit, tax and advisory services. Operating across the islands of Guernsey, Jersey and the Isle of Man, it is a standalone, locally led partnership with over 450 members of staff.

Adam Cichocki - Advisory Partner, Jersey D: +44 1534 824 393 acichocki@deloitte.co.uk

Jo Huxtable - Tax Partner, Guernsey D: +44 1481 703 308 jhuxtable@deloitte.co.uk

The combined practice forms a core part of the KPMG Islands Group, made up of International Financial Centres and Overseas Territories spanning a sub-region which extends from Malta to the Caribbean. This grouping works closely with other KPMG practices in major global financial centres such as London and New York, ensuring that clients can benefit from an optimal blend of local and global expertise from KPMG’s network.

Businesslife Magazine, Issue 79, August/September 2022

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alternative funds

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interview

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