Bl Magazine Issue 53 November/December by BL Magazine

BL MAGAZINE

ISSUE 53 NOVEMBER/DECEMBER 2017

PRIVATE EQUITY REAL ESTATE CRYPTOCURRENCIES BREXIT BEPS AND FUNDS RECRUITMENT HEDGE FUNDS FUND FINANCING

The funds Edition 2017

ISSUE 53 NOVEMBER/DECEMBER 2017

is robo advice the end of wealth management?

Our investment funds team is "a cut above the competition" LEGA L 5 0 0

No.1 1,200 We are the largest team of investment funds lawyers across the Channel Islands (CI).

We advise more investment funds serviced in the CI than any other offshore law firm*.

1st

56%

We advised on the launch of the world's first regulated, cryptodenominated fund.

We advise on over 50% of new investment funds business across Guernsey and Jersey*.

8/10

No.1 We are the only tier one law firm for investment funds in both Guernsey and Jersey (Legal 500).

US$100bn

We advised on the SoftBank Vision Fund â&#x20AC;&#x201C; the world's largest ever investment fund.

9/10

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We are instructed by 8 of the 10 largest private equity real estate firms worldwide (PERE, 2017).

We advised on the launch of Guernsey's first Private Investment Fund.

We are instructed by 9 of the 10 largest private equity firms worldwide (PEI, 2017).

For further information, please contact one of our investment funds partners at careyolsen.com *Based on the latest available statistics from Monterey Insight.

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H O N G KO N G

CAYMA N ISL A N D S LON DON

GUE RN SE Y

SI N GAP ORE

JERS EY

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Welcome

Plus ça change, plus c’est la même chose AS WE APPROACH the end of the year, it’s par for the course to look back over the past 12 months and see what’s changed. It seems hard to believe that it’s only a year since Donald Trump stunned the world (and arguably himself) by becoming President of the United States. And I could blether on (again!) about how bonkers it’s been since he took charge, but there seem to be more pressing issues closer to home – that’s if the UK’s departure from the EU can be described as more pressing than the potential for nuclear war… Yes, good old Brexit continues to plough its slow and unsteady course. Negotiations are still in the early stages, but it feels like they’re already mired with in-fighting and a distinct lack of progress – so much so that we’ve been hearing that old mantra of ‘no deal being better than a bad deal’ all over again. Seeing as this is our annual funds edition, Brexit and how it might affect the Channel Islands is something we were always going to be looking at. While the subject is naturally a concern for fund practitioners, it remains one where the general attitude is pragmatic. After all, the negotiations are out of the hands of those in Guernsey and Jersey, so it’s a case of planning as much as possible and then charting the optimal course. That’s not to say that the funds industries in the Channel Islands have been sitting idly on their hands during 2017. Indeed, across both islands, funds are in pretty rude health. Not only have new regimes in Guernsey and Jersey been welcomed, but the islands are making ground when it comes to cryptocurrencies. In all honesty, I confess to finding the whole blockchain and Bitcoin schtick utterly confusing. Thankfully, there are plenty of people who seem to know what it all means, and that may well translate into a whole new and successful funds area for the islands. However, more traditional areas are also enjoying a purple patch. Private equity and real estate remain the two strongest sectors in the islands and, as we reveal in individual articles on each subject, it seems that the amount of ‘dry powder’ waiting to be invested is at the highest level in some time – so it looks set to be an interesting 12 months ahead. Indeed, the coming year for funds looks

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set to be as fascinating as the year that’s passed. It won’t be without its challenges – Brexit being one of them. There’s also the prospect of the Base Erosion and Profit Shifting project coming into force in the not-too-distant future – something funds practitioners will absolutely have to get to grips with. Then there’s the issue of recruitment. For some considerable time, both Channel Islands have argued that there’s a very real skills gap in many sectors – from technology and tourism to finance and the law. And funds seem to be no exception. If the funds industries want to keep growing, that requires people – but will the islands’ population controls end up hampering that growth? And just where do growing firms find the next generation of funds experts? All of the above issues were discussed in depth at this year’s Channel Islands Funds Forum, which BL was delighted to organise again in partnership with PwC. You can read a review of the event on page 50, but the day was fascinating and thought-provoking, and we look forward to hosting it again next year. Finally, there’s our cover story. With automation set to take millions of jobs in the coming years, will wealth management be hardest hit as investors turn to ‘robo advice’ instead? Everyone wants value for money, and if that can be provided by algorithms, why shell out for the personal touch? Perhaps we’ll see a whole industry retraining as funds experts in the years ahead. So, as this year winds down, we’d like to thank all our readers, advertisers and event sponsors for their support in 2017 – and as premature as it may seem, have a great winter and festive season, and we’ll see you in 2018. n

the coming year for funds looks set to be as interesting as the year that’s passed

Nick Kirby, Editor-in-Chief, BL magazine

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GLOBAL FUND SERVICES

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Contents

INSIDE

14 bl guernsey

The latest financial and business news and views from the bailiwick

MAGAZINE

BL is published six times a year by Chameleon Group +44 1534 615886 www.blglobal.co.uk

CEO, CHAMELEON GROUP Carl Methven carl.methven@blglobal.co.uk EDITOR-IN-CHIEF Nick Kirby nick.kirby@blglobal.co.uk 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

6 News

37 brexit

66 hedge funds

A round-up of the latest Channel Island business news

Just how might the UK leaving the EU affect Channel Islands funds?

Nine strategies used by hedgies to make their millions

12 Appointments

40 cryptocurrencies

Recent key hires among firms in Guernsey and Jersey

Could this cutting-edge tech be the next big thing in the funds universe?

Finance 68 Venture capital

22 Interview

46 beps and funds

Tim Hames, Director General of the BVCA, on the state of play in the funds industry

How funds are having to adapt to imminent changes in regulation

FUNDS 26 private equity

50 funds forum review

The robots are coming, and the victims could be traditional wealth managers

Highlights from BL’s recent Channel Islands Funds Forum

business 76 HANDLING Uncertainty

56 Recruitment

When nothing is certain, how do businesses plan for the future?

It’s all about ‘dry powder’ as investors look for the hottest place to put their money

32 real estate Property is enjoying a boom time, with funds investing in a whole range of projects

Are Channel Islands funds facing a serious staffing crisis?

63 fund financing How the typical funds investor is changing

How female start-ups are facing discrimination when it comes to funding

72 ROBO ADVICE

80 rebuilding a brand Once a brand goes down the toilet, what needs to be done to make it a success again?

18 bl Jersey A review of the biggest business developments and finance news stories

85 The Agenda It’s all red, green and white for our lifestyle section, as the time comes to get festive

contributors The BL Global Discussion Forum

TOM HUELIN

Follow us @blglobalnews Office: Meadowlands, La Rue a la Dame, St Saviour, Jersey JE2 7NQ © 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.

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Freelance finance and business writer Tom is this issue’s new kid on the block. In his first piece for BL, he takes on the mess that is Brexit and examines how it might affect the Channel Islands funds industries.

KIRSTEN MOREL

It’s a double-header for Kirsten, who not only distils down eight hours of the Channel Islands Funds Forum, but also gets to grips with how cryptocurrencies are shaking up funds like never before.

DAVE WALLER

BL regular Dave looks at the growing funds industry, and questions whether the Channel Islands are having a recruitment crisis. He then turns his eye to the booming real estate sector.

RICHARD WILLSHER Finance writer Richard gets the cover this issue as he asks whether robo advice spells the end for traditional wealth management. He also analyses how BEPS could change the way funds are run.

November/december 2017 5

in the NEWS Follow us @blglobalnews

Estera launches in Luxembourg

Dates announced for 2018 Funds Forum and NEDs Forum BL GLOBAL HAS announced the dates for next year’s Channel Islands NEDs Forum and the Channel Islands Funds Forum. The NEDs Forum will take place on 21 March 2018 at the Royal Yacht Hotel in St Helier. Now in its third year, the forum has become the leading event in the Channel Islands NEDs calendar, attracting delegates and speakers from Guernsey, Jersey and beyond. It provides an excellent opportunity for new and established NEDs to keep up to date with pressing issues and to network with fellow NEDs. Last year’s running order can be found at www.cineds.com – this will be updated with information on 2018’s event as it becomes available. The 2018 Channel Islands Funds Forum will take place on 26 September at the Radisson Blu Hotel in St Helier.

This year’s event brought together more delegates than ever to address the challenges faced by the funds sectors in the Channel Islands, and to examine the opportunities that lie ahead. Carl Methven, CEO of BL Global, commented: “We’re delighted to announce the dates for these two key events. In 2017, both conferences were bigger and better than ever, and we intend to build on that next year – with even more high-calibre speakers and thought-provking sessions.” Earlybird tickets for both events are available until 29 December 2017. These discounted tickets for the NEDs Forum cost £100 (half-day event). Those for the Funds Forum are available at £150 (full-day event). For more information and to make a booking, contact Carl Methven at events@blglobal.co.uk n

FIDUCIARY AND ADMINISTRATION services provider Estera has launched a new office, Estera (Luxembourg), following its acquisition of Headstart earlier this year. Led by Headstart Managing Directors Christophe Gaul and Manuel Mouget, the Luxembourg team provides a full range of corporate and trust services to private equity and real estate firms, institutional clients and high-net-worth individuals. Estera CEO Farah Ballands said: “Building a presence in Luxembourg, one of the world’s most important jurisdictions for funds and corporate services, allows us to broaden our service and jurisdictional offering and to increase the choice we offer to clients.” Estera now operates from 11 locations, including Guernsey, Jersey, the Isle of Man, Hong Kong and the Cayman Islands. n

News

Channel Islands investment companies hit £50bn AUM THE ASSETS UNDER management of investment companies domiciled in the Channel Islands have reached a record high, according to the Association of Investment Companies (AIC). The assets of Channel Islands-domiciled investment companies totalled £50.1bn at 31 August 2017. This is the first time assets have exceeded £50bn. The record follows another recent all-time high, when Channel Islands assets hit £49.9bn at 30 June 2017. There are 99 investment companies domiciled in the Channel Islands. Over the eight months to the end of August, Channel Islands-domiciled investment companies achieved strong levels of secondary issuance, raising £2.43bn. This was significantly higher than the same periods in 2016 and 2015, when these companies raised £1.53bn and £1.51bn respectively. In addition, a new investment company domiciled in the Channel Islands, EJF Investments, launched in April. AIC Chief Executive Ian Sayers said: “It’s encouraging to see Channel Islands investment companies growing so strongly. In a low-interestrate environment, demand remains high for investment companies generating income. The benefits of the closed-ended structure for accessing illiquid assets are clear, as shown by the problems of open-ended property funds last year.” n

Far East offices for Collas Crill and Touchstone OFFSHORE LAW FIRM Collas Crill has opened an office in Hong Kong, and has appointed Simon Fraser as a consultant. Stephen Adams, Managing Partner of the firm’s Singapore office, will have responsibility for the new Hong Kong operation, working with Fraser to extend the firm’s reach in Asia. Fraser has more than 20 years’ experience as a solicitor in England, Wales and Hong Kong, as well as 14 years of fiduciary experience at senior level with offshore trust companies. He worked at MJ Hudson and also served as a Director of Ogier Fiduciary Services in Jersey. Meanwhile, Jersey-based wealth management systems specialist Touchstone has opened an office in

Singapore. Touchstone provides global wealth management administration and accounting systems, specialising in Microsoft’s Dynamics NAV technology, consultancy and development. Established in Jersey in 1997, it is the wealth management division of business software specialist the Touchstone Group. It opened an Australia office in 2008. “There’s been a drive for companies to have better administration and accounting systems to help them look after their clients’ assets, particularly with the impending regulation of the Hong Kong financial services market,” said Peter Le Brocq, Touchstone Managing Director. “We see significant growth potential in the Asia Pacific region.” n

It’s as simple as... making the right move VG has great opportunities in fiduciary solutions and funds administration. We can offer you training and development to realise your potential and grow with the company.

Talk to us about joining VG and becoming part of our family. Emma Stewart, Head of Human Resources T +44 (0)1534 500357 E hr@vg.je www.vg.je VG also trades as Volaw Group. For details of the legal and regulatory status of VG and Volaw Group, please visit our website www.vg.je.

Independent fiduciary and administration solutions

Funds Private Client Family Office Corporate Employee Benefits Real Estate Islamic Finance Structured Finance

News

Done Deals Appleby has advised HSBC on the transfer of the businesses of HSBC Bank International in Jersey and HSBC Private Bank (CI) in Guernsey into the Jersey and Guernsey branches of the bank. Appleby’s team included Partners James Gaudin, Wendy Benjamin, Michael Cushing, Kate Storey and Anthony Williams.

Heathrow proposes Channel Islands route HEATHROW AIRPORT HAS called for the scrapping of Air Passenger Duty (APD) and a growth in domestic routes, with Jersey and Guernsey included in a map of potential new routes. In a letter to UK Chancellor Philip Hammond ahead of the Autumn Budget, Heathrow urged the government to scrap domestic APD on all UK flights, after research from Frontier Economics revealed that UK passengers are paying an extra £225 million in aviation tax on domestic flights compared with many European counterparts. The proposal is part of a nine-point plan recently unveiled by the airport – Bringing Britain Closer – which includes plans to connect more of the UK to the nation’s only hub airport. It aims to connect at least 14 UK destinations, including the Channel Islands, Liverpool, Humberside and Newquay. It has long been a bone of contention that neither of the Channel Islands has a direct flight to Heathrow any longer. n

Easyjet image credit: / Shutterstock.com

Aurigny to partner with easyJet GUERNSEY AIRLINE AURIGNY has announced plans to partner with budget airline easyJet, promising easier and guaranteed connections with international flights. Aurigny has signed a memorandum of understanding with easyJet, allowing it to use the connections and distributions service Worldwide by easyJet. The airline said: ‘For islanders, it will enable easy luggage transfers and worry-free, guaranteed connections with easyJet flights at Gatwick. Should a passenger miss a connecting flight, they will be transferred to the next available flight.’ The partnership means Guernsey will appear as a destination on easyJet’s website. Passengers will be able to book standalone Aurigny flights without needing an easyJet leg to their journey. The tickets are expected to go on sale at easyjet.com by the end of the year. n

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Fund manager Blackstone has acquired a portfolio of Channel Islands and UK registered investment vehicles worth £559 million. Appleby provided Guernsey and Jersey-based legal advice to the real estate funds managed by Blackstone as part of the deal. Appleby also acted for the respective borrowers in relation to the senior and mezzanine financing provided. Appleby Guernsey Corporate Partner Jeremy Berchem was one of the leaders of the Channel Islands team, assisted by Senior Associate James Walsh. Bedell Cristin has advised the Royal Bank of Scotland International on loan facilities made available to the Channel Islands Property Fund for its acquisition of Royal Chambers and the Rotunda in Guernsey. The Bedell Cristin team was led by Guernsey Partner Kate Ovenden and Jersey Partner Tim Pearce. Intertrust’s fund services business has assisted iCON Infrastructure with the first and final closing of its €1.2bn iCON Infrastructure Partners IV fund. iCON focuses on privately held investments in infrastructure assets in Europe and North America. Intertrust’s team was led by Guernsey-based Funds Director Kees Jager. Mourant Ozannes has advised Guernsey-based natural resources company Pallinghurst Resources on its acquisition of AIM-listed Gemfields by way of a hostile contractual takeover. Mourant Ozannes Partner John Rochester led the team advising Pallinghurst. Mourant Ozannes has also advised the Saudi Arabian Oil Company in connection with the corporate structuring of its first Sukuk Issuance Programme, for an issuance of up to SAR 37.5bn (US$10bn) Sukuk (Islamic bonds), and its SAR11.25bn (US$3bn) Sukuk issuance under the programme. The Mourant Ozannes team was led by Partner John Rochester along with Corporate Senior Associate Alex Porter. Ogier has advised PE firm Hellman & Friedman and Singapore sovereign wealth fund GIC on the acquisition of Allfunds Bank for €1.8bn from Banco Santander, Intesa Sanpaolo, General Atlantic and Warburg Pincus. Partner Raulin Amy led the Ogier team, advising on Jersey law in the transaction. Walkers (Jersey) has acted for real estate investment manager Aerium, alongside law firm Burges Salmon, in relation to the acquisition of One Central Square in Cardiff from Legal & General for £51 million. Walkers’ team was led by Senior Counsel Sophie Reguengo. n

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Highvern sets up family office HIGHVERN TRUSTEES HAS launched a dedicated Family Office Services team. The new team, many of whom already provide family office services to Highvern’s clients, started operating in October, led by Naomi Rive (pictured), Group Director and Head of Family Office, and Ross Collins, Associate Director Family Office. Naomi became Group Director of the firm following its management buyout 10 months ago. She previously served as Chief Trust Officer at Coutts since 2014, having spent her earlier career at Appleby, latterly as a Partner. Ross previously held the role of Trust Manager at Highvern, and spent his earlier career with Coutts and EFG Bank. Rive commented: “Highvern’s new team works with family offices, or as a family office function itself when required. It assists with the day-to-day administration and management of each family’s varied affairs, bringing to bear all the in-house professional, legal, accounting, corporate and trustee resources at our disposal.” n

Management buyout for Orchard PR TWO OF THE management team at Guernsey-based communications agency Orchard PR – Brooke Kenyon and Chris Chilton – have acquired the company from its founders, Steve and Lois Falla. They will lead Orchard with immediate effect, with Kenyon as Client Services Director and Chilton as Operations Director. Steve Falla will remain in the business as Executive Consultant. Falla commented: “Lois and I know this transition will sustain Orchard’s passion, energy and focus to enable it to build on 21 years of success and continue to thrive in the future. Brooke and Chris have made an enormous contribution to the development of the company in recent years and it is now time for them to take control and drive it forward.” Chilton, who has worked with Orchard for almost nine years as an Account Director, spent his early career in the media, public sector and finance industry in London. Kenyon has also worked in London with a range of consumer lifestyle brands, and has been with Orchard as an Account Director for nine years. The PR company employs a total of 13 people and has clients in Guernsey, Pictured (l-r): Lois Falla, Chris Chilton, Jersey and the Isle Brooke Kenyon and Steve Falla of Man. n

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MERGERS AND ACQUISITIONS Corporate services provider Alter Domus has signed an agreement to acquire Luxembourg Fund Partners, subject to regulatory approvals. On completion, Alter Domus will be able to provide set-up support, administration and management company services to alternative investment fund managers. Cloud solutions provider Calligo has made three acquisitions in recent months. It has purchased Canadian cloud services provider 3 Peaks, which has clients across Canada and the US; the IT services division of Fusion Systems, which operates from Guernsey; and AMS Systems PSF, a Luxembourg-based IT services business that provides managed services and cloud infrastructure to the financial services sector. Equiom has completed two acquisitions in Europe – Malta-based licensed trustee and fiduciary company DF Corporate Services, and trust and fiduciary business Carey Group Monaco. DF Corporate Services brings a suite of complementary services to Equiom’s existing Maltese business, while Carey Group gives Equiom entry into Monaco and allows it to further leverage its yachting proposition. Corporate service provider JTC Group has confirmed its acquisition of Merrill Lynch Wealth Management’s International Trust and Wealth Structuring business (ITWS), following regulatory approval from the Isle of Man Financial Services Authority. ITWS, which will be assimilated into JTC’s Private Wealth Services division, administers trust services for international advisory clients. The deal gives JTC a presence in the Isle of Man for the first time. PraxisIFM has acquired Kompas International, a trust and corporate services business based in the Netherlands. This marks the first acquisition by PraxisIFM since it listed on The International Stock

Exchange in April. Kompas, which has 10 staff, will be known as PraxisIFM Netherlands after the deal. Alternative investment, corporate and private client administrator Ocorian, which operates from Jersey, is to purchase two affiliated corporate service providers based in Europe – Intruad Management Services in Amsterdam and Intruma Corporate Services in Luxembourg. Ocorian says the acquisition will extend its international reach and corporate services offering into the Netherlands, while growing its Luxembourg proposition. Corporate services provider Sanne has entered into an agreement to acquire Luxembourg Investment Solution (LIS) and Compliance Partners (CP). LIS is a third-party alternative investment fund manager with assets under administration in excess of €8.3bn. CP provides primarily corporate services to clients. The transaction, depending on regulatory clearances, is expected to complete in Q1 2018. Global corporate service provider Vistra has entered into a definitive agreement to acquire the corporate services business of Deutsche Bank’s Global Transaction Banking division. The corporate services business provides management and administration of SPVs and asset holding companies to banks, non-bank financial institutions and corporates. The transaction, which is subject to regulatory approvals, is expected to close in the first half of next year. Guernsey-based security specialist West Sealand International (WSI) has acquired its European partner, Shield Risk Consulting (SRC). The acquisition extends the firm’s consulting portfolio and provides it with a European operating centre in Copenhagen, Denmark. SRC has become part of WSI, as a wholly owned European WSI subsidiary, and will retain its own branding. n

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News

Appointments Hawksford has appointed Darren Kelland as Global Head of Private Client Services. He has more than 13 years’ experience of working with private clients and family offices. Before joining Hawksford, Darren was Head of Private Wealth at Intertrust (formerly Elian and Ogier Fiduciary Services), having held the role of Director and Head of the Family Office team he established in 2010. Darren was a member of the firm’s risk assessment committee and also led the acquisition and integration of Allied Trust Company during 2014/15. In his new role, he will be responsible for a team based across Jersey and Asia.

RBS International has added Joanna Dentskevich to its board as a NonExecutive Director. Joanna has been a business consultant and a NED for funds and corporate institutions in the UK, Jersey and Luxembourg, including LSE-listed, infrastructure, credit and distressed debt funds. She is the owner of Triskelian Advisors, which provides risk officer and risk advisory services to Jersey financial services firms. Her career has included stints with Deutsche Bank, Morgan Stanley and London-based Allometry Capital. At RBS, Joanna will help set cross-jurisdictional strategy and guide on the bank’s structure.

Jersey Finance has named Lisa Springate as Head of Technical, from 20 November, succeeding Tom Cowsill. Lisa joins from Bedell Cristin’s Jersey office, where she’s been part of the commercial litigation team for 17 years and a Partner for nine. Prior to moving to Jersey in 1993, Lisa practised in London, and with law firm Mayer Brown JSM in Hong Kong. Lisa is also a board member of the Institute of Directors in Jersey and a Non-Executive Director of Board Apprentice. In her new role, she will lead the delivery of technical services to members and ensure the appropriate legal, regulatory and fiscal platforms are in place.

Ipes has appointed Gary Ayres as a Senior Manager in the Jersey office, responsible for managing client delivery teams. He brings 11 years of asset management experience to the role. His career began at PwC Ireland in 2006. Having worked with several onshore and offshore funds, Gary has broad knowledge of IFRS, US GAAP and FRS102. He was seconded to PwC’s Boston and New York practice in 2010, where he worked with large US alternative funds. Gary moved to Jersey in 2013 and was promoted to Senior Manager in 2015, managing a portfolio of private equity clients across Europe and leading PE audits in the Channel Islands.

Financial services consultancy Optimus Group has recruited Nigel Le Cras to the position of Head of Compliance, based in Guernsey. Nigel brings more than 30 years’ experience within the offshore finance sector to the role. He has held senior posts within global corporate, trust and fund administration service providers. He has been a Compliance Officer since 1998 and a Money Laundering Reporting Officer since 2013. Nigel will now lead the compliance/regulatory section of Optimus, working with the team to keep up to date with regulatory changes.

Financial services provider State Street has promoted Paul Mundy to Head of Alternative Investment Solutions (AIS), managing the private equity and real estate fund administration businesses in Jersey and Guernsey. He also serves as Head of Director Services for AIS in Europe. Paul joined State Street Jersey in January 2014 as Head of Enterprise Risk Management for AIS EMEA, and then moved to Guernsey as its Head of AIS in August 2015. Prior to joining State Street, Paul was Director of Risk and Compliance at RBS International. He has also worked for Citibank and JP Morgan.

Finding the best brains in the business... 12 march/april 2017 www.kendrickrose.com

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Offshore banking lawyer Simon Felton has joined Ogier’s banking and finance team as a Partner. He joins from Mourant Ozannes, where he has been Managing Partner in New York and London since 2007. He has led international teams working on structured finance transactions and advises investment banks on capital markets, structured finance and securitisation transactions. During his career, Simon has helped a special-purpose vehicle repackage securitisation residuals, advised on the disposal of a portfolio of mortgage receivables, and advised on substantial private M&A activity for institutional and private equity clients.

Corporate services provider Sanne has recruited Oliver Morris as Head of Private Equity, EMEA, based in the Jersey office. Oliver will oversee Sanne’s EMEA private equity work and develop new business initiatives. He joins from KPMG Channel Islands, where he has been a Director for the past 12 years. During this time he also served as Technical Director at the British Private Equity & Venture Capital Association (BVCA). This was a two-year secondment, during which Oliver remained part of the leadership team at KPMG Advisory, delivering onshore and offshore private equity structures.

Claire Le Brocq has been promoted to Ocorian’s Managing Director of Alternative Investments (Jersey) and appointed to the firm’s Executive Committee. Claire has over 20 years’ experience in investment and finance, including 10 in private equity. She specialises in Sharia real estate structures and works with asset managers across Europe and the Middle East to manage fund structures for the Gulf Cooperation Council and Islamic investor market. Claire has played a key role in developing Ocorian’s approach to regulatory governance, leading the development of policies and a procedural compliance framework.

HSBC has named Jonathan Langan (pictured) as its new Chief Financial Officer in the Channel Islands and the Isle of Man. Jonathan joined the HSBC Group in 2006 in London, where he held a number of roles across global banking and markets and global asset management. He spent his early career with EY. Jonathan has been with HSBC in Jersey for four years, most recently as Business Finance Manager for the Channel Islands and Isle of Man. In his new position, he takes over from Sanjay Nair, who has become HSBC UK’s Head of Finance for Commercial Banking, located in the UK.

Financial services provider Enhance Group has appointed Tom Wiseman (pictured) as Group CEO, taking over from James Painter, who has now become Executive Chairman. Tom has been Managing Director of Enhance’s London business for two years, relocating to Jersey for the new post. He was a stockbroker at Charles Stanley & Co and a Partner at Seven Investment Management, both in London. James was a founder of Enhance in 2005. His career began in 1996 at ABN Amro, moving on to the Royal Bank of Canada and then Equity Trust.

First Names Group has appointed Robert Hessing as Director, Corporate Services in Luxembourg. With over 21 years’ experience in the US and Luxembourg, Robert specialises in private equity and corporate real estate. At First Names, he will lead a service delivery team focusing on private equity and real estate clients in Europe, the UK and US. Robert qualified as an attorney in the Netherlands and has spent more than 16 years of his career in the US as an attorney with Kirkland & Ellis. He has also worked for EY in its New York and Chicago offices, and for UBS in Luxembourg.

We call it resourcing excellence. www.blglobal.co.uk march/april 2017 13 info@kendrickrose.com

BL guernsey New name for NED programme

scheme offering prospective NonExecutive Directors the chance to sit on a board has been renamed to more accurately reflect its purpose. Originally known as the NED Apprenticeship Programme, the scheme is now called the NED Development Programme. Run by the GTA University Centre, it aims to develop and diversify the local NED pool by offering aspiring NEDs the chance to sit on a partner board. Since launching in 2015, 11 people have completed placements, with three going on to be appointed full-time to a board. There are 22 aspiring NEDs signed up awaiting placements, with a further eight sitting on host boards. Two other boards are going through the placement process. GTA University Centre Programmes Manager Michelle Morley said: “Despite the scheme’s success, we continually review the programme, and there was some question over the use of the word ‘apprentice’, which doesn’t reflect the seniority, expertise and business acumen that those joining the scheme have. We feel the time is right to rename it.” The programme involves training,

T including accounting and corporate governance sessions with Deloitte, and legal and corporate governance sessions with Appleby. It features a 12-month placement on a partner board, where participants are mentored by an experienced board member who will share their expertise. The scheme also offers participants free membership to the NED Forum, enabling them to attend NED Forum training sessions and networking events. For more information, contact Tina Torode, NED Development Programme Co-ordinator, at tina.torode@gta.gg or call the GTA on 01481 721555. n

Waves granted Air Operator Certificate

n-demand air taxi service Waves, which launched earlier this year, has been granted an air operator certificate (AOC) by Guernsey’s air registry, 2-Reg. This means the company can start carrying freight as well as passengers. It will now

14 november/december 2017

Eight quarters of growth for Guernsey funds

begin its freight operation and start the soft launch of its passenger service. Chief Executive Officer Nick Magliocchetti said: “We’re in final testing of our booking system and our security app, as well as ensuring our pilots are fully trained. We’ll be testing the entire customer experience from booking, check-in, boarding and disembarkation using family and friends.” The company has made a number of announcements in recent weeks as it moves closer to the launch of its technology-led air taxi service. “We’ve seen the appointment of our first pilot, the launch of the Waves training academy, and the arrival of our training and missions aircraft,’ said Magliocchetti. n

he total value of funds business in Guernsey grew by £4.5bn (1.6 per cent) in the second quarter of this year, according to the Guernsey Financial Services Commission (GFSC). Its figures show that at the end of June 2017, the net asset value of all funds under management and administration in Guernsey stood at £271bn. For the year since the end of June 2016, the total net asset value has increased by £23.9bn (9.6 per cent). The total value of funds business on the island hasn’t fallen since the second quarter of 2015. “The figures demonstrate the solidity and stability of our funds industry and the continuing attractiveness of Guernsey as a funds centre,” said Guernsey Finance Chief Executive Dominic Wheatley. “Eight consecutive quarters of growth show that the funds sector in Guernsey remains buoyant, while the introduction of new Guernsey structures such as the Private Investment Fund and the manager-led product shows that we will not rest on our laurels.” According to the GFSC figures, the Guernsey closed-ended sector was valued at £167.2bn at the end of June – up £2.8bn (1.8 per cent) during the quarter, and rose £13.7bn (nine per cent) compared with 12 months earlier. The value of Guernseydomiciled open-ended funds decreased slightly (0.04 per cent) during the quarter, but remain at £43.9bn – an increase of £2.6bn (6.3 per cent) year-on-year. In total, Guernsey’s financial services regulator approved 14 new investment funds during the second quarter – 10 closed-ended, one open-ended and three non-Guernsey schemes. This means the total number currently approved for domiciling or servicing in Guernsey increased by three over the course of the quarter to stand at 986. n

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Guernsey named top European specialist finance centre

uernsey has been ranked as the top European specialist finance centre in The Banker’s annual ranking of international finance centres (IFCs). The Financial Timesowned monthly international affairs publication bases its ratings on data ranging from financial market indicators to economic potential and business environment factors, focusing on the level of international business and the value offered to institutions seeking to expand their international operations. Recognising that data for specialised financial centres is seldom consistent with that used for mainland financial centres, The Banker surveyed each specialist IFC and compiled a separate table using data relevant to those locations. Guernsey was awarded a score of 98.40, an improvement of 12.37 on last year’s figure of 86.02, and enough to move it up

one place to second overall behind the Cayman Islands. However, Guernsey’s improved score saw it leapfrog Jersey, making it the top-scoring specialist IFC in Europe. Guernsey Finance Chief Executive Dominic Wheatley (pictured) commented: “Guernsey sets high standards across all its sectors of expertise, and our ranking as Europe’s number one specialised finance centre is testament to that.” Guernsey was also named the Best Centre for Fund Administration at Investment Week’s Fund Services Awards 2017, seeing off competition from Jersey, Luxembourg and Dublin. Guernsey’s entry cited private equity funds passing £100bn in 2016, the growth in Guernsey-domiciled funds’ net asset value, and the first commercial deployment of blockchain technology. n

Guernsey registry adds another Boeing jet

ortune Global 500 company HNA Group has, via its subsidiaries Hongkong Jet and BAS Guernsey (BASG), registered another jet with the island’s aircraft registry 2-Reg. Luxury corporate Boeing 737 jet 2-BASG is the latest addition to BASG’s air operator certificate (AOC) and can now be offered for commercial charter alongside the 787 Dreamliner 2-DEER, which was registered in Guernsey earlier this year. More privately owned aircraft are expected to follow. Speaking to the Guernsey Press, Hongkong Jet and BASG Chief Executive Denzil White said the Guernsey registry was very responsive and showed high standards. “Response times are critical to us as a business. When we were looking at

16 november/december 2017

registering the 787 in Hong Kong, we were told it would take 15 months – Guernsey did it in three days.” The 2-BASG recently called into Guernsey on a test flight, completing the final stage of its certification on the register. Gus Paterson, Director of Civil Aviation for the Channel Islands, whose office issues the AOCs, said such business relationships were important to the island’s aviation industry. “This is a major opportunity for Guernsey in developing a relationship with BASG and HNA. It is great for us to have a 737 on the register and it should be a good money earner for us,” said Paterson. “The inspection flight was also a good opportunity for us to test our processes.” n

Orlando launches fourth fund domiciled in guernsey

erman-based private equity firm Orlando Management has closed its fourth Guernsey-domiciled fund. The European Special Situations Venture Partners IV Fund (ESSVP IV), advised by Orlando, had its final closing in the second quarter of 2017, having successfully raised total capital commitments of €320 million. The fund will focus on investment in special-situation industrial assets in Germany and German-speaking countries, as well as the Nordics, with sales typically in the range of €50 million to €500 million. It continues the successful investment strategies of its three predecessors by acquiring typical mid-market companies in special situations and ‘diamonds in the rough’. Guernsey-based fund administrator IAG has been appointed as company secretary and administrator to ESSVP IV, while Guernsey law firm Carey Olsen advised the general partner on the launch of the fund in the island. The success of the fundraising was attributed to significant support from existing investors, combined with an overwhelming level of interest from new investors, which led to oversubscription. Allocation to new investors was limited to selected highquality, long-term institutional investors. Investors in the fund include a diversified mix of endowments, foundations, insurance companies and family offices from Europe, the US, Israel and Japan. n

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BL jersey states Reports on 2016 economic performance

minister plans tax changes

he latest report presenting estimates of the size and performance of Jersey’s economy in 2016 has been published by the Statistics Unit at the States of Jersey. The key findings include the following: ●T he average economic standard of living of Jersey residents, measured as realterm gross value added (GVA) per head of population, declined marginally in 2016 due to the increase in total economic output (GVA) being lower than the increase in the resident population. This means the figure has decreased by 18 per cent since 2007. ●G VA per head of population in Jersey in 2016 was £40,200 (current year values) and was 53 per cent greater than in the UK. ●O n an annual basis, Jersey’s economy, as measured by total GVA, grew by one per cent in real terms in 2016. Total GVA in 2016 was £4.19bn (current year values), which represents the third consecutive year in which the island’s economy has grown in real terms. ●T he rental income of private households (actual and imputed) was the largest contributor to the realterms growth of total GVA

in 2016, resulting from an increase in the number of resident households combined with higher rents paid on an annual basis. ● The financial services and wholesale and retail sectors saw GVA decline on an annual basis, whilst public administration recorded the largest percentage decline in GVA, down by four per cent in real terms. ● GDP grew by almost one per cent in real terms in 2016, to £4.11bn (current year values). ● Labour productivity, as measured by GVA per full-time equivalent worker, declined by two per cent in 2016. Non-finance sectors overall saw productivity remain essentially unchanged in 2016 (up by 0.2 per cent on an annual basis); the financial services sector’s productivity fell by three per cent. Over all sectors of the economy, productivity has fallen by more than a fifth (22 per cent) in real terms since 2007, driven by a decline in the productivity of the island’s finance sector of 32 per cent. To view the Measuring Jersey’s economy: GVA and GDP 2016 report, visit www.gov.je n

Jersey to assess money laundering and terrorist financing risk

he Jersey Financial Crime Strategy Group (JFCSG) is to conduct a risk assessment of the threats posed to the island by money laundering and terrorist financing. A report and action plan will be published after completion in May/June 2019. The Financial Action Task Force, which sets the global standards concerning financial crime, now requires all countries to identify, assess and understand the risks posed by money laundering and terrorist financing.

18 november december 2017

s part of Jersey’s Budget proposals for 2018, Senator Alan Maclean, Minister for Treasury and Resources, has outlined key tax proposals relating to financial services companies. Currently only companies defined as ‘financial services company’ within the income tax law are subject to the 10 per cent company income tax rate. A number of companies that undertake financial services activities fall outside that definition and are subject to the standard 0 per cent company income tax rate. The Minister proposes that the definition of ‘financial services company’ be widened so that more companies undertaking financial services activities are subject to the 10 per cent company income tax rate. These would include: ● Companies registered under the Financial Services (Jersey) Law 1998 to carry out general insurance mediation business ● Companies registered with the Jersey Financial Services Commission as a registrar ● Companies holding permits under the Insurance Business (Jersey) Law 1996 ● ‘Finance companies’ – companies trading in the provision of credit/finance to customers. The full Draft Budget Statement can be viewed at www.gov.je n

Like many other jurisdictions in Europe, Jersey will be using an assessment methodology developed by the World Bank to help undertake its national risk assessment. The methodology is designed to: ● Guide countries in assessing risks in order to design a more effective, risk-based regime to prevent money laundering and combat terrorist financing ● Contribute to capacity building, not only for money laundering and terrorist financing risks, but also data collection practices ● Raise awareness, trigger interaction and cooperation among stakeholders from government and the private sector. JFCSG Chair Richard Corrigan (pictured) said: “Whilst this isn’t the first time Jersey has considered money laundering and terrorist financing risks, the national risk assessment will be the most comprehensive assessment of these risks to date. Its conclusions will be instrumental in taking future policy decisions.” n

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New forum for Jersey NEDs

new LinkedIn Group, called j-ned, has been launched for Non-Executive Directors in Jersey. Founded by Sarah Garrood, Partner at Maven Partners, and Louise Follain, Non-Executive and Chartered Director, the group is aimed at all existing Jersey NEDs and anyone considering becoming a NED. Those seeking to refer work to NEDs or appoint NEDs to their board can also join. The group held a well attended launch event on 12 October at the Jersey Arts Centre. It intends to have two or three meetings a year, depending on corporate sponsorship. The next will be in January. The group’s main aims are: ● To create a wider community for NEDs to be accessible and interactive with each other ● To provide an online platform for NEDs to network, discuss and debate relevant issues and share technical knowledge ● To encourage diversity from all areas – background, education, experience, age ● To facilitate the development of the next generation of NEDs in Jersey ● To provide a gateway for those searching for a professional NED. Louise Follain said: “Sarah and I met at the BL Global NEDs Forum this year. We wanted to create a way of connecting NEDs at all stages of their career and with different fields of expertise. Our hopes are that it will gain momentum and be used by NEDs to network and debate topical and technical issues affecting boards. “We encourage all members of the group to participate by using it as a portal for industry discussion.” To join or find out more, visit LinkedIn and search for j-ned (Jersey Non-Executive Directors). n

20 november/december 2017

Marketing support group launched

marketing group focusing on the professional services industry has launched in Jersey. Professional Services Marketing Group (PSMG) Jersey has been formed by senior marketers on the island to exchange ideas, share best practice, collaborate on projects and advance the reputation of the profession. PSMG is an international organisation with groups in the UK and affiliated groups in the US, Australasia, Europe and the Middle East. The new Jersey group is an affiliate of the London PSMG, set up almost 30 years ago to support those in marketing and business development. PSMG Jersey will host events throughout the year, and held its launch event on Wednesday 11 October. It was co-founded by Martyn White (Head of Corporate Marketing and Business Development at Carey Olsen) and Matt Tabb (Global Head of Corporate Communications at Equiom), and is supported by firms including Carey Olsen, Equiom, Jersey Finance, Sanne, JTC, Aztec and HSBC. For more details on PSMG Jersey, visit www.psmg.co.uk. n

Members of the PSMG Jersey launch group

Funds regimes driving growth

he number of alternative fund managers marketing into Europe through Jersey’s national private placement regimes (NPPRs) continued to rise during the first half of 2017, and there’s been a strong uptake in the new Jersey Private Fund (JPF), according to mid-year figures from the Jersey Financial Services Commission (JFSC). As at 30 June 2017, 131 alternative investment fund managers had been authorised in Jersey to market into Europe through NPPRs under the Alternative Investment Fund Managers Directive (AIFMD) – up 14 per cent on the same time last year. The total number of Jersey alternative

investment funds being marketed into Europe through NPPRs also rose, to 276 – a 10 per cent year-on-year increase. Meanwhile, uptake of the JPF, launched in April to provide a fast-track investment regime, reached 44 by 31 August. The majority of these were newly created fund vehicles, with just under a fifth being conversions from existing structures. Jersey Funds Association Chairman Mike Byrne said: “It’s pleasing that more than 80 per cent of JPFs are brand new funds. At the outset, we felt there was real demand for this type of structure among institutional and professional investors, and the figures support this.” n

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Interview

As Director General of the British Private Equity & Venture Capital Association (BVCA), Tim Hames has a perfect view of how the funds industry is performing, where money is being raised, and the role of the Channel Islands. He talked to BL about transformative technology, Brexit and the future of the industry

Words: Nick Kirby Pictures: Phil Bourne How did you get to where you are now? By accident! Trade bodies are very strange – they vary between industry insiders who understand the industry backwards, and industry outsiders who have the alleged value that they understand the outside world better. I’m very much in the second camp. My first career was as an academic. I taught American Politics at Oxford University, when that was a respectable thing to do. I then became a journalist, working at The Times from 1996 to 2008. After I left, I worked as a special adviser to the Speaker of the House of Commons, before coming to the BVCA in 2010, initially to handle public affairs and communications. In 2013, I became Director General. In a nutshell, what does the BVCA do? It has an outward-facing and an inward-facing function. The outward-facing function is to be the representative and advocate of the industry to politicians, officials and regulators, the media, and any other interested parties. The internal function has been to encourage greater networking between limited partners (LPs), general partners (GPs), entrepreneurs and aspiring entrepreneurs. Then there’s the advisory committee, who either work with LPs, GPs or entrepreneurs, or a combination of all three. Recent BVCA research on venture capital (VC) shows that returns are at their highest in 13 years. Is there a reason for that? VC went through a pretty miserable decade between 2002 and 2012 in the UK – the aftermath of the dotcom boom and bust, 9/11 and then the financial crisis. Things were pretty grim, to be honest. In 2012, something like £320 million was invested by UK VC. That seems an impressive number, but that year it was less than the combined wage bills of Manchester United and Manchester City! This year will probably see something closer to between £2bn and £3bn being invested. There are a number of reasons for that. The industry had to change focus and create more specialist investment strategies. There’s a greater appetite among potential investors who see there are some truly transformative technologies out there that can enable you to go from a very small business at start-up to a very big business in a short period of time. Not every business is going to do that, but there’s utterly transformational tech around.

22 november/december 2017

And finally, there have been some very high-profile successes or exits. The proof of the pudding is what price you get on exit, and there have been some impressive examples of this – Skyscanner is just one of them. Do you see that continuing? I think the most important element in ensuring whether this does continue is transformative tech. Valuations in the US for the tech sector are higher, and there’s the risk of a tech boom, so they’ve been willing to put their money into UK and European tech because it seems like relatively good value. As long as the vision for transformative tech is actually realised, then there’s reason to think we’re at the beginning of a decent run for VC. Private equity (PE) also seems to be in rude health. Why’s that? If your metric is fundraising, PE’s in astonishingly rude health. This year, Preqin’s early data suggests there could be a record year, exceeding 2006/07 in terms of money raised. If your metric is pricing, then things are a bit nervous as pricing is quite high.

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Interview

The

interview Tim Hames And there’s a lot of dry powder waiting to be spent – figures suggest in the region of $1trn. What does that say to you? It’s going to require institutions to be pretty dexterous as to how they spend it. I suspect that means they’ll spend money in different sectors to those they invested in historically, because certain sectors are very crowded and some less so. They might be much more willing to look at less fashionable geographies in terms of where investee companies are located. I also think they’ll be more willing to do that if, for instance, the tech is interesting enough – to invest perhaps at an earlier stage in a business’s life than they might otherwise have done historically.

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If they don’t do that, then everyone ends up chasing the same assets and you end up paying higher prices. Do you think there will be a natural transition from VC to PE? The ball is moving up the pitch at faster speed. The notion of VC investing in early stage businesses and then at some point turning to private equity firms would have been pretty rare a few years ago. But I think that’s going to be one of the big distinguishing features of the next two to three years. And not only between VC and PE. Within VC there’ll be a flow between early-stage people and those who come in later – in PE, between lower mid-market and large buyouts. I think there’s going to be a huge blurring as people position themselves in order to gain the most advantage out of transformative technological change. Let’s talk about Brexit. What’s your take on it? And how do you think it will affect your industry? I think we’ve reached a point where we can no longer keep saying: ‘We don’t know’. Brexit clearly isn’t stopping people raising money,

november/december 2017 23

▼

And that accounts for a slight cooling in activity as people say to themselves: ‘Take care how much you pay for what’. But there’s a lot of money in the industry and that’s partly because of a strong record of returns in the past decade. In a world where there’s no such thing as a safe bet, private equity is seen as a more tried-and-tested bet than others. The acid test now is how money is spent over the next five years.

Interview even for institutions and funds that have a history of only spending money in the UK. There’s no evidence that there’s any kind of investors’ strike because of Brexit. That’s the good news. Where the Brexit effect does take place is what and where you choose to put that money into – clearly, unless pricing adjusts quite radically downwards, you’d be more nervous about investing in the sorts of businesses where components fly backwards and forwards across national boundaries with the risk of exposure to tariffs. You’d be more nervous about businesses that historically have had a large proportion of non-UK/EU labour – like much of the hospitality sector in the UK. So, until things become more settled, it has an influence over investment choices. That said, Brexit-sensitive businesses should be worth less at the moment than Brexit-insensitive businesses, but I’m not sure that’s always the case. Any positives you can see? You have to slightly look over the horizon for the positives. If the UK were in a position to be much more flexible in future free-trade deals with big blocs such as the US, China, India and so forth – because it’s on its own and not part of a cumbersome group of 28 that are all negotiating – that could give it first-mover advantage. If Brexit’s handled sensitively and intelligently – two big ifs – the UK could get something out of it. But that depends on the UK post-Brexit looking at its tax and regulatory structures and saying: ‘We inherited a lot of these from our EU period, do we really need them and want them to look like this?’ And on it being more go-getting in terms of looking for business outside Europe and North America. The BVCA has a Channel Islands Working Group – what’s the purpose of that and how do you work with them? We set it up about four years ago for a number of reasons. The Channel Islands

I find it amusing to stimulate rather more cooperation between Jersey and Guernsey than might have naturally occurred

24 november/december 2017

FACT FILE Name: Tim Hames Age: 52 Position: Director General, BVCA Married to: Julia Children: One son, two stepsons Hobbies: Running and food (not together!) Interesting fact: Strictly speaking, I’m Dr Hames, as I have an Oxford DPhil in American Politics. are absolutely fundamental in the broader ecosystem of the industry. I strongly felt there was a huge amount of talent in the advisory community across Jersey and Guernsey that the BVCA didn’t have the institutional means of tapping. We meet about four times a year, but there’s exchange of information all the time around issues to do with tax, regulation, the state of the industry, new ideas on how things could be structured; and I think it’s proved to be a pretty good set-up. And as an outsider, I find it amusing to stimulate rather more cooperation between Jersey and Guernsey than might have naturally occurred. Like the industry at large, funds in the Channel Islands look rather healthy. What would you say are the islands’ strengths and weaknesses? The strengths are largely obvious. It’s the sheer pool of expertise; it’s the deep roots; it’s the English language; it’s the confidence in the ability of institutions and the operation of law. In an era in which the whole offshore world is under the spotlight, there’s a strong sense that Jersey and Guernsey aren’t the same as Cayman or the BVIs. So, I think there are an awful lot of reasons to feel confident. However, the islands aren’t part of the EU, and Luxembourg is trying to make the most of that. But it doesn’t have the same history. For now, it doesn’t have the same quality of ‘squad’. People aren’t as institutionally familiar and comfortable with it as they are with Jersey and Guernsey. There’s been a lot of consolidation in Channel Island businesses, with the finger pointed at the regulatory burden. What’s your view on that? There’s an element of truth in that, but you do tend to find that these things go in waves. People will spin off from big firms and do their own thing. I think that’s a very natural process. If institutions get too big, there are too many people looking for promotion and opportunities at the same time, so the logical thing to do is jump

and get your own niche. It’s part of the ebb and flow and there will be new entrants unquestionably. It’s said that there’s a lack of qualified funds staff in the islands. Why do you think that is? If there’s a single factor that artificially restrains the sector over the next five to 10 years, it’s the ability to hire the sort of people you want as quickly as you want, in the numbers that you want. If some of the fundraising figures for 2017 turn out to be correct, you’re talking about a huge increase in five years in the amount of money being raised. You can’t just whistle up a set of experienced advisers at that sort of notice, there has to be a pipeline of people coming through. So, the more enlightened you can be about encouraging people with the appropriate skill sets to make a commitment, the better off you’ll be in the longer term. Finally, how do you see things playing out in VC and PE in the next 24 months? I think fundraising will continue to be pretty strong. Whether it peaks this year or next is difficult to say, but the short-term fundraising outlook is quite impressive. In order to position themselves to spend that money in a sensible fashion, institutions need to go through quite a lot of reinvention. They’ll be looking at their business model and asking why they’ve never done deals in certain places; why they’ve not looked at X as a place in which to find investor money; why they’ve never backed a business younger than five years old, and so on. Firms will need to cast the net wider than they have done historically. Do they have the right people to do that? You’re seeing a lot of very big funds deliberately raising smaller funds on the side in the earlier stage and more techfocused investments. I think that’s going to be a distinct pattern. The age of the onesize-fits-all approach to funds is rapidly disappearing. n NICK KIRBY is Editor-in-Chief of BL magazine

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Funds

FROM A GLOBAL perspective, it appears

that private equity (PE) has reached an interesting juncture. From record deal activity in 2015 (US$599bn), acquisitions slowed in 2016 ($507bn) and continued to do so in 2017 ($329bn to September), according to data from Preqin. Lucrative PE exits have followed a similar trajectory, peaking in 2014 at $618bn, before steadily falling to $212bn in 2017. Given that there’s been continued strong fundraising, this has left the PE space with a huge amount of capital, known as ‘dry powder’, available for investment. Preqin data shows that private equity dry powder reached a record $918bn as of June 2017. Christopher Elvin, Head of Private Equity Products at Preqin, believes that this war chest for investments may even reach $1trn by the year-end. Ben Honeywood, Audit Director at KPMG, agrees that 2017 has been another bumper year for PE fundraising. He cites the record $100bn Softbank Vision tech fund and the €17bn CVC Fund VII – the

biggest European buyout fund – both of which were established in Jersey. “Fundraising is at levels not seen since before the global financial crisis, and brings the current level of capital invested into PE to around $3trn, with no immediate signs of reducing,” he says. “However, high valuations continue to make it difficult for funds to put capital to work as quickly as they can secure it,” warns Elvin. This will inevitably put pressure on the deal market, as fund managers seek to find attractively priced assets in which to invest. Closer to home, in terms of PE assets under management, Niamh Lalor, a Partner at offshore law firm Ogier, says: “Guernsey passed the £100bn milestone for the first time, while Jersey Finance stats show PE fund values rising by almost a third yearon-year to £59.7bn at the end of 2016.” The sentiment is echoed by Darren Bacon, Partner at Mourant Ozannes. “Channel Islands private equity has fared very positively in the past 12

months,” he says. “According to the Guernsey Financial Services Commission’s latest statistics, the value of Guernsey investment funds has risen £28.6bn – 12 per cent – over the past year.” The market also appears relatively healthy in terms of deal flow and exits. “Funds that have performed well are raising new money and looking to make new investments. For those investors seeking liquidity, the secondary market remains active and provides an exit from previous deals,” says Bacon.

LOCAL RIVALRY Guernsey has traditionally been stronger in PE than Jersey, with the likes of Terra Firma, BC Partners, Apax and Pantheon all using Guernsey for their funds. KPMG’s Ben Honeywood believes the reason for this is because its regulatory and legal environment has long been very welcoming to PE firms wishing to set up funds offshore. Still, Jersey has caught up of late, most

Private equity:

keeping its powder dry Words: Chris Menon

26 november/december 2017

With a massive amount of money in private equity waiting to be invested, the road ahead looks like a fascinating one for the Channel Islands

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Crill. “With the increasing competition among all fund domiciles – both onshore and offshore – the tax benefits are becoming less obvious and the real drive for structuring choice is access to markets at a reasonable cost, credible yet flexible regulation, and expertise of the services providers in the particular asset classes. “Given these factors, there’s been a particular trend in our practice of funds investing in UK real estate, or real estatelinked, assets and traditional private equity funds targeting management buyout transactions. The latter tends to be across a wide spectrum of markets – from complex fintech and algorithmic innovations to shaving companies.”

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notably because of the Softbank fund mentioned earlier – also known as ‘The Whale’ – and CVC Capital Partners’ CVC Fund VII. That said, there were also a number of high-profile large buyout funds raised in Guernsey over the past year, including Apax Fund IX ($9bn), Permira VI (€7.5bn) and Cinven VI (€7bn). Honeywood believes Jersey is gaining momentum. “The recent high-profile large fund raises indicate the attractiveness that Jersey has enjoyed in recent years. This has been supported by the consolidation of the Jersey fund administration market, as well as investment in business property infrastructure, which has modernised and added a new energy to the market and made Jersey very attractive to entrants and start-ups.” Traditionally, big deals have been structured through the Channel Islands for tax benefits, but this is changing, says Paul Wilkes, Group Partner at Collas

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november/december 2017 27

Funds

Wilkes also believes the PE expertise available in the Channel Islands leaves them well placed to take advantage of investor appetite for investment into US tech companies via PE funds. “This has led to an increased effort from the islands to be in key US cities to promote their funds regimes, which meet the current demands of the discerning investor,” he confirms. “Separately, South Africa remains a large funds market that actively acknowledges the benefits of offshore investment by its citizens. This has historically been a great source of business for the Channel Islands – a number of South Africa investment firms have a presence here. Now is the right time to reinvigorate that sector and educate the next generation of fund managers as to the perfect partnership the islands can provide as they grow their businesses.”

FUTURE PROSPECTS Adam Moorshead, Managing Director Guernsey for JTC Group, which provides fund, corporate and private wealth services to institutional and private clients, is confident about the Channel Islands’ prospects. “Based on the growth both islands have seen through the past 18 months, the prospect for next year remains strong, particularly with large technology investments now taking place. We anticipate deal volumes are on a path of continued growth.” He also believes that with geo-political uncertainty likely to create significant volatility in traditional markets, private equity will become even more attractive to investors. Ben Honeywood concurs. “In a recent Preqin survey of managers across the PE market, among existing investors, 61 per cent indicated that they would invest more in 2018 than 2017, with only six per cent indicating they would invest less. What’s more, the rise of secondaries funds in recent years has added further liquidity to the market.” Further ahead, he is aware of risks but

28 november/december 2017

Based on the growth both islands have seen through the past 18 months, the prospect for next year remains strong

believes the Channel Islands can safely navigate them. “As long as the Channel Islands stay off any EU blacklist, I don’t expect any fundamental changes. “Clearly, there will be areas of uncertainty from Brexit, but the Channel Islands are well placed to navigate through the uncertainties that exist – the islands will be better placed, with well-thought-out collaboration when fending off onshore entrants to the PE market.” Ogier’s Niamh Lalor is confident the Channel Islands, along with Luxembourg, will continue to benefit from Brexit uncertainty. “The Channel Islands have also benefited from effective market access in Europe, particularly following the European Security and Markets Authority’s view that there are no significant obstacles to granting the passport to the Channel Islands once it’s opened up to third countries.” All of this points to the Channel Islands looking set to maintain their position as a leading base for private equity. n CHRIS MENON is a freelance finance writer

Boom areas for private equity Opinions vary as to what are likely to be the hottest PE sectors over the next 12 months. Ben Honeywood, Audit Director at KPMG, says: “Tech, tech and tech. The Softbank mega fund has grabbed the headlines, but KKR and Apax have also recently raised their first tech funds, chasing deals as we continue to see the changes in consumer trends, as we all buy, sell and operate in a more digital world.” Casting his net more widely, Darren Bacon, Partner at Mourant Ozannes, argues: “Anything that’s asset-backed and yield-producing is likely to remain attractive. We would therefore expect infrastructure, real estate and debt to remain active sectors.” Paul Wilkes, Group Partner in Collas Crill’s Guernsey office, believes there will be continued investment into UK real estate, focused on logistics and regional hubs, as well as clean energy and debt. While Adam Moorshead, Managing Director - Guernsey at JTC, highlights the technology, infrastructure and retail sectors. Infrastructure is also a sector favoured by Niamh Lalor, Partner at Ogier in Jersey, alongside the medtech/life sciences space and the cryptocurrency sector.

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ZEDRA: An established business

ZEDRA was formed in 2016, yet the business has a long and interesting history. The company’s Funds division plays an important part in its continued success and is experiencing a period of growth and investment

THE ZEDRA FUNDS division administers in excess of $1.5bn across more than 20 funds, both regulated and unregulated, spanning most of the conventional asset classes. The division is driven by experienced and loyal staff, who are dedicated to creating and delivering bespoke solutions for clients. That diverse client base includes high-net-worth individuals and their families, international corporations, institutional investors and entrepreneurs. ZEDRA is owner-managed, not private equity owned, so the management and staff are afforded the opportunity to invest in the Group, thereby further incentivising them to provide the utmost in client care.

EXPANDING TEAM ZEDRA has experienced rapid expansion this year. Recent senior hires have not only strengthened the firm as a whole, but also elevated the level of product and service solutions it provides. One of the most integral hires has been Robert Lucas as ZEDRA’s new Head of Funds. Robert comes to ZEDRA with over 16 years’ experience, having worked across a wide range of trust, fund administrators, corporate funds and private equity firms. Robert says: “ZEDRA’s fresh ‘clean slate’ approach to fund administration is exactly what the industry needs. I aim to harness the entrepreneurial spirit, the extremely experienced and motivated administration team, along with ‘best of breed’ technology, to provide the highest level of service to both existing and new clients.” The appointments of Mike Capraro and Ryan Taylor fulfil another part of ZEDRA’s strategic plan to be one of the world’s premier trust, corporate and fund service providers. Mike joined as Head of Business Development, Fund Services,

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Robert Lucas, Head of Funds

Ryan Taylor, Associate Director

Jersey, and Ryan as Associate Director, Fund Services, Jersey. Mike focuses on new business development to build the firm’s client base, both in the UK and further afield, to provide new market growth. Ryan is a skilled technical funds specialist. His role includes improving ZEDRA’s client experience by providing bespoke accounting and valuation solutions. He’s also been instrumental in implementing the new technical infrastructure. Niels Nielsen, ZEDRA CEO, says: “These appointments are a signal of intent that we will continue to seek out the very best trust, corporate and fund service professionals to help grow our firm.”

WORLD-LEADING TECHNOLOGY ZEDRA has invested in state-of-the-art technology to provide automation and web portal access and ensure efficient regulatory reporting. The company has partnered with Pacific Fund Systems, the leading provider of global fund administration software. ZEDRA has engaged its fund administration software and web portal, PFS-PAXUS and PFS-CONNECT, for fund administration operations. The decision has given ZEDRA access to software built on extensive experience in the alternative funds sector.

Mike Capraro, Head of Business Development

PFS-PAXUS assists with core functions such as fund accounting, investor services and regulatory reporting requirements for its clients. Supporting all open- and closedended capital structures, ZEDRA uses PFS-PAXUS to deliver bespoke solutions to investment managers handling start-up and existing funds, as well as complex structuring to family offices and private investors looking for innovative solutions such as private and umbrella funds. PFS-CONNECT enhances ZEDRA’s offering, enabling it to provide access to information for investment managers, investors and agents, and making for a complete experience and service for all. The significant investment in both technology and people is testimony to the ambitions of the company to be the leading trust, corporate and funds firm. ZEDRA continues to deliver on its ethos – ‘Do More. Achieve More’ – to reach its goals. n

GET IN TOUCH

For more details, visit www.zedra.com Contact ZEDRA Head of Funds Robert Lucas on +44 (0)1534 844352 or robert.lucas@ zedra.com or ZEDRA Head of Private Funds Andy Cunningham on +44 (0)1534 844234 or andy.cunningham@zedra.com

november/december 2017 29

Advertising Advertisingfeature feature

Private equity thriving thanks to alternative thinking In a world short on socio-political certainty, the amount of ‘dry powder’ in private equity is increasing as investors wait for the right investment opportunity. Michael Johnson, Head of Fund Services at Intertrust in the Channel Islands, explains why this has led to a rise in certain alternative asset classes AFTER THE GEOPOLITICAL upheaval of 2016, it would have taken a brave forecaster to stick their neck out and predict a completely stable 2017 in the social and political spheres. Anyone doing so would have been made to look fairly foolish when Theresa May called a snap general election in April. That decision resulted in the FTSE 100 Volatility Index climbing to its highest point in five months against a backdrop of near-constant pressure on equities and general wariness across global stock markets. The early political forecasts weren’t reflected in the results of the election. On the morning of 9 June, a shock result saw

30 november/december 2017

continued volatility in bond and equity markets, as the direction of the government’s fiscal and monetary policies was left completely up in the air. This, combined with broader global uncertainty, contributed to investors either looking to keep their powder dry when it came to actually deploying capital, or seeking alternative asset classes that could represent more stable returns. In light of this and their recent strong performance, the private capital markets are larger than ever before, as a recent private equity (PE) report commissioned by Intertrust has found. Returns and distributions have remained robust and general partners (GPs) exiting from their investments find themselves in a seller’s market due to intense competition. Alternative assets research firm Preqin has found that, globally, PE assets under management hit $2.49trn in June 2016 (an all-time high). Tim Hames, Director General of the British Private Equity & Venture Capital Association (BVCA), in a foreword to Intertrust’s recent report, said that the volume of uninvested capital could hit $1trn by the end of 2017. So, private capital is still plentiful. But the pressure to deploy it in a timely and meaningful fashion is greater than ever, and the industry wants to ensure continued health through any future financial crises. This pressure has resulted in a flight to

newer asset classes as managers look to diversify portfolios and find optimum efficiency in both long and short-term structures that offer greater security than traditional investment vehicles.

BUILDING STABLE INVESTMENTS One such alternative asset class is infrastructure, which has had a much greater role for private capital in recent years as a consequence of government cutbacks across the world. Governments have had much less money to spend since the 2008 financial crisis, so large-scale infrastructure projects, such as the building of roads, bridges, hospitals and schools, have required the input of private capital. This trend has coincided with an increased PE allocation from institutional investors such as pension funds and sovereign wealth funds, which are often looking for long-term assets and yield, so are perfectly suited to investing in the infrastructure asset class. As infrastructure projects are important for the functioning of society, they represent a stable long-term investment with less sensitivity to external economic factors that can have a significant and immediate impact on bonds and equities. Infrastructure projects are often outlined and planned as a means of gaining political capital, as in the case of Donald Trump’s infamous Mexican wall or Theresa May’s industrial strategy for the UK, launched earlier this year. But just because politicians promise investment in order to win credit and votes doesn’t mean that infrastructure

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we’ve increased the size of intertrust’s portfolio of non-Channel Island domiciled funds, which is a good Brexit buffer

projects aren’t for the greater good. Intertrust has proven expertise in servicing infrastructure assets and is proud to be associated with the asset class, as it provides real, tangible value to communities. On behalf of our clients we administer major infrastructure initiatives covering sectors such as healthcare, education, social housing, highways and street lighting.

POWERING INVESTMENTS Another area of growth in recent years has been the energy asset class. The race is on to find the most sustainable and effective way to provide power to populations all over the world. Traditionally, PE involvement in energy has been to increase the efficiency of fossil fuel sources or seed renewable energy companies such as those that use biomass. These are two relatively classic uses of PE – improving efficiency and finding new solutions – but are applied to an alternative asset class in this case. The drive towards renewables for PE investment represents a significant growth area and a necessity as we move towards the future. This is an example of PE mirroring what’s going on in the real world as individuals and companies face the challenge of providing sustainable energy.

EYES ON THE FUTURE As the world moves towards an increasingly digital future, PE begins to make the transition as well. The technology sector has undergone rapid growth over the past 20 years, but initially this was funded by angel investors and venture capitalists due to its inherent risk. Now, however, the technology sector has reached a point of maturity that makes investments look a lot more sensible and sustainable over the long term. We are now seeing greater capital than

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ever being deployed by traditional limited partners (LPs) – but also from tech companies that find themselves capital-rich and have a continued thirst to benefit from the ‘Fourth Industrial Revolution’. At Intertrust, our interest in technology funds is twofold. They aren’t only sensible investments for our clients but they also inform the direction of our own significant investment in emerging technologies, so we can enhance our client experience and maintain our high credibility.

BROADER REACH FOR THE CHANNEL ISLANDS The flight to multiple alternative asset classes is a positive thing for the Channel Islands because it results in the widening of their sphere of influence. The areas noted above aren’t generally centred in London, which is where the islands have traditionally done most of their work. Therefore, alternative PE investments allow Channel Island practitioners to broaden their reach and expand their global footprints. These assets are more global in nature, so there’s an opportunity for large, international firms such as Intertrust to use our expertise and draw on the experience and knowledge of colleagues

in our 39 offices across 28 jurisdictions around the world. Working globally also means we’ve increased the size of Intertrust’s portfolio of non-Channel Island domiciled funds, which is a good Brexit buffer and a means of diversifying our local offering. A diverse offering is also a real positive for our employees, as they engage with funds and asset classes that have real-world impacts. Diversity is key in a volatile world and our multi-jurisdictional, multi-asset model is sustainable, effective and built with the long term in mind. n

PRIVATE EQUITY AND INTERTRUST

If you’d like to learn more about Intertrust’s private equity offering, please contact Michael Johnson, Intertrust’s Head of Fund Services in the Channel Islands, at michael.johnson@intertrustgroup.com Intertrust Jersey is regulated by the Jersey Financial Services Commission; Intertrust Guernsey is regulated by the Guernsey Financial Services Commission.

november/december 2017 31

Funds

Real estate investment is going through a boom time – and it only looks set to continue as demand increases and projects expand into new areas and geographies

32 november/december 2017

The UK market provides a decent illustration. Much of the caution that followed the Brexit vote has thawed and investors are returning to the country’s commercial property market. With the pound now low against the dollar, investors from the Middle East, Far East and US are being lured in by ‘bargains’ – or deals that appear to be bargains, compared with when the pound was stronger. “For international investors, the currency differential meant a 15-20 per cent discount to previous expectations,” says Fiona Le Poidevin, CEO of The International Stock Exchange Group. “And that’s made UK property more attractive.” In February, German fund Deka Immobilien bought the new Facebook headquarters, Rathbone Square in London, for £435 million (a price four per cent lower than the value of the building the previous September). In April, the same fund acquired the entity that owned Cannon Place, a landmark development by Hines, for £485 million. Funds are also increasingly looking at UK regions beyond London, mirroring the European trend towards investments in hotels, student accommodation and distribution centres. And investors are seeking greater control of how the assets are handled. Institutional investors such as pension funds are, for example, moving from using fund managers to direct investments and joint ventures. Simon Hopwood, a Partner at Bedell Cristin, says: “We act for a lot of student accommodation deals, some of which are

done through joint ventures with sovereign wealth funds from Singapore, for example. Just before Christmas, we closed a joint venture for student accommodation across Europe. That sector is very strong. You’ve got lots of foreign students coming into places like London, prepared to pay pretty high rents – and it’s secure income because of the parental guarantees.”

BREAKING NEW GROUND Elsewhere, fund managers have had to be more creative in where they find assets – and they’re getting the go-ahead from investors to enter uncharted territory in the search for yield. Take, for example, funeral homes, or accommodation for people with disabilities. In January, pension fund the Universities Superannuation Scheme joined Morgan Sindall Investments to launch the Supported Housing Investment Limited Partnership. Each committed £100 million to deliver more than 500 purpose-built supported-living apartments across the UK, designed to enable vulnerable people to live as independently as possible. There have been plenty of smaller deals too. “The funds themselves may be getting bigger, but many of the deal sizes are smaller,” says Michael Morris, Group Partner at Collas Crill. “Those in the regions pay £5 million to £15 million.” Morris cites a fund that invests in country hotels, where assets could be “in the region of £3 million to £6 million”. Collas Crill is just one Channel Island firm benefiting from the solid flow of real

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IN JUNE THIS year, the Sunday Times reported a $1.3bn property deal that included Grosvenor House, one of London’s most iconic hotels, and majority stakes in the similarly luxurious Dreams and Plaza hotels in New York. The buyers? A consortium of Middle Eastern family offices, US property tycoon Ben Ashkenazy, and Hamad bin Jassim, the former Prime Minister of Qatar – an international all-star cast that shows how, even in a deeply uncertain world, you can’t shake the foundations of real estate as an investment. Recent research by Preqin revealed a sector in rude health. Fund managers returned a record $668bn to investors between January 2013 and June 2016 – and funds are currently perched on a record $255bn of ‘dry powder’ – unused money sat waiting to be deployed into investments. Uncertainty has, of course, played its part, as funds hesitate to commit their cash. But there’s a problem – these vast stockpiles have pushed up prices, and while there are now more real estate funds than ever before, all competing with each other for investors’ capital, it’s proving harder to find assets with a sensible price tag. “From a global real estate perspective, volumes are down in terms of fundraising, reflecting a lack of product in the market,” says Alistair Horn, a Partner at Mourant Ozannes in Jersey. “There’s huge competition for the assets and when the right ones come, it sparks a fast, aggressive bidding pattern. But it’s been a very strong real estate year to date. Very strong.”

Words: Dave Waller

Funds

From penthouse to pavement

Funds estate business. While Jersey is traditionally seen as stronger in the area than Guernsey – a reputation that springs in part from its Jersey Property Unit Trust (JPUT) vehicles – both islands are now channelling plenty of work. They’re acting as a natural conduit into the London property market and providing a route to raise capital to buy real estate assets. “I’ve worked on various international deals,” says Dilmun Leach, Group Partner at Collas Crill. “City Airport was reported to be worth $2bn, while the Australian railway network was sold using Jersey entities.” Leach also describes other “very significant international infrastructure deals” sold via JPUTs. Then there are the smaller deals being done across the UK. “In the search for yield, we’re seeing a lot of lower level real estate acquisitions – offices in Milton Keynes and Birmingham, deals of £10 million to £12 million. In the Channel Islands, more niche funds are being launched and more real estate sectors are being targeted.” There’s plenty to keep the buzz going. This April, Jersey introduced its Jersey Private Fund, which offers relatively light-touch regulation and a greater flexibility that appeals to new fund managers. By June, it had already sparked the creation of 44 new funds. Meanwhile, Simon Hopwood reports an increase of real estate work in Sharia-compliant structures, thanks to the influx of Middle East and Malaysian money. “Fifty per cent of our practice is in Sharia-compliant structures, purely because of the levels of flows from these regions,” he says. “Malay pension funds are buying assets in

With more real estate funds than ever, all competing with each other for investors’ capital, it’s proving harder to find assets with a sensible price tag

London, as are those from the GCC region.” And it’s not just about working with the UK – the Channel Islands are well-placed to guide work elsewhere too. “Lots of institutions are buying up in Germany, the Netherlands and elsewhere in Europe, as well as the US,” says Hopwood. “They’re looking – but the problem is the lack of stock globally, and trying to find value in assets is very difficult. It’s hard to find assets in the UK, for example, so investors are looking to Europe.”

Three areas in which real estate may boom in the next 12 months

BUILDING BLOCKS One of the key areas of growth for the islands is in real estate investment trusts (REITs). Introduced in 2008 – perhaps the worst possible time to launch a property investment vehicle – REITs have come into their own since 2012, when the laws were relaxed to allow smaller closed funds, opening the door to institutional investors. REITs are attractive because they work well from a UK perspective. That means different types of investors come together to invest in UK property, including pension funds and sovereign wealth, everywhere from the US to Africa to the Middle East and Asia. Hopwood reports seeing “Asian sovereign funds and institutions joining to do large London investments like the Broadgate estate”. It goes much further than that. “Student accommodation REITs are very popular too,” says Fiona Le Poidevin. “We’ve seen a residential REIT. These are sizeable – several hundred million pound structures, very big and significant and well-known in the market. One trend is REITs investing in other REITs in other jurisdictions, in US REITs or French REITs, for example.” Le Poidevin points out that the Channel Islands can claim a quarter of the UK market for HMRC-approved REITs, and that there’s been a huge pick-up in enquiries and registrations of the vehicle since September 2016. As for the coming year, things are sure to keep building. As long as returns remain tricky to come by elsewhere, investors will always look to bricks and mortar as a solid, reliable option. Plus all that dry powder has to blow somewhere. But, as Preqin’s report pointed out, it’s a ‘crowded marketplace’, with ‘challenging pricing’ and ‘fundraising is going to remain extremely challenging for most’. All of this is an improvement on the period before the Brexit vote, however. Hopwood says he’s “encouraged” by the levels of activity, while Horn appears to agree that the islands are wellplaced to build. “We have the servicing, the cost-effective regulatory environment, the regulatory standards, and that ability on all sides of the fence to execute transactions quickly,” he says. “And our exposure isn’t linked to the success or failure of the UK property market – they have the panEuropean approach. “So I see no reason, given our clients and what we know, why they wouldn’t continue to have faith in the Channel Islands’ mature platform.” n DAVE WALLER is a freelance finance writer

34 november/december 2017

Ones to watch

Private rented sector These are new housing developments built specifically for rent, not for sale. A lack of traditional affordable housing stock has led many to believe that in 20 years’ time, more people will rent in the UK than own their own homes. A lot of funds are setting up to capitalise – their investors benefit from the property’s rising value, and from rising rents too.

Distribution centres E-commerce is expected to account for about 15 per cent of overall retail spend in 2020, and its continued rise is revolutionising how supply chains work. The international network of distribution and logistics warehouses holds an obvious appeal for investors – rents are hitting record highs as demand for storage soars.

Student accommodation The banks are always fond of this one, as it’s seen as secure income. Student pads are more like hotels these days, in amazing buildings, and foreign students are prepared to pay high fees. And their parents are there in the background, guaranteeing the rent.

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Real estate funds: facing the future Siobhan Durcan, Director at Deloitte, looks at the state of play in real estate and how her firm is helping clients navigate the market REAL ESTATE FUNDS are facing many challenges. Brexit, an

uncertain global economy, including a slowing down in China, and greater challenges on corporate governance have made it difficult for existing funds to continue to perform at the superior risk-adjusted returns that investors have come to expect. While some new funds face challenges in raising capital, other more established funds might say the biggest challenge is finding the right assets to deploy that capital to. The annual Deloitte London Office Crane Survey acts as a barometer for the commercial property market, and the 2017 survey highlighted that overall construction levels have marginally dipped despite an above-average volume of new starts. Completed space, which is at a 13-year survey high, has had an impact on the level of space under construction. But, mitigating the effect of this supply somewhat, occupier demand for new space has remained resilient so far. Without a doubt, real estate funds will continue to face political and economic uncertainty as the UK continues its EU exit negotiations. Contractors are upbeat, however, predicting a consistent rise in workload and anticipating further inflation in tender prices over the next 12 months.

FUTURE TECHNOLOGY The real estate fund sector is also ripe for disruption, and one possible approach to the buy and sell side of the transaction is blockchain technology. A blockchain-enabled property management solution would be well suited to the real estate funds business. The technology could enable a real-time, secure view of the data, reducing the time it takes to disseminate the data about a property into a usable management format. Anything that enhances the speed and quality of data shared in the due diligence process of transactions, improves the property operations’ information sharing and the communications process between fund managers and investors, can only be a good thing.

NEW REGULATORY AND REPORTING SERVICE Regardless of how things may shape up in the future, the sector already requires a large volume of detailed information to be shared quickly and securely. An increase in corporate governance will only add to the information burden. Deloitte’s new regulatory and investor reporting managed service uses one set of data to satisfy multiple reporting requirements, simplifying the process for clients. The managed service includes any combination of the following components: ●F und registrations for Alternative Investment Funds (AIFs), Undertakings For Collective Investments In Transferable Securities (UCITS) and offshore funds with local regulators ●R egulatory reports such as AIFMD Annex IV, Form PF and Form CPO-PQR

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● Investor reporting such as marketing factsheets, Solvency II, Packaged Retail Investment and Insurance Product (PRIIP) Key Information Documents (KIDs) ● Investor tax reporting and advisory ● Market intelligence and advisory services to stay current with local regulatory requirements, and provision of distribution advisory services including client relationship management systems and salesforce effectiveness. The Deloitte project team integrates the data, centralises it in a data repository, and manages the day-to day creation, production and dissemination of these reports. This reduces the risk of error, and enables the clients’ marketing, technology, legal, compliance and operational teams to focus on issues more central to the management of their firm and wider business objectives. n

DELOITTE REAL ESTATE EXPERTS

Siobhan Durcan, a Director in Jersey, has over 17 years’ experience in offshore financial markets. Her audit clients include real estate, private equity, family office and fund management sectors. Siobhan leads the Channel Islands Real Estate Sector Group and has extensive experience managing complex real estate structures and property groups, including pan-European property and expert funds. She leads some of Deloitte’s largest real estate relationships. For further information, call Siobhan on +44 (0)1534 824274, email sdurcan@deloitte.co.uk or visit www.deloitte.co.uk

REAL ESTATE SERVICES Deloitte’s real estate experts in the Channel Islands and the UK provide a broad range of services to support real estate investors and fund managers.

Real estate fund formation ● Feasibility studies ● Tax planning, structuring, optimisation and modelling ● Capital raising and capital market strategies ● Financial accounting and reporting advisory ● Accounting due diligence ● Global equity and debt offering services

Ongoing real estate funds services ● Financial statement audits ● Tax compliance ● Finance transformation ● M&A transaction services ● Valuation – business and property ● Transition sourcing, advisory and due diligence ● T axation – international, national, state and local ● Integration, divestiture and restructuring ● IT systems strategy, selection and implementation

november/december 2017 35

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www.blglobal.co.uk 13/10/2017 09:12:52

What does

Brexit

Guernsey and Jersey remain cautiously optimistic ahead of Brexit, but just how will the UK’s departure from the EU affect the Islands’ funds industries?

Words: Tom Huelin

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“WHERE DO WE go from here?” went the not-so-cheery refrain of 1990s doom merchants Radiohead. “Words are coming out all weird. Where are you now, when I need you?” It’s easy to imagine Brexit Minister David Davis muttering these pessimistic lines of worry and dread to himself as he trudges off to Brussels for his weekly scrum-down with EU adversary Michel Barnier. The pair have been tasked with agreeing terms of the UK’s departure from the European Union following Theresa May’s triggering of Article 50 in March. Early signs suggest it will be a long, protracted process with consensus rather difficult to achieve. Where do we go from here indeed, David? Ever since the UK voted to leave the EU in 2016, politicians, commentators – pretty much everyone in the country – have been frantically trying to understand the impacts that Brexit may, or may not, bring. How will the UK trade with Europe? What will happen to freedom of movement? These are just two issues to resolve before the March 2019 deadline.

november/december 2017 37

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mean for funds?

Funds

the islands are past masters at operating outside the EU while trading with the continent and the rest of the world through negotiated bilateral agreements

38 november/december 2017

How the UK’s financial services industry is affected by all this is another key factor, one which both Jersey and Guernsey will be keenly monitoring. And while the markets are likely to show some volatility over the coming months, what specifically of the funds industry, both in London and the Channel Islands? Will UK fund managers have to relocate to mainland Europe? Will the UK be able to continue using the islands’ offshore funds and outsourcing functions? Despite the uncertainty, confidence in the Channel Islands funds industries is on the up. According to State Street’s Brexometer Index, 45 per cent of investors now expect positive economic growth in the next three to five years – that’s up 13 per cent from late 2016. “I believe Brexit will impact the Channel Islands’ funds industry positively,” explains Paul Mundy, Head of Alternative Investment Solutions (AIS), State Street in the Channel Islands. “The experience, reputation, knowledge and regulation we have here is recognised globally. I don’t see that changing – if anything, it springs opportunity.”

POSITIVE THINKING Jersey and Guernsey have spent decades developing mature financial centres that look well-positioned to weather the Brexit storm. With strong links to both the City of London and mainland Europe, perhaps opportunity really will knock for the islands’ funds industries. But is it relocation, relocation, relocation for London-based fund managers? “It’s really got nothing to do with being in or out of the EU,” says James Athey, Senior Investment Manager at Aberdeen Standard

Investments. “Most UK asset managers have fund ranges to already meet the needs of the different client bases in the UK and continental Europe, so the UK leaving the EU shouldn’t have a massive impact.” The data backs up the fact that investor sentiment in the funds space remains high. Funds under management in Jersey topped £263bn in June 2017, while research by Preqin found that, of UK hedge fund managers surveyed, only four per cent were considering leaving the UK for elsewhere in the EU as a result of Brexit. “Our funds industry is growing,” says Emily Haithwaite, Partner in the investment funds group at law firm Ogier. “We haven’t seen any signs of a slowdown, and certainly nothing to say that Brexit has created a dip in funds or managers in Jersey. Our funds practice is as busy as ever with new instructions, including a large proportion from UK-based managers.” Guernsey is a similar story, with total funds under administration and management worth more than £271bn, according to the latest figures. Both islands have benefited from building relations with investors and regulators on both sides of the English Channel as Paul Smith, Chairman of the Guernsey Investment Fund Association, describes. “Over the years, the Channel Islands have operated as third countries to the EU. We have a Channel Islands office in Brussels, and we’ve negotiated various opportunities within Europe. That shows that the islands have had a good relationship with the EU. And I think, and hope, that will continue,” he says. Indeed, the islands are past masters at operating outside of the EU while trading with the continent – and the rest of the

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Funds

world – through independently negotiated bilateral agreements. It’s an approach the UK will need to adopt post-Brexit. And it appears that the Conservative government is well aware of this. Robin Walker MP, part of Davis’s Brexit team, was sent to the islands on a fact-finding mission earlier this year. “He was very positive,” says Smith, who attended meetings with Walker. “He was keen to listen to our views and suggestions on how the islands and the UK could work closer together going forward.” The UK’s intention to work closely with the Channel Islands through Brexit and beyond has been warmly received by local businesses, as Jean-Paul Peters, Head of Funds Banking at RBS International Guernsey, explains: “It’s refreshing to see, because the Channel Islands do have a part to play, both in terms of our experience of being outside the EU, but also being classified as third countries ourselves and successfully working within the European Commission’s regime from a financial services perspective.”

UK ‘MIDSHORE’ OPTION It’s feared that Brexit could adversely affect the Channel Islands if the UK were to position itself as some kind of offshore jurisdiction to rival the islands. But it’s a move Geoff Cook, CEO of Jersey Finance, believes would be counter-productive. “If the UK wants to incentivise through tax, they’d have a job getting a good settlement through Europe. If you want to try and undercut competition while trying to win partnerships with them, I think it would be a really bad move.” J-P Nowacki, Managing Director of London-based CSC Capital Markets

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Europe, agrees, suggesting instead that the UK and Channel Islands could work better together in the future than they have done before. “The UK positioning itself as a ‘midshore’ tax centre – it will never get as low as the Channel Islands, but could be low enough to drive some structuring into the UK – could in turn drive funds into the Channel Islands as well.” A report by KPMG in 2015 revealed that Guernsey alone acted ‘as a conduit for £24.6bn of inward investment into the UK from global investors’, and there’s no reason to suggest this relationship can’t continue post-Brexit. In fact, the islands could benefit further, should the EU lift restrictions that make selling their funds into the UK more difficult. Whether Brexit is fully agreed by March 2019 remains to be seen. It’s not looking overly promising right now – perhaps no deal will indeed be better than a bad deal, as Prime Minister May suggested at the start. But whatever the outcome in London and Brussels, proactive planning has allowed Jersey and Guernsey to be informed about the possible impacts of Brexit, making both jurisdictions cautiously optimistic about the future. “The UK government has said the Crown Dependencies will be factored into their thinking when they’re negotiating new settlement instructions,” Geoff Cook concludes. “We’ve got good bilateral arrangements with European countries, so there’s no reason why anything should change there. Growth outside of Europe is strong, and we’ve still got full market access to the EU27 and Britain, so we’re in good shape. But we’re not complacent.” TOM HUELIN is a freelance writer

AIFMD stuck on the back burner The European Securities and Markets Authority (ESMA) ruled in July 2016 that there were no significant obstacles impeding Jersey and Guernsey from applying for an Alternative Investment Fund Managers Directive (AIFMD) passport. The passport would allow the islands to market their funds to EU investors, which is currently only available to EU jurisdictions. The islands have been positively assessed by ESMA for the passport, but the application was put on hold following the Brexit referendum. The islands are still able to market funds to EU investors via national private placement schemes. Other alternatives for the islands include prioritising fund marketing to non-EU countries, as Ogier Partner, Emily Haithwaite, explains. “For example, for US managers who don’t need to access EU investors, we can offer them a regime that’s totally outside of the AIFMD.” Private placement schemes should remain available to the islands until at least 2018, when passporting may be revisited by ESMA.

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Funds

Capitalising on

Crypto

Cryptocurrencies promise to be one of the biggest developments in the history of funds, so how are the Channel Islands securing first-mover advantage? Words: Kirsten Morel

THE WORLD OF blockchain technology has once again moved to the forefront of investors’ minds, as the value of Bitcoin reaches new heights and a deluge of business ideas use crowdfunding to raise the millions they need to get going. Amid all of this activity, the Channel Islands have quietly been making their own way, mining the point at which blockchain technology and traditional finance meet. In 2019, blockchain technology and Bitcoin will celebrate their 10th anniversary. For most people, however, awareness of blockchain is only just gaining momentum, despite the initial media furore surrounding the rise in value of Bitcoin back in 2013/14. That the world’s first cryptocurrency briefly hit the $1,000 mark a few years ago, seems almost quaint today – holders of Bitcoin have become more used to valuations in excess of $3,000. Indeed, at the time of writing (17 October) it has soared to a staggering $5,762. Such an increase in value has driven investors’ curiosity, but the world of cryptocurrencies, with its volatility and network of unusually titled exchanges, isn’t easy for the less-than-dedicated to penetrate. However, with the potential for enormous returns, many investors do want to be involved but direct investing may not be for them. This point was proved in 2014, when

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the world’s first regulated cryptocurrency fund launched from Jersey. The Global Advisors Bitcoin Investment fund (GABI) was established to provide an alternative, indirect route to investment, taking in fiat currency and investing in Bitcoin. “Funds are attractive to investors because of the opportunity to spread the investment risk and the ease of having someone else manage the assets,” says Mark Grenyer, Director at JTC Group. “With a new asset class like cryptocurrencies, it’s also about ease of access. For example, it isn’t straightforward opening a personal crypto trading account and having the confidence of knowing which providers to use.” The fact is, GABI was ground-breaking. As a regulated route to an unregulated market, the fund gave ‘expert’ investors a way into Bitcoin. But this wasn’t the only benefit. To be a regulated fund, Global Advisors had to get Jersey’s regulatory authorities on board and, once accomplished, the island’s reputation soared in the crypto universe. “After inception in November 2013, it took nine months to secure regulatory approval for the fund,” says Jean-Marie Mognetti, CEO at Global Advisors. “In order to gain that regulatory approval, the legal infrastructure of the vehicle was key, not only from a commercial perspective, but also to meet the rigorous standards applied by the JFSC. “In particular, understanding the risks of the vehicle was of paramount importance to both parties, to ensure they were considered, managed and controlled (internally and externally) to withstand the scrutiny this product would inevitably receive. To date, the fund’s success speaks

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Funds

for itself and reflects positively on the innovative regulated environment Jersey has created.” Since the launch of GABI, Global Advisors has floated it on The International Stock Exchange and has also launched two more crypto funds, including one that focuses on the new wave of Initial Coin Offerings (ICOs) – the latest crypto-based phenomenon that involves investors buying into blockchain-based business ideas using cryptocurrencies. At JTC, Mark Grenyer has seen GABI have a long-lasting impact on Jersey’s place within the crypto universe. “GABI is a great story for Jersey and the Channel Islands. Together with the recent CoinShares Fund we worked on with Global Advisors and Carey Olsen, it shows that, as well as being able to accommodate private crypto funds, there’s a pathway through the islands that leads not only to a regulated fund but also to a listing.”

While GABI has had a greater impact for Jersey, Guernsey hasn’t yet seen the crypto sector turn to its funds regime in quite the same way, despite the similarities between the laws of the two islands. But this hasn’t stopped the island looking to gain from blockchain technology too. In August, Zurich’s Solidium Partners issued an insurance-linked security using a Guernsey Incorporated Cell Company, Solidium Re ICC. The $14.8 million catastrophe bond transaction is thought to be the first securitisation to be settled with blockchain. Guernsey, which has a larger insurance industry than Jersey, was similarly engaging in a world first for blockchain technology in the finance sector, and this ability to innovate is as much down to the regulatory environment as anything else. “The advantage we have is that Guernsey has a very flexible regulatory framework, which makes it possible to work with new asset classes and technologies that may not easily fit within existing regulatory regimes elsewhere,” says Stephen Ozanne, Senior Associate at law firm Walkers. Cryptocurrencies don’t tick existing regulatory boxes, because nobody has been sure exactly how best to classify them. The recent rush to ICOs has provided the perfect example of the problems being faced by regulators. “The difference between a fund that invests in ICOs and an ICO itself can be put quite simply – are you buying shares in Disney or are you buying tokens to use in Disney World?” asks Chris Griffin, Counsel at law firm Carey Olsen. “Are these online tokens securities? And if they’re not, then what are they? Are they

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november/december 2017 41

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IMPACT IN GUERNSEY

Funds

commodities or currencies? The answer will drive the regulatory analysis, and you’re unlikely to get a pan-regulatory view, particularly in the crypto space, which moves so quickly that it’s inevitable regulators are playing catch-up.”

REGULATION AND REPUTATION Whilst the islands’ regulatory authorities are showing the flexibility needed to deal with new, difficult-to-define asset classes, perhaps the aspect of the funds regimes that makes them most amenable to innovation is the reliance on the local fund administrator as the regulated entity. As the administrator has the expertise, knowledge and controls needed to meet regulatory requirements (think AML, KYC and so on), the fund’s founders can move quickly to establish their new fund, precisely because the administrator already has everything in place. This means Jersey now has a head start on other jurisdictions. “As a business, we’ve had to invest heavily in developing bespoke processes and controls in the administration and oversight of these funds,” explains Grenyer. Early on in Bitcoin’s development, it gained a reputation for being used for criminal purposes. Naturally, the regulator wants to make sure locally held coins don’t taint the islands’ reputations. “The regulator focuses on key areas such as the provenance of the Bitcoin, which must be sourced from a traceable line of ownership, and the custodian arrangements surrounding Bitcoin,” says Chris Griffin. Matters like this and the issue of there being no Channel Island-based banks being

willing to work with crypto businesses will eventually be resolved. In the meantime, in the blockchain sector at least, the islands are proving themselves to be as flexible and innovative as they so often claim to be. Given the medium to long-term outlook for cryptocurrencies and blockchain technologies, this could prove to be vital. “It’s interesting to note that traditional heavyweight institutional investors remain cautious and are yet to enter the market,” says Jean-Marie Mognetti. “The biggest actors are still family offices and sophisticated private investors. Interest from hedge funds is gaining momentum, but is still a minority. There are no ETF products yet, but when they arrive it will have a huge effect – creating almost overnight a large change in the fragile equilibrium between offer and demand.” The crypto sector is still young, but the Channel Islands have taken important first steps that have really made an impression. The key for the islands is to stay on top. “It will be interesting if in three to five years, crypto will be seen as an established asset class alongside real estate and private equity,” says Grenyer. “It will be equally interesting to see the extent to which the disruptive effect of crypto and the blockchain technology that underpins it has altered the financial landscape generally. “For present purposes, the great thing is that both the government and the regulator are supportive and knowledgeable, and this gives us a real opportunity to establish and develop this niche.” n KIRSTEN MOREL is a freelance finance and technology writer

The rise of bitcoin

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Building blocks Bitcoin is the most famous of blockchain applications. While the valuation of cryptocurrencies grabs the headlines, many people believe blockchain’s biggest benefits will come from far more prosaic uses, and the funds industry could be a beneficiary. “As with the dotcom boom, blockchain may currently be in a bit of a bubble that could burst, but the technology itself will have been proven,” says Stephen Ozanne, Senior Associate at Walkers. “I expect institutional technology and investment companies to adopt blockchain technology to run their existing platforms. For instance, I can see the advantages of using blockchain to administer a fund, and I’ve seen tokens used to register investors’ interests. “However, one of the key issues facing public blockchains, such as the Bitcoin blockchain or Ethereum, is that they enable anonymous transactions, making it difficult to complete customer due diligence. “I expect this problem to be solved with the use of private or permissioned blockchain platforms such as IBM’s blockchain.” Private blockchains allow administrators to know the users and so can comply with regulatory obligations. Asset manager Northern Trust has already gone down this route by working with IBM and using the IT giant’s private blockchain, which is based on Hyperledger Fabric. The solution is used to manage a Guernsey-domiciled private equity fund, providing secure and transparent access to managers and investors alike. According to Northern Trust, the new platform ‘delivers a significantly enhanced and efficient approach to private equity administration’. For investors interested in the returns that blockchain can deliver, funds are a natural way to reduce risk. But rather than looking to Bitcoin or the cohort of ICOs that are making waves today, it may be more prudent to back those firms that are looking to exploit this new technology in far more mundane ways.

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Advertising feature

Investments and funds in the age of cryptocurrencies Still viewed with suspicion in some quarters, cryptocurrencies look set to make a big mark in the funds sector. Aonghus Fraser, Group Chief Technology Officer at C5 Alliance, examines why this could be a positive step forward

THE FAST-MOVING pace of technology has recently given rise to a number of revolutionary ideas and concepts that can provide attractive investment opportunities all based on blockchain technology. Essentially, a blockchain is a decentralised and distributed database or ledger with cryptography that ensures that it is tamper-proof. The most famous example of blockchain technology is Bitcoin. The cryptocurrency had a market cap in early October of US$68bn, although this had reached $80bn earlier in the year. As a pure cryptocurrency investment, investing in Bitcoin might appear to have been a safe bet. The price of a Bitcoin has gone from approximately $600 to a peak of just over $5,000 in the 12 months to the beginning of October. Not many assets can match this. Institutional investors such as JP Morgan and Morgan Stanley even bought XBT, the ISO code being used for Bitcoin, despite JP Morgan Chase CEO Jamie Dimon saying cryptocurrency “is a fraud”. There are a number of opinions that counter this, including John McAfee, the serial entrepreneur, founder and former head of McAfee Associates, the well-known computer security and anti-virus company, who believes that a Bitcoin will reach $500,000. This may be far-fetched, but

44 november/december 2017

with a maximum of 21 million Bitcoins expected to be mined (available in circulation) by 2048, classic supply and demand economics are one reason that investors are bullish about Bitcoin’s future. But what exactly does all of this mean

with a maximum of 21 million Bitcoins expected to be in circulation by 2048, classic supply and demand economics are one reason that investors are bullish about Bitcoin’s future

for the funds industry? The cryptocurrency market is bleeding edge and volatile at present. However, there are actively managed cryptocurrency funds that aim to beat the performance of Bitcoin, such as Alphabit. These funds also use a relatively new phenomenon – Initial Coin Offerings (ICOs) or token sales, a mechanism for crowdsourcing funds for developing blockchain-based products and services. Some successful ICOs have raised up to $250 million, with the total amount raised far superseding traditional venture capital in 2017 for initiatives in the blockchain space. Regulators, however, including the US Securities and Exchange Commission (SEC), are rightly cautioning investors due to the lack of regulation. Indeed, the Chinese authorities have banned ICOs. The first regulator to address the lack of regulation in this space and provide a safer environment for investors will provide great economic benefit to their jurisdiction, attracting numerous startups and businesses looking to provide innovative new services and investment opportunities. Contrary to popular belief, most cryptocurrencies aren’t anonymous – all Bitcoin transactions, for example, are stored publicly and permanently on the network. Anyone can see the balance and transactions of any Bitcoin address.

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However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances. This is where regulation and anti-money laundering approaches will provide the protection needed for the industry to mature.

GAINING MOMENTUM What’s undeniable is the scale of activity in the area of cryptocurrencies and blockchain technologies. This significant shift in momentum is giving rise to start-ups and investment funds that are looking to bring traditional funds and investment approaches to an industry described by some as the ‘Wild West’. Bitwise HOLD 10 Private Index is one such fund. It’s currently available only to US-accredited investors, but there are plans to launch additional funds. This fund indexes the top 10 largest cryptocurrency coins, accounting for 85 per cent of the overall market. One of its central aims is to help investors gain exposure to cryptocurrency with the ease and economy of investing in an S&P 500 index fund. With 12 months’ past returns of 744 per cent (versus Bitcoin’s 537 per cent), approaches like this are bound to attract investment from traditional markets. Closer to home, Jersey’s Global Advisors created the Bitcoin Investment Fund (the

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world’s first regulated cryptocurrency fund) in 2014. This also represented the first institutional-grade programme for managing exposure to Bitcoin (see feature, page 40). Crypto platform Blackmoon aims to bridge the gap ‘between the crypto universe and the traditional investment market’, providing an alternative to the majority of existing approaches that are either pegged to cryptocurrencies or tradable assets such as gold or USD, claiming cost-effective structures and flexibility. A little bit further into the future of trading is Spectre (Speculative Tokenized Trading Exchange), which at the time of writing, was about to launch a token sale. Spectre aims to be the first brokerless financial trading platform with an embedded decentralised liquidity pool initially funded from their ICO. There are numerous other examples, with 15 new crypto hedge funds in this area – unsurprising, perhaps, when there have been extreme examples of 82,000 per cent gains in the case of Ethereum. It’s also reported that Wall Street firms are expected to move trillions to blockchains in 2018. It’s a brave new world out there – but it’s not without its controversy. Many believe the cryptocurrency arena to be akin to, or worse than, the tulip bulb mania of the 17th century – a period in the Dutch

Golden Age when contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then dramatically collapsed. There are numerous regulators banning ICOs or cryptocurrency exchanges due to their unregulated nature (although the SEC is now treating virtual tokens or coins as securities in certain instances), but it’s only a matter of time before the regulators catch up with the market. This will be a good thing and it will give rise to even more areas of potential interest to the funds industry – the overall market cap of cryptocurrencies now stands at approximately $150bn. Goldman Sachs is considering trading in Bitcoin and IMF Managing Director Christine Lagarde has advised that ignoring virtual currencies wouldn’t be wise. Being aware of this fast-moving world and the developments from a regulatory, as well as a technological, perspective will be key for funds looking to diversify and capitalise on opportunities in this exciting new space. n

FIND OUT MORE

If you would like to know more about blockchain technology or cryptocurrencies, please contact Aonghus Fraser at aonghus.fraser@C5Alliance.com

november/december 2017 45

Funds

â&#x20AC;Śbut BEPS is coming a Tightening of international corporate tax rules means that managers of Channel Island funds will have to review their business models

46 november/december 2017

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Funds

Words: Richard Willsher

Co-operation and Development’s (OECD’s) Base Erosion and Profit Shifting Project (BEPS) has been in the making for years. Most developed countries have signed up to BEPS, and while it will take a few more years for the project to be fully implemented, its aims are clear. Its 15 ‘actions’ have been framed to ‘equip governments with domestic and international instruments to address tax avoidance, ensuring that profits are taxed where economic activities generating the profits are performed and where value is created’. Their main target is multinational businesses that shift their profits to low-tax or no-tax jurisdictions to reduce their tax liabilities, even though they may have no significant operations there. BEPS also relates to tax strategies used by multinational organisations that operate in different jurisdictions, which seek to exploit the mismatch and gaps in tax rules of those jurisdictions, so that profits aren’t taxed anywhere. As a consequence of the changes proposed, investment funds will also be affected by a number of the measures. Investment funds weren’t the main focus of BEPS. Nor are the Channel Islands under more scrutiny than other jurisdictions. However, funds will need to be mindful of the structures they adopt if they’re to avoid falling foul of this tightening international anti-tax-avoidance initiative. “The whole BEPS regime was conceived as a coordinated approach for all the OECD countries to come up with some principles that sought to ensure that if you earned profit in one jurisdiction, you were taxed in that jurisdiction,” explains John Riva, KPMG’s Head of Tax for the Channel Islands. “Because our international fund business is global in its reach, BEPS affects the fund operating models of jurisdictions with which we trade.” BEPS has slowly started to take effect, but those operating models will only be affected as countries implement it and possibly amend their local tax regimes at the same time. In June this year, 68 countries, including Jersey and Guernsey,

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signed up to the Multilateral Instrument (MLI) – its effect will be to make it easier to amend a significant number of the thousands of bilateral tax treaties currently in force. This, in turn, will make it easier to achieve the objectives of the BEPS project as they apply to tax treaties. This isn’t expected to come into full force before 2019. “There’s no need to panic,” advises Anthony Chandlen, Senior Tax Manager at PwC, “but it’s time to look at your fund structures, particularly where they utilise tax treaties, to ensure that the structure established will work in future and, where necessary, take remedial action.” There’s reason for optimism, however. First, the jurisdictions that funds deal with may be unaffected by BEPS if treaty platforms aren’t used and the investment holding structure is straightforward. Second, the tests that BEPS proposes may prove that the particular fund structures remain fit for purpose and will continue to serve their investors well.

It’s time to look at your fund structures, particularly where they utilise tax treaties, to ensure that the structure established will work in future and, where necessary, take remedial action

In addition, the Channel Islands have a proven track record in responding and adapting to various anti-tax avoidance measures. These include the US Foreign Account Tax Compliance Act (FATCA), the UK version of it that followed and the OECD Common Reporting Standard (CRS), as well as ever-tightening Know Your Customer rules and the Alternative Investment Fund Managers Directive (AIFMD). The islands’ jurisdictions have come through these tests with flying colours for their transparency and the quality of compliance. “In many ways, the potential impact on funds could be described as the unintended consequences of the bigger initiative to ensure global commercial companies pay the right amount of tax,” explains Tim Morgan, Partner at Mourant Ozannes. “But our jurisdictions have been early adopters of new regulation and the work that funds have already been doing in compliance will assist them in demonstrating they’re fully transparent. “At the same time, there’ll be an increased focus on the type of fund investors involved – whether, for example, they’re international institutions or highnet-worth individuals who invest in the islands, typically in alternative investment funds such as property or private equity.”

A MATTER OF SUBSTANCE As with much that’s emerging from the BEPS initiative, it’s early days in trying to establish what the various tests and criteria actually mean. For example, what constitutes ‘substance’? The integrity of the Channel Islands as financial centres is key. Others may be better known for brass plates rather than fully functioning businesses, but as PwC’s Anthony Chandlen points out: “We’re not a volume centre, we focus on quality and substance. Jersey is larger than many of our competitors and has the substance to effectively manage the business booked here. We have nearly 1,300 funds and around 32,000 companies on our registry. “There are about 13,000 people here working in the financial services industry to serve those entities, and they’re a highly

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THE ORGANISATION FOR Economic

Funds

skilled workforce working in a wellregulated industry that’s been recognised as such by external monitoring bodies. In fact, this is one of the positives to come out of BEPS as far as we’re concerned. “You also have to look at what functions are being performed in a particular jurisdiction. What skills do those people bring? What value is attributable to the work that they do? And as far as fund management companies are concerned, a lot of the profit can be booked in Jersey because there are real people working here in real offices, doing highly skilled jobs.” Elliot Refson, a Director at management services provider Crestbridge, agrees. “I have the impression that BEPS is mindblowingly complicated,” he says. “However, particularly in real estate and private equity funds, Jersey absolutely has the expertise needed to manage and administer funds. “And we’re always open for business. If we need to add to our talent pool, we can bring in more highly skilled people from elsewhere. Substance is not a problem.” So, could the islands lose business as a result of BEPS, or could it actually open up new opportunities? Those funds with inappropriate business models could potentially suffer. However, by the time some of the other jurisdictions bring in BEPS measures –

and that could be years hence – funds that have, say, a five-year life could already have come to an end. Meanwhile, the Channel Islands have been thinking about BEPS for some time and have started taking on board what the ‘new normal’ will look like.

ADAPTING TO BEPS Craig Cordle, Group Partner at law firm Ogier in Guernsey, has been doing exactly that. “As a fund structuring lawyer, the issues raised by BEPS aren’t necessarily new,” he says. “The product isn’t necessarily changing, it’s just that the regulatory sphere in which we’re working is becoming a bit more complex. “BEPS has, in part, caused us in Guernsey to think about the products that we offer here. For example, the private investment fund (PIF) and the manager-led product (MLP), are both new products we’ve developed over the past couple of years. “These have moved the focus away from funds themselves and on to the manager and this is consistent with European regulation and with BEPS’ substance criterion. What’s the manager doing? Where is it operating and where’s the controlling mind of the fund? “What’s more, BEPS compliance is

facilitated by leveraging the talent we have here and the new talent that’s coming to the islands.” BEPS means careful assessment of existing funds and the deployment of the islands’ deep pool of skills in offering new funds that will be BEPS-compliant. John Riva at KPMG points out that the fund environment is a kaleidoscope of regulatory change. “Every single structure that has a tax dimension needs to have a health check annually. The tax rules tend to change and an arrangement which is fit for purpose one year, may not be the next. We operate in a global environment and there’s an unbelievable amount of change going on.” The BEPS initiative may have been developing over several years but it’s not yet the finished article. Perhaps it never will be. So, constant vigilance and adaptability will be essential. However, the Channel Islands have demonstrated time and again their integrity and nimbleness as fund business centres. That looks like remaining as solid ever, despite the tempestuous tax and regulatory changes that swirl around the global financial services industry. n RICHARD WILLSHER is a freelance finance writer

Three key BEPS tests BEPS means careful assessment of existing funds and the deployment of the Channel islands’ deep pool of skills

Transparency/principle purpose What is the fund designed for? Who are its investors and its ultimate beneficiaries? Why has it been established in the Channel Islands? Are its investors paying the right amount of tax on profits or capital gains in the right jurisdictions? Substance Does the fund and its manager have substance in its business – that is, does it have staff? If so, what functions do they perform – for example, risk management, fund management, accounting, compliance and so on? Operating model Does the operating model of a fund enable it to meet these tests?

48 november/december 2017

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Funds

The largest annual pan-Channel Island funds event brought together high-calibre speakers and senior delegates to hear about the most pressing issues in Guernsey and Jersey’s funds industries

Channel Islands Funds Forum:

A Sharper Focus AS UNCERTAINTY ABOUNDS in the political sphere, the Channel Islands’ funds industries keep growing, but is this success built on past strengths or is the sector ready to face the challenges that lie ahead? These and many more searching questions put funds in Guernsey and Jersey in sharper focus at BL’s Channel Islands Funds Forum 2017. Held at the Radisson Blu Hotel in St Helier on 27 September, the Forum – produced in partnership with PwC – was attended by 150 leading members of the Channel Islands’ funds industries. The event was sponsored by Appleby, JTC Fund Services and Optimus Group, and supported by Altair, Puritas and Rossborough Professional Risks. This year, the Forum was the biggest ever, both in terms of delegate numbers and because it featured a pre-conference seminar from Preqin, data and intelligence providers to the alternative assets industry. Amy Bensted, Head of Hedge Funds, and Tom Carr, Head of Real Assets Products at Preqin, opened the day by looking at how the alternative assets industry has evolved over the years. In his round-up of the past 12 months, Carr examined institutional investors’ portfolios. “It’s a fast moving industry, with change happening all the time,” he said. “In recent years, institutional

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FUNDS: THE STORY SO FAR Following a short break, Nick Kirby, Editor-in-Chief of BL magazine, welcomed delegates to the main conference before introducing the day’s first panel event, a look at the ‘story so far’, rounding up the past 12 months in the Channel Islands’ funds sectors. Moderated by Ben Robins, Partner at Mourant Ozannes, the panel began their look back over the year by discussing changes to the islands’ regulatory regimes. Emma Bailey, Director of Investment Supervision and Policy Division at the Guernsey Financial Services Commission, highlighted the introduction of Guernsey’s new manager-led regime. “The regime was introduced in May 2016 and allows the licensing of a general partnership in one day, with no regulation on the fund, all of it being at manager level.” From a Jersey perspective, Mike Jones, Director of Policy at the Jersey Financial

Services Commission, pointed to the publication of the AML handbook and Jersey Private Placement Funds as examples of beneficial work that’s been completed in the past year or so. Fiona Le Poidevin, CEO of The International Stock Exchange Group (TISE), explained that new Chapter 7 rules “mean we can now cater for pretty much any investment vehicle structure”. Highlighting TISE’s success, she said that it had “seen a 45 per cent increase in new securities listing, a lot of which has come from private equity”. This good news was slightly tempered by discussion of Luxembourg, a theme that resurfaced throughout the day. “Luxembourg is a threat, but has a lot of headwinds, including tax harmonisation,” said Michael Johnson, Head of Fund Services at Intertrust. “A lot of their products are fairly new and so aren’t tried and tested.” Robins moved the discussion on to fintech and crypto funds. All the panellists agreed that the islands have moved quickly to explore these areas – but, beyond investing, Fiona Le Poidevin warned about the effects they could have on the way the sector works. “There’s a lot more going on than just blockchain, and we have to stay on top of it all,” she said. “I don’t think people have grasped how fintech will change the way the industry works here in the islands.”

THE BIGGER PICTURE The conference moved from regulatory regimes to a look at the ‘Global Political Landscape and its Impact on Funds’. Light-hearted in tone but serious in substance, this was a talk in which Mark Boleat, Deputy Chairman, Policy and

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Words: Kirsten Morel Pictures: Glen Perotte

investors have moved into a wider range of alternative asset classes.” The big story of 2016 was that fundraising levels had returned to the peaks seen in 2008, and this year is already looking strong, but according to Carr “capital is becoming concentrated among fewer funds and managers”. Although there has been a reversal of the net outflows of 2015/16 to inflows of $25bn this year, the medium-term outlook remains mixed and there are warnings for hedge funds. “An increasing number of investors are planning to reduce their exposure to hedge funds,” said Bensted. “Over a three-year time frame, the largest proportion of investors, 30 per cent, plan to reduce this exposure.”

Funds

luxembourg is a threat, but has a lot of headwinds including tax harmonisation

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TAX MATTERS Following on from the examination of the political landscape, Rob Mellor, Tax Partner at PwC, gave a tax update, focusing on managing risk in an ever-changing world. “Tax authorities are getting smarter and using data, which means the tax risk is increasing,” he explained. “We’ve also got the push for transparency with FATCA, MiFID II and AIFMD reporting. Data is being shared and mined.” With the new corporate criminal offence in the UK in the same vein as other initiatives focusing on corporate governance, Mellor warned: “The tax authorities see your tax attitude as reflective of your entire corporate attitude.” Turning to BEPS, he asked whether fund directors “are aware of where the tax risk is”. And on Brexit, he explained: “A whole list of tax issues fall out of Brexit, and

UK fund managers are waiting to see how ESMA deals with them.” A fascinating session generated a number of questions and brought the morning to a close. Delegates left for lunch looking forward to the next panel discussion, promising a view of the islands from the outside.

THE OUTSIDE VIEW Moderated by Lisa Cawley, Partner at law firm Kirkland & Ellis, the panel began by exploring experiences they’d had structuring through the Channel Islands. Gurpreet Manku, Assistant Director General at the British Private Equity & Venture Capital Association, described the development of the organisation’s relationship with Jersey and Guernsey. “We started working with the islands in 2014 when they were going through the process of applying for a third-country passport,” she said. “Over time, that relationship has developed and we’ve started working together on BEPS, the UK’s register of persons of significant control, and now Brexit. “There are so many legal, regulatory and tax changes out there – when you have a broad network, it’s much easier and efficient to get answers.” Cawley brought the discussion round to the threats posed by competition. “In Continental Europe, there’s a tendency to lean towards Luxembourg. The introduction of the RAIF shows it’s trying to become less complicated but, if successful, it could be a threat,” she said. Concluding the discussion with her views on governance, Cathy Pitt, Partner at CMS Cameron McKenna Nabarro Olswang, looked at the role of directors. “There’s a growing swell of opinion on corporate governance and the need for directors to do a good job,” she said. “People see governance as really important and want to see directors challenging the manager.” Agreeing that the islands are strong on

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Tax authorities are getting smarter and using data, which means the tax risk is increasing

Resources Committee, City of London Corporation, explored the volatile geopolitical landscape that’s generating enormous uncertainty in the world. Starting with global political uncertainty, which has been supercharged by the US and North Korea, Boleat questioned whether this was all so different from 20 or 30 years ago, when war raged in Europe. Politics aside, he highlighted two trends that should be of greatest concern to all – the fact that “lies are now more accepted than they used to be” and that “leaders are increasingly chosen by extremists rather than elected representatives”. The result, he said, is that “we’re giving power to the wrong people”. Pointing out that the UK could have a Labour government in the near future and that Brexit is the UK’s “biggest non-wartime decision since World War II”, he described the UK’s political situation as “astonishingly unstable”. But he added: “Jersey is in as good a place as it can be. Tax is in the right place and we’re doing well on Brexit.”

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Funds

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Transforming your business for a new global tax world

By 2020, how a firm deals with tax risk will be viewed as a competitive advantage, or disadvantage. Are you ready? If you need help navigating through the implications of this ever-changing tax landscape, talk to us today. To find out how our tax team can help you, contact: Debbie Payne Tax Director debbie.payne@pwc.com Tel: +44 (0)1534 838284

David Waldron Tax Director david.x.waldron@pwc.com Tel: +44 (0)1481 752081

Justin Woodhouse Tax Partner justin.woodhouse@pwc.com Tel: +44 (0)1534 838233

© 2017 PricewaterhouseCoopers CI LLP. All rights reserved. “PricewaterhouseCoopers” and “PwC” refer to the Channel Island firm of PricewaterhouseCoopers CI LLP, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. PricewaterhouseCoopers CI LLP, a limited liability partnership registered in England with registered number OC309347, provides assurance, advisory and tax services. The registered office is 1 Embankment Place, London WC2N 6RH and its principal place of business is 37 Esplanade, St. Helier, Jersey JE1 4XA.

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november/december 2017 53

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governance, the panel also suggested they need to be ready to answer questions about the “problems that are out there” when promoting the islands abroad.

THE ISLANDS RESPOND The Channel Islands were offered a response in the next panel session, moderated by Mike Byrne, Chairman of the Jersey Funds Association and Partner at PwC. Starting with the view that there’s no point in having competition between the islands, Paul Smith, Chair of the Guernsey Investment Funds Association, took the conversation towards Brexit and its effects. “Brexit is driving people to Luxembourg, but it has its own problems, so we can’t be complacent and need to keep on pushing.” The arrival of a number of megafunds in the islands provoked a note of caution from Gavin Farrell, Partner at Ferbrache & Farrell. “We do see the herd mentality, but don’t want to be seen as only for very large funds.” Achieving this means promoting the islands which, according to Andrew Weaver, Partner at Appleby, means knowing their strengths. “We’re good at emphasising our strengths and playing to them. The islands are building a reputation in management strength and we should be using intermediaries to disseminate the message,” he said. Luxembourg was acknowledged as a threat with a big marketing budget. But Paul Smith felt the islands could look beyond Europe. “We’ve been so focused on Europe that I think we now need to start focusing on the rest of the world. We need to be available to other promoters,” he said. The session ended with a look at the islands’ positives. While regulation and fintech were mentioned as opportunities, the panel agreed that flexibility was the greatest strength.

MONEY FLOWS Paul Wilkes, Group Partner at Collas Crill, had the task of grilling Scott Spencer, Senior Investment Manager at Ravenscroft, in the penultimate session of the day. Examining the world’s money flows was always going to be a broad topic and Scott Spence took delegates from the main political uncertainties of our time via

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The islands are building a reputation in management strength and we should be using intermediaries to disseminate the message

China’s aviation industry to biotech, cloud tech and big data. From genetically engineered cures for cancer to the takeover of TV by Silicon Valley tech giants, there hardly seemed to be a sector that Spencer hadn’t analysed. Analysis aside, he rounded off the session with a reminder that, in times of political uncertainty, it’s the basics that matter. “You can’t invest for politics, but if there was a crash, we’d invest according to the things we understand people have to do – eat, drink and brush their teeth.”

THE ROAD AHEAD The Channel Islands Funds Forum was brought to a close with a look into the future, as Adam Moorshead, JTC Group’s Managing Director - Guernsey, asked the panel to discuss the biggest challenges and opportunities in the coming year. Christopher Griffin, Counsel at Carey Olsen, felt that Jersey should target specific regions. “We should do more to raise our profile in the Middle East,” he said, before pointing out that the JFSC was doing all it could to make the island more attractive. Niamh Lalor, Partner at Ogier in Jersey,

continued with the theme, suggesting that while the tools are there, they need to be put to use. “Asset classes are becoming increasingly diverse, but we must ask ourselves whether we’ve done enough to promote ourselves as a jurisdiction.” Accepting that more can always be done to promote the islands, Dominic Wheatley, Chief Executive of Guernsey Finance, pointed out the value of stability. “In this unsettled world, the Channel Islands offer a stable environment and product. In 12 months’ time, the islands will still look stable, and investors like the certainty that comes from stability.” Amy Bryant, Chief Operating Officer of Jersey Finance, picked up on the theme about new markets. “If more funding were available to Jersey Finance and Guernsey Finance, would we use it to counter Luxembourg? Some, yes, but we’d use a significant proportion for geographic diversification. We’d want to invest more in Africa and Asia.” Moorshead moved the conversation on to blockchain, and Niamh Lalor focused on its potential as a technology to be used in the funds sector. “One of the first things a client sees is customer due diligence, and if they have to do it four times, it’s off-putting. If we can use technology to streamline this, then that’s an opportunity.” After discussing business development, Moorshead brought the session and the day to a close with a strong message for delegates to take back to the office. “It’s crucially important that we’re internally self-critical and aware of the risks, but our external message has to be positive, loud and proud.” With those words ringing in their ears, delegates broke for networking drinks and deeper discussion of the issues covered during the day. n

Channel Islands Funds Forum 2018 – Earlybird tickets The 2018 Channel Islands Funds Forum will take place in Jersey on 26 September 2018. An ultra-earlybird rate of £150 is available until 29 December. For more information, email Carl Methven at events@blglobal.co.uk

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Advertising feature Funds

Could asset managers face legal action? New measures to increase protection for investors could spark legal action against asset managers. Tim Mitchell, Practice Leader at Rossborough Professional Risks, explains the issues and how insurance could provide vital cover NOBODY LIKES THE threat of landing up in court, but a shake-up in how UK-based asset managers operate could result in legal action from clients and the UK’s financial services regulator. The Financial Conduct Authority (FCA) has set out measures designed to make the UK’s £6.9trn asset management industry more competitive and improve investor protection, after identifying issues in the sector. The importance of the asset management sector can’t be underplayed. As the FCA said in its study looking at the industry, it plays a vital role in the UK economy, while managing the savings and pensions of millions of people. The UK industry is the second largest in the world. However, the FCA said there’s room for improvement. Price competition is weak, despite a large number of firms operating in the market. The FCA found evidence of sustained, high profits over a number of years. It warned that investors aren’t always clear on what the fund objectives are, while fund performance isn’t reported against an appropriate benchmark. Concerns about the operation of the investment consultant market were also flagged up by the FCA. Recommendations to remedy the situation include strengthening the duty on fund managers to act in the best interest of investors, and covering consideration of value for money. To bring individual focus and accountability, the regulator wants to use the Senior Managers and Certification Regime. This regime is being applied to investment managers in 2018. Other proposals include a consultation on requiring fund managers to return any risk-free box profits to the fund and to disclose box management practices to

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investors. Technical changes to improve fairness around the management of share classes, and the way in which fund managers profit from investors buying and selling their funds, also form part of the package of measures.

THE RISK FOR ASSET MANAGERS While a phased approach is being taken by the FCA, some actions are already moving forward. As more remedies are implemented, the risk for asset managers is that non-compliance could result in regulatory action by the FCA and claims from clients. If that happens, professional indemnity (PI) and directors & officers liability (D&O) insurance could make all the difference to asset managers. A well-drafted policy should provide coverage for a range of actions brought by regulators – such as the launch of proceedings in relation to breaches of the proposed prescribed responsibility. With the focus on the senior management regime, consideration should be given to additional dedicated and separate senior managers insurance – standard D&O policy limits could be exhausted by individuals who aren’t directors but are protected by a D&O policy. Take also the issue of returning risk-free box profits to the fund and how fund managers profit from investors buying and selling funds. Insurers may see claims arising from issues such as claims for the return of fees. Typically, these are excluded under PI policies and are often described as ‘disgorgement’ in documents. Rossborough, in conjunction with the expert capabilities provided by our parent Arthur J Gallagher, has had some success

in agreeing key exceptions to these types of policy exclusions. Over the years, we’ve developed bespoke products alongside the ever-evolving regulatory environment – and that’s because asset managers are important and valued clients for Rossborough. We keep a close eye on developments in the asset management sector, including regulation, so we can provide proactive and clear advice when it comes to policy coverage. As part of this work, we’ll continue to monitor how the FCA moves forward with its measures to ensure policies offer the best coverage for asset managers – focusing on any aspects of the proposals that impose a requirement to amend the PI and D&O policy provisions. n

ROSSBOROUGH PROFESSIONAL RISKS

For details, visit www.rossborough.co.uk or contact Tim Mitchell, Practice Leader, Professional Risks, on +44 (0)1534 500588 or tim_mitchell@rossboroughgroup.co.uk

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THE FUNDS INDUSTRIES in the Channel Islands aren’t exactly part-time operations. As of June, Guernsey had £271bn of funds under management and administration, while the value of regulated funds in Jersey stood at £263bn. The industry in both islands is growing, employing thousands of people (an estimated 4,000 in Jersey alone) in every facet, from hedge funds and private equity to real estate, fund administration, depositaries, law and, increasingly, compliance. All that growth doesn’t come without its pressures. A machine like this is always going to require fresh brain power, especially as it has to react to constant changes in the industry. But, like other aspects of the finance sector, funds face a major, and unavoidable, issue – you can only fit so many people on an island. Not only is there a natural limit to the number of fund-literate professionals resident on any small lump of land, but geographical constraints also mean the governments in both islands are being forced to tighten population control, restricting the potential to bring people in. As part of upcoming changes to its population policy, Jersey’s Population Office revoked 283 permanent registered permissions – the licences that allow organisations to introduce employees from off-island – in the six months to August. It revoked only 47 in the first half of 2016. It doesn’t take much brain power to recognise that, while such measures may help preserve the islands’ coveted quality of life, they’ll also restrict the influx of fresh, talented funds professionals.

“Two or three years ago, I can remember being at an Institute of Directors event and Geoff Cook, the head of Jersey Finance, was asked what kept him awake at night,” says Shelley Kendrick, Director of Jersey recruitment consultancy Kendrick Rose. “He said: ‘The number of calls I get about employment and licences’. And that hasn’t changed – it’s still a big issue at the forefront for many companies.” These companies are certainly recruiting from a small pool. When a new role in funds comes up on the islands, it typically heralds the start of a short game of ‘musical roles’, in which those with the requisite experience shift from one job to the next, each filling the vacancy left by the person who’d moved on ahead of them. Which is fine for those individuals, but not so good for a growing industry.

ATTRACTING THE TALENT So where does fresh blood come from? A natural first port of call for recruiters is to those who’ve left the islands to study elsewhere. But the reality, according to Teresa Lamy, Head of HR at First Names Group, is that graduates may take five to eight years to return home. If, that is, they come back at all. The trick, she says, is to be openminded in your approach. “We used to go to market looking for youngsters with relevant degrees. But looking at our own management committee, most of them didn’t start in finance. So, we now look for intelligent people with the right attitude who fit the organisation culturally, rather than having the right field of study.

Words: Dave Waller

Recruit on that criteria and you expand the span of people.” As for bringing new talent to the islands, organisations do have limited numbers of licences with which to lure in people from outside. Many will try to save these for crucial hires. Yet even with the right permissions, it’s not necessarily easy to tempt external candidates across. These are uncertain times, and people are thinking harder about where they choose to live. Anyone committing to the islands will have to be happy to be saddled with London prices, but without all the culture and convenience of the capital. “You do have to do a sales pitch on Jersey and how island life is,” says Jo Hewlett, Head of HR for Aztec Group. “And for some it is a turn-off. But our CFO joined us from the UK – the sales pitch worked on him. Once here, people do tend to appreciate the beauty and fall in love with the place.” The key, she says, is “to retain them once you’ve found them”. What unites organisations in the Channel Islands, especially smaller companies, is the work they’re putting in to establish smarter ways to not only attract people but to keep hold of them and grow organically. To do this, they have to make themselves stand out from rival employers in everything from their organisation’s ethics to the opportunities for training and development they offer new recruits. This takes innovation, whether that’s sponsoring graduate awards or encouraging interns to use social media to show off the company culture. “I just had an organisation speak to

Are funds facing a

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Population controls and on-island education are just two of the challenges facing Jersey and Guernsey when it comes to employing people in their growing funds industries

recruitment 56 november/december 2017

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Funds

crisis? www.blglobal.co.uk

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Funds me, saying they’d made offers to three graduates,” says Shelley Kendrick. “They lost all three because other organisations on the islands were offering this fantastic social life, employing lots of others like them through a structured graduate programme. Things like training and coaching, leadership development and succession planning are all growing and being revamped.” A few years back, this may well have been a problem. In the period following the financial crisis, many organisations stopped recruiting and, following the now-familiar pattern, budgets in non-fee-earning areas such as training and development were the first to be given the kibosh. “When times are hard, the training budget is one of the first things to go,” says Kim Perkins, Head of Human Capital at Ashburton Investments. “Some companies now have a skills shortage as a result. But we’ve been very fortunate – our training budget has never been hit. And that helps us attract candidates when they talk to recruitment agencies. Our basic package may be similar to others, but we’re putting people on courses and giving them study leave. That does tend to tip the balance.” Another tactic for retention is to offer people rotation programmes. Organisations are increasingly bringing skilled people in from their own offices overseas, and sending local employees in the other direction to pick up new experiences. Lamy explains how one First Names employee recently bounced from Jersey to Tokyo, another from Guernsey to Hong Kong. “When the States can see we’re giving islanders experiences elsewhere that they can then bring back, they tend to be more supportive,” says Lamy. “We’re not sticking two fingers up at their population controls. We’re saying: ‘We get it, and here’s how we’re trying to support that and upskill local people’.” Indeed, it would be unfair to roundly criticise the States for being inflexible. The governments will do what they can to accommodate and support companies’ needs, if they can demonstrate them.

GRASS ROOTS WORK But it’s not just about bringing people in from outside, or clamping on to university graduates. “The funds industry is looking for introductory courses all the time, for school leavers as well as graduates,” says Michelle Morley, Programmes Manager at GTA University Centre in Guernsey, which works with the Guernsey Investment Fund Association among others to tailor its courses to industry demands. “We regularly run overview courses in fund administration, and refreshers for those who’ve been working in the field five to 10 years. We cover things like taxation issues that may have changed, using the latest case studies to illustrate pitfalls.”

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What unites organisations in the Channel Islands is the work they’re putting in to establish smarter ways to not only attract people but to keep hold of them

Targeting school leavers certainly seems a sensible idea. They’re an under-fished shoal in the existing local talent pool, and to be offered the chance to get up and running in a potentially lucrative career in funds, while their mates are still desperately ‘downing’ their student loans in the freshers’ bar, may hold a powerful appeal. GTA is one example of the kind of grass roots work going into enhancing the capabilities of the people already on the islands. The question is whether such measures are enough to keep feeding the funds industry machine, or whether there’s a possible employment crisis just waiting to happen. No one has a crystal ball when it comes to employment – note the wildly differing opinion on the potential for carnage once artificial intelligence has its full impact on the workforce. As such, Morley follows a sensibly noncommittal course. “There’s certainly talent here that can be used,” she says. “Whether it’s enough, I don’t know.” People will always tend to draw a potentially bleak view of the future, but

many businesses on the island are taking the philosophical approach. “It’s worth being optimistic. At the end of the day, you just have to work within those constraints,” says Lamy. “You can spend a lot of time jumping up and down and complaining about decisions and obstacles, or you can just say: ‘That’s the way it is, let’s make it work’.” It’s also worth recognising that these questions are nothing new. “I was chatting to the owner-director of a trust business that’s been here 30 years, and they’re really growing,” says Kendrick. “Five years ago, that same person had said he didn’t know where the private wealth world would be in 10 years.” A local careers adviser will probably encourage school leavers to picture what they’ll be doing in the same timeframe. Some may now answer: ‘Working in the funds industry’. And at least some of them will be right. That’s if AI doesn’t claim all the jobs first. n DAVE WALLER is a freelance finance writer

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Funds

Moore Stephens Fund Services An offshore, specialist, bespoke service. Providing fund accounting and administration services for both private and institutional clients. We have long standing relationships with fund promoters and investors from multiple jurisdictions, delivering high quality reporting that can be created to suit client needs and requirements. For further information please email: fundservices@moorestephens-jersey.com or telephone: +44 (0)1534 880088

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Regulated by the Jersey Financial Services Commission.

PRECISE. PROVEN. PERFORMANCE.

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Advertising feature

Recruiting leaders of

the future

With assets under management of $24bn, Moore Management, a First Names Group company, provides bespoke fund services to the world’s largest institutions and fund manager start-ups. Jon Trigg, its Global Head of Funds, explores the impact of recruitment on a fast-growing business I RETURNED TO Jersey, the island I love

and where I grew up, with my wife and two young girls in May 2000. This wasn’t a difficult decision, as we both fully believed that the benefits of coming back to live on an island nine miles by five far outweighed any others we were considering. Despite all that’s wonderful about Jersey, when it comes to growing a business on the island there are some obvious limitations, not least of which is a restrictive pool of experienced people ready and able to take up the challenge. Jersey is synonymous with the finance industry and anyone that has worked, or is working, in finance will know that ‘funds’ is just one of a number of highly competitive sectors fighting to hire from the limited pool of talented and skilled individuals required to make the industry flourish. Among the findings of the 2016 States of Jersey report on Higher Education Funding, a number of significant statistics stand out. First, ‘more than 82 per cent of new jobs now being created in Western economies ask for degree-level education’. And second, the number of Jersey students opting to go to university had started to decline at a time when the demand for a graduate workforce is higher than

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ever. This contrasts with the finding that ‘skilled people who can help businesses grow, innovate and improve productivity are in high demand’. I would suggest that, regardless of sector or indeed geography, this last point remains a given! Core to the Moore business, and indeed the wider First Names Group, is the very firm belief that our people are the most important tangible assets of our business. They are what make us prosper and make our clients want to do business with us for the long term. This thinking isn’t just what we say in our marketing materials, but is an intrinsic part of our business culture and something we all feel extremely passionate about. Whilst a university degree is great, we certainly don’t see it as a mandatory part of our recruiting process, or a prerequisite when attracting new members to our team. What’s important for us is that each individual has the drive and willingness to not only learn, but also share their own experience with others. As such, we naturally embrace ambitious people and go to considerable lengths to actively grow and manage a pipeline of suitable people who we believe have what it takes to succeed in this industry. Our thought process is always to be one

step ahead, so we often recruit in advance of the wider business need, to ensure that there’s sufficient lead-in time to allow for a gradual progression and integration into our business.

HEART OF THE MATTER Our recruitment process is just the start of the journey, as we know that if we recruit based on ‘cultural fit’, ‘potential’ and ‘ambition’, such candidates are more often than not ‘hard wired’ and open to learn, grow and be developed. In fact, it’s what attracts many to us in the first place. We want all of our people not only to be challenged and to expand their own skills, but we also want them to enjoy what they are doing. And that’s why our commitment to be the best and to make a difference, both professionally and personally, is at the core of how we develop our people. I passionately believe it’s not just the job of our human resource team to ensure that we all become the very best we can or to provide everyone with long-term career goals – this is something that’s intrinsically my responsibility too. Each individual member of our team is critically important to us. However, our approach is to build a team that will always be stronger than its

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Advertising feature

Teams from Moore and First Names came together at La Mare Wine Estates as part of a five-day leadership programme

individual parts, not just in the good times but most importantly when challenges are being faced and need to be overcome. Therefore, in a market where talent is often perceived as being in short supply, we work even harder to ensure our people receive the support they need to succeed, not just in their professional lives but also to develop them personally too. Knowing this, it won’t surprise you to hear that we take learning and development very seriously. So seriously, in fact, that we invested in the creation of our very own internal professional and personal development programme – Ascent 2020 – in January this year. This programme provides flexible learning tailored to each individual in our business, regardless of whether their ambition is to be the next CEO or to simply help them be the best they can be in their current role. The programme is designed to equip each member of the business with knowledge and skills that will last a lifetime and help each of them to realise their potential – inside and outside work. It’s been purposely designed to be very different from other more traditional learning programmes to ensure that the skills everyone is learning are easily transferable across the whole business. Being part of a larger global business allows us at Moore to proactively support cross-team, company and cross-geography secondments and assignments, as we know this is a great way to develop skills, expand networks and ensure we have the right people in the right place at the right time. Two of our Jersey team – Director Andrew Pittom and Manager Joel Speight – are both currently operating out of our

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Moore and First Names people from multiple jurisdictions recently took part in the Super League Triathlon event in Jersey

we firmly believe our people are the most important tangible assets of our business

Tokyo office and helping to not only build relationships with our team and clients, but also to embrace the culture and life in Japan. In addition to driving forward our Asia strategy, they have experienced the speed of the bullet train, sampled the powder snow in Japan’s world famous ski resorts, trekked up Mount Fuji and tasted the different and wonderful cuisine to be found in the main thoroughfares and the back streets of Tokyo. As we continue to build our global footprint, we’re committed to placing individuals, not just at senior level but more importantly at mid and junior levels, in international jurisdictions, to provide them with opportunities for personal and professional development. We believe this will be a key ingredient in building a long-term global team that’s committed to ensuring we don’t lose the culture or

agility of an exciting growing business. Nearer to home, we have proactively provided Moore team members seeking a new challenge with opportunities to work in different areas of our business without the need to move jurisdiction. This innovative approach to people management has invigorated and enthused team members, many of whom have jumped at the chance to take advantage of the opportunities available to them. Being frank, this approach has also helped prevent the risk of them seeking a different role with a competitor. As a business, we develop leaders, not followers. And in a tight labour market such as this one, we take time to develop new and ambitious projects for our teams, which don’t simply revolve around social events or branding. I believe that my fellow directors and I are extremely fortunate to work in an environment and company culture that actively encourages us to not only support the professional development of our teams, but openly encourages us to help them build their future careers, whether that’s in Jersey or elsewhere. Our somewhat unique people-focused business allows us to create a long-term, sustainable business where our future leaders are already part of our business. Now that’s an investment worth making. n

WORKING WITH MOORE

We’re always on the hunt for fresh new individuals to join us. To find out more, visit www.mooremanagement.com/careers to see our current vacancies.

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to be a director?

The IoD Certificate and Diploma in Company Direction is an internationally recognised benchmark for directors, providing a robust and challenging programme to meet the needs of today’s executives. This 13 day modular programme leads on to the prestigious qualification of Chartered Director. The 2018 programme will be delivered in Jersey on the following dates: 19 - 20 March 2018 Role of the Director and the Board 23 - 25 April 2018 Finance for Non-Financial Directors 23 - 25 May 2018 Director’s Role in Strategy and Marketing 2 - 3 July 2018 Director’s Role in Leading the Organisation 15 - 17 October 2018 Developing Board Performance To find out more call:+44 (0)1534 610 799 email: jedirector@localdial.com or visit www.iod.je

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Funds

The Future of Fund

As the funds industries in the Channel Islands look to build on their strengths, will they explore new avenues when it comes to fundraising? Words: David Burrows

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THE CHANNEL ISLANDS have long been associated with successful funds industries. Both Guernsey and Jersey have considerable strength in alternative asset funds such as private equity, real estate and infrastructure. Historically, the cash to invest in the funds created in the islands has been stumped up from a wide group of sources. This includes pension funds; funds of funds; sovereign wealth funds; government agencies; supra-national bodies and high-net-worth individuals largely based in the UK, Europe and US. However, itâ&#x20AC;&#x2122;s claimed in some quarters that these traditional sources of investment

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â&#x2013;ź

Financing

Funds

into alternative funds have run dry, and that financing for funds is increasingly coming from other investors. If that’s the case, then who are these investors and what role do the Channel Islands play in meeting their needs? Andrew Weaver, Partner at Appleby in Jersey, has certainly witnessed a shift in investor interest. “We’ve seen an increase in the more private investment structures, particularly private wealth and family office investment structures, and ‘club deals’ investing in a single asset, primarily real estate. We’re also seeing a rise in co-investment structures, investing alongside fund vehicles, and feeder or pooling structures for investors who don’t want to invest directly in overseas funds.” Frances Watson, Partner at law firm Mourant Ozannes, agrees that greater activity has come from a new generation of private wealth and family office investors. Yet while interest from these quarters has increased, some institutional investors are scaling back. She cites regulation such as Solvency II – which relates to the amount of capital EU insurance companies must hold to reduce the risk of insolvency – as playing a part in this subtle shift. “If an insurer is investing in alternative asset classes such as private equity, it needs to focus on what it sets aside for the greater margin of risk,” she explains. “Institutions have had to think about how they allocate their assets.”

THE NEW VERSUS THE OLD It’s worth examining whether the more traditional sources of investment actually are drying up, or if that cash is simply just tied up. Or is this new cash in addition to old money? Kate Storey, Partner at Appleby in Guernsey, suggests it’s largely the latter. “Old money, however, isn’t perhaps being spread quite as widely as it was,” she says. “Professional investors and pension funds are reducing the number of fund sponsors they’re exposed to, and increasing their exposure to those sponsors, so new sponsors must cast their net widely.” Mike Capraro, Head of Business Development Fund Services at Zedra in Jersey, disputes claims that sovereign wealth funds are a significant new source of capital. “Apart from a few isolated reports of investment, this doesn’t appear

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to be a major trend for new money. These funds are sufficiently substantial and well-resourced to pursue their own direct investments rather than deploy money through third parties, unless they offer unique expertise.” So if there is a subtle change in who’s investing, where are they investing from? Is there more interest in the Channel Islands from investors in different geographies? Weaver believes the answer is yes. “We have seen an increase in Nordic promoters choosing the Channel Islands for their fund vehicle, as well as interest from India and China. There’s been an increase in investors from North America, and Middle Eastern sponsors using Channel Islands funds structures have broadened the geographies from which they raise money.” This geographic shift has been spotted by other practitioners. “The Channel Islands are seeing a lot of wealth coming from outside Europe. Sophisticated investors worldwide are getting to know about them,” says Watson. She goes on to argue that this shift hasn’t happened before because, until recently,

it’s claimed that traditional sources of investment into alternative funds have run dry, and that financing is increasingly coming from other investors

interest from the Far East and Middle East was minimal and it’s taken time to build these relationships. “The Channel Islands are much more sophisticated in marketing now. And I think greater interest in these jurisdictions from foreign investors is the

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Funds

fruition of an awful lot of hard work.” While countries like South Africa have long since had good links with the Channel Islands, for other foreign countries it’s been a slower burn. The next question is: do these ‘new’ investors have interests in specific asset classes? Kate Storey has noticed more of a focus on real estate and private equity. “In Guernsey, there’s also a focus on investment in insurance-linked securities. Growth areas also include financial services, fintech and Islamic finance.” It could be argued that private clients want to invest in things they understand, which would explain the increased interest in real estate and private equity. PE into automotive, airlines, biomedical and tech, for instance, is something that investors feel they have some knowledge about. With property, Brexit has certainly helped, in the short-term at least – as sterling declined, so interest in the London property market increased. Watson highlights a desire for incomegenerating assets – property being one. “The weakening of sterling has certainly been good for property investors. We

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continue to see opportunities for investors outside of Europe,” she says. Andrew Weaver notes that investor demand is noticeably driving a shift in the type of fundraising the islands are seeing. “Undoubtedly private wealth and family offices are driving a shift to more private structures compared with plain vanilla private equity/real estate funds. Fund structures have definitely stepped into the non-bank lending space.” However, he adds: “Some elements of this are restricted due to the limited availability of preferential tax treaties, although there are structuring options available to lessen the impact here.”

IMPACT OF BREXIT This brings us to Brexit and whether the Channel Islands are well placed, irrespective of how the UK leaves the EU, or whether it poses the risk that investors will look for funds elsewhere. Storey is optimistic. “This new market is right in the centre of the Channel Islands’ expertise, with their decades of pedigree in servicing the private wealth sector,” she says. “The major advantages of establishing

investment structures in the Channel Islands include the speed of set-up, and the physical proximity of the Channel Islands to the UK and Europe whilst being outside of the EU. Also, the stability and certainty their regulatory regimes offer whilst the UK goes through Brexit. “Optionality and flexibility are a significant feature of the more recent regulatory developments in the Channel Islands – a highly sophisticated approach to the development of regulation is aimed at ‘future-proofing’.” This positive view of the islands is largely echoed by Frances Watson. “The Channel Islands are regarded as a highly respected jurisdiction globally. As for Brexit, there will be advantages and disadvantages – things ebb and flow. The weakening of sterling linked to it has evidently thrown up good short-term opportunities for some investors.” Mike Capraro believes that fund promoters have responded to Brexit either by adopting a ‘wait-and-see’ approach or by selecting the path of least resistance and setting up their funds in Luxembourg or Dublin. “Luxembourg has apparently been a huge beneficiary of Brexit. EU managers with a history in Jersey have continued to use the jurisdiction for follow-on funds, but others with no history in Jersey have defaulted to EU jurisdictions. Tax and legal advisers to those managers also appear to favour Luxembourg or Dublin.” Despite the migration towards other jurisdictions, Capraro is optimistic that the Channel Islands will remain attractive to investors. He predicts that Jersey will continue to develop links with markets further afield, such as the growth economies of Africa, the Middle and Far East, and South America – which bring their own challenges, mainly in compliance and due diligence. He concludes: “Jersey has in the past always found a way to reinvent and reposition itself in changing circumstances through its strong and capable political leadership and through industry innovation. There’s no reason to believe that it will not continue to prevail.” n DAVID BURROWS is a freelance finance writer

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In the world of money managers, having the smarts to make more dough is what makes you the king of the jungle. Hedge funds have turned an atavistic human desire for domination into an art form, and the strategies they employ sometimes border on the surreal and ethically dubious. Here are a few that caught BL’s eye…

Words: Chris Menon

ways hedgies make their millions

1. LIFE SETTLEMENTS

3. NATURAL DISASTERS

Several funds invest in the secondary market for life insurance policies, known as life settlements. When a consumer wishes to stop a life insurance policy, for example, the hedge fund will pay a surrender value that’s higher than that offered by the insurance company. However, it’s still buying at a discount to the face value. Once the fund has bought the policy, it will continue to pay future premiums and the future payout is received by the fund upon the death of the original policyholder. Longevity is the key risk in investing in life settlements. If the hedge fund’s life expectancy assumptions are too short, the fund will pay more premiums and its return will decrease. Perversely, these funds would lose money if there was a cure for cancer or heart disease, or for any medical breakthrough that extends life.

Some hedge funds specialise in reinsuring natural disasters, charging high premiums to assume the risk of such a catastrophe from an insurer. Ironically, they tend to make more money following a natural disaster such as Hurricane Irma, as fearful insurers and state governments seek counterparties that will assume the risks that they bear. The most successful hedge funds exploit such ex-ante disaster concerns better than others, while being less exposed to the ex-post realisation of disaster shocks. One such fund is Nephila Capital. In one interview, Greg Hagood, its co-founder and Managing Partner, explained the best time to invest in insurance-linked securities. “The perfect environment would likely be after a series of large catastrophes, where the market is quite dislocated and there is a shortage of capital in the broader market,” he says. Delightful...

2. DISTRESSED DEBT

4. PRISONS

Hedge funds make money by buying distressed debt on the cheap – be it mortgages or the sovereign debt of a whole country – and then force the debtor to make full payment or suffer the consequences. In Ireland, this has led to the eviction of families in mortgage arrears. Most notoriously, a group of US hedge funds that included NML Capital (a subsidiary of Elliott Management Corp) bought Argentine defaulted bonds on the cheap after that country defaulted on its debt in 2001. After much lobbying, a US judge ruled in favour of these hedge funds in 2012, and said Argentina had to pay them back at full value. Eventually, NML Capital received an estimated US$2.28bn for its initial investment of $177 million. Such actions don’t appear to cause Paul Singer, the billionaire head of the Elliott Management hedge fund, any guilt. As he famously said: “Resentment is not morally superior to earning money.”

Profiting from the incarceration of fellow humans is a popular trade for some hedgies. UK hedge fund Winton Group is an investor in Florida-based private prison operator GEO Group, which has been accused of poor treatment of inmates and immigrant detainees. GEO’s website states that in the US it ‘oversees the operation and management of approximately 77,000 beds in 72 correctional and detention facilities’, making them sound more like hotels than prisons. GEO UK also manages the much criticised 249bed Dungavel House Immigration Removal Centre in South Lanarkshire, Scotland, which until this year even detained the children of immigrants.

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5. LITIGATION FINANCE Although class-action lawsuits can settle in the billions of dollars, successful cases often entail mountainous legal fees and take years to settle. That’s where

Funds

lawsuits right before the merger consummates, with a view to forcing a higher price for their shares. Hedge fund Magnetar Capital did this when it invested in Dell and opposed its takeover by Silver Lake Partners in 2013. Three years after the deal went through, Magnetar received £25 million more, as a judge ruled the takeout price should have been $17.62 per share, not $13.75.

8. COMMODITY SPECULATION

litigation finance comes in, funding the legal costs in order to take a cut of the expected settlements. One hedge fund that specialises in this area is Emanuel Friedman’s $7bn EJF Capital. EJF has provided funding for lawsuits over products such as Risperdal, a schizophrenia drug that allegedly causes men to grow breasts, and a medical treatment known as transvaginal mesh implants, which has caused damaging side-effects.

6. TAX INVERSIONS Companies spend a lot of time trying to figure out how to avoid paying taxes and it can make a huge difference to their profit and losses. Sometimes, one company can acquire another company domiciled abroad in a lower-taxed jurisdiction, then reincorporate in that foreign country in order to enjoy a much lower tax rate. Hedge funds have also got into this game by looking for companies in the US and abroad which may be good fits for each other. After that, it’s a simple matter of investing in the company, talking to management, and creating a catalyst. John Paulson’s hedge fund was making money from such moves, but a $51bn takeover of Jersey-registered biotech company Shire by US pharma specialist AbbVie was scuppered by US government rule changes under President Obama in April 2016.

Numerous hedge funds speculate on commodities, such as crude oil, wheat, cocoa and so on, pushing the price up in the futures markets with long-only contracts. For example, following leaks by Wikileaks, it became clear that the reason the price of oil shot up to $147 in the summer of 2008 wasn’t down to oversupply by the Saudis but because of speculation. Such activity increases price volatility and leads to price shocks that often harm the poor. “What we’re experiencing is a demand shock coming from a new category of participant in the commodities futures markets,” Michael Masters, head of Masters Capital Management testified before Congress in the midst of the 2008 food crisis caused by the rising price of food staples for the world’s poor.

9. MADOFF CLAIMS In 2010, a Partner at Baupost Group, the Boston hedge fund run by investment legend Seth Klarman, bought a claim against the disgraced hedge fund manager Bernie Madoff, who had run a Ponzi scheme. It paid $74 million for a $230 million Bernard L Madoff Investment Securities claim from Kenneth Krys, a co-liquidator of the biggest Madoff feeder fund, Fairfield Sentry. Very soon, the Madoff trustee responsible for disposing of the fund’s assets to pay claimants found that it had more money to pay claimants. In one move, the value of Baupost’s investment increased substantially and was worth approximately $150 million. n CHRIS MENON is a freelance finance writer

7. APPRAISAL RIGHTS In a merger, acquisition or management buyout, a shareholder has the right to sue in court if he thinks the takeout price is too low, and can request the court to re-appraise the value of the company. This measure makes sense because it protects the shareholders against a ridiculously low takeout price. Hedge funds buy stock in a target company shortly before, or even after, a merger is announced, then file

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Finance

New research demonstrates that female entrepreneurs attract far less venture capital funding than their male counterparts â&#x20AC;&#x201C; so what can be done to remedy the imbalance?

Are women doomed before they start? 68 november/december 2017

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Finance

THERE’S AN INCONVENIENT truth that female entrepreneurs will stumble across sooner or later: their gender will count against them when they come to seek investment. Yet a not-insignificant proportion are starting their own firms exactly because they’ve suffered gender discrimination in their careers. The past decade has seen a 45 per cent growth in the number of women founding their own business in the UK. And, according to a survey in May of female founders and aspiring founders by Allbright, an investment platform and support network for femalefounded businesses, 61 per cent of them did so to have more control over the direction of their careers and the type of work they take on. And 44 per cent did it to take advantage of flexible working conditions. Having opted to create their own entrepreneurial future, female founders then struggle to get funding for their ventures because of their gender. The facts speak for themselves. In the US, female-founded firms make up nearly 40 per cent of all privately held companies but attracted only 2.17 per cent of the country’s venture capital in 2016, according to researcher PitchBook. Globally, only 10 per cent of VC funds went to female founders between 2010 and 2015. And in the UK, PwC found that only 2.7 per cent of VC funding went to female-led businesses during 2016. Further research demonstrated that of the 160 venture capital firms in the UK, only 18 per cent per cent are investing in women. Dana Kanze, a New York tech entrepreneur-turnedacademic, decided to delve into this shocking state of affairs. She quit her career starting up businesses to investigate the discrimination she suspected she had experienced as a female co-founder.

GENDER BIAS In her recently published academic paper, We Ask Men to Win and Women Not to Lose, Kanze and her colleagues analysed video footage of venture capitalists interviewing entrepreneurs at TechCrunch Disrupt, one of the world’s most prestigious start-up competitions. Only start-ups with a demonstrated need for venture capital are accepted into the competition, belying the claim that female entrepreneurs raise less money because they start businesses with lower capital needs. What the researchers found was that start-ups led by men raised an average of $17.1 million per startup, which was 5.14 times more that the average funds raised by female-led start-ups ($3.3 million). They discovered that this extreme disparity came about because of a kind of bias that “is far more deeply

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PROMOTION V PREVENTION This finding had been personally borne out by Kanze’s experience at TechCrunch 2009, where as co-founder of tech firm Blue Line Labs, she was constantly asked prevention questions while her male co-founder was asked promotion questions. “We were sitting side by side, we both had the same finance background, and I had the title of CEO, so I should definitely have been asked the promotion questions,” says Kanze. “He had an operational title, so he should have been asked the prevention questions. It just became blatantly obvious after a while. I thought it was just unique to my start-up.” The paper didn’t cover why women were asked more prevention rather than promotion questions but Kanze believes it comes down to implicit gender bias and stereotyping. “In this particular context, women don’t embody the stereotypical characteristics of an entrepreneur, which is young, male, white and Stanford educated,” she says. “The stereotypical characteristics of women are incongruent with that of the archetypal successful entrepreneur – like Mark Zuckerberg. These widely held beliefs will manifest themselves in the types of questions directed towards men versus women, both by male and female investors.” Felicia de Laat, a Partner at law firm Mourant Ozannes, thinks that this unconscious discrimination against female entrepreneurs is because “people tend to favour, develop and support people who are most like themselves”. In the male-dominated venture capital world – where only one in 10 decision-makers in British venture capital firms is a woman, while two-thirds have no female decision-maker at all – this means male VC partners investing in male founders. “A lot of VC firms and private equity firms have very low levels of female partners in executive roles and, because of that, they tend to mirror themselves in the start-ups they invest in,” says de Laat. “Generally,

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Words: Emma De Vita

ingrained and insidious than direct and explicit,” explains Kanze. It boils down to the types of questions venture capitalists asked of male and female founders. While the questions put to female entrepreneurs tended to focus on the potential for financial loss – for example: ‘How do you prevent people from gaming your game?’ – questions for male entrepreneurs tended to focus on the potential for financial gain, such as ‘Where do you want to get to if everything is fine… What is your aspiration?’. In other words, female entrepreneurs are being asked to prove they can execute a safe return for an investor (playing not to lose), while male entrepreneurs are instead expected to show that the opportunity can grow (playing to win). The researchers go on to show that the latter (promotion) approach is far more attractive to potential investors than the former (prevention) approach, and can be, in part, to blame for the difference between men and women in attracting funding.

Finance people understand that diversity is a good thing in the abstract. But when it comes to the crunch and you’re making a deal, you’re going to fit it into your model and your sweet spot and go for the deals that match those, and you might not have a diversity factor as part of that process.” Levelling the playing field for female entrepreneurs therefore means getting more women into those roles, says de Laat. But you have to reach a critical mass of around one-third female partners in executive roles to make a significant difference to investing more in female-led start-ups. “You need a commitment from leadership in VC firms to gender diversity – you need to tie it to the top, to someone who has skin in the game,” she says. Kanze advises VC firms: “Create a playbook of their questions that are applied in the initial screening process regardless of candidate, that they should use instead of flying by the seat of their pants and asking adhoc questions to whoever shows up.” This means asking questions that are balanced between prevention and promotion in order to improve their decision-making processes. “If there’s some irrational component, like implicit gender bias, then many firms are looking to correct that anyway as it’s going to maximise returns for them.” Philip Salter is the founder of Londonbased thinktank The Entrepreneurs Network, which runs a Female Founders Forum. He says: “A more diverse investor base would go a long way to ensuring a greater number of female-led businesses are better funded. Part of this involves changes to venture capital firms’ employment practices, but it also requires more female entrepreneurs paying it forward.” He cites entrepreneur Debbie Wosskow, who recently sold Love Home Swap for $53 million, and co-founded Allbright to

fund and support female entrepreneurs. However, he adds a note of caution: “Funds targeted at female founders will never be the whole solution, but I expect they will prove the economic case for challenging our biases. “The market is coming up with other solutions. For example, on some crowdfunding platforms, female-led businesses are more likely to be funded than their male counterparts. Clearly, the investment base here is less concerned by the founder’s gender.” De Laat suggests female founders find the VC firms that are more likely to invest in female-led start-ups, such as Astia, Merian Ventures, Female Founders Fund and Aspect Ventures, as well as finding a

support network and mentor. Kanze says that if a fund does have a mandate to only invest in female-run businesses as an investment criteria then it neutralises the threat of implicit gender bias. In the short term, when asking for funding from investors, Kanze suggests female founders attempt to identify the questions they are being asked as prevention or promotion types, and to redirect the dialogue to their advantage. “Stay on topic while weaving promotion into your responses,” she says. Until things change in the long term, this is a useful tool in a female founder’s toolkit. n EMMA DE VITA is a freelance business writer

gender imbalance

40%

proportion of privately held companies in the US that are female founded

2.17%

venture capital funding attracted by those firms

Only one in 10 decision-makers in British venture capital firms is a woman, while two-thirds have no female decision-maker at all Source: Pitchbook, 2016

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Finance

Face the future Regardless of how things may shape up in the future, the funds sector already requires a large volume of detailed information to be shared quickly and securely. Deloitteâ&#x20AC;&#x2122;s new regulatory and investor reporting managed service uses one set of data to satisfy multiple fund registration and reporting requirements. Be ready for tomorrow, today. Private Equity John Clacy, Partner D: +44 1481 703210 jclacy@deloitte.co.uk

Real Estate David Becker, Partner D: + 44 1481 703335 davbecker@deloitte.co.uk

Private Equity Helen Gale, Partner D: +44 1534 824358 hgale@deloitte.co.uk

Real Estate Siobhan Durcan, Director D: +44 1534 824274 sdurcan@deloitte.co.uk

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november/december 2017 71

Finance

Is robo advice the end of wealth management? Warren Buffett has long held the view that the only thing you can be sure of when it comes to fund managers is their fees. Could robo advisers replace them and provide better value for money? 72 november/december 2017

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Finance

Words: Richard Willsher

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kid-gloved treatment. The cat seems to be out of the bag. The investment industry, having developed a low-cost, hi-tech solution to handling smaller clients, is now faced with clients of all wealth levels who expect tech every time. And it’s putting pressure on some providers, who simply can’t keep up with the new technology. Research released in June 2016 by consultancy Capgemini found investment firms that didn’t have the latest tech were losing business. It reported: ‘Up to 56 per cent of [investment] firms’ net income could be at risk due to client attrition due to lacking digital capabilities’. And ‘more than half of wealth managers (55 per cent) aren’t fully satisfied with their firm’s digital capabilities, and consequently over a third (39 per cent) would even consider looking for employment elsewhere’.

SHIFTING SANDS So, is this the end of wealth management as we know it? “Yes and no,” answers Alexis Calla, Global Head, Investment Advisory and Strategy, Wealth Management at Standard Chartered Bank, based in Singapore. “We believe that a combination of factors will continue to require wealth managers to change their game. However, this fundamentally is still about helping clients invest their life savings wisely, to manage emotions and stay the course during down markets. “The traditional expertise of wealth managers, as such, will continue to be an asset. This is especially so in Asia, where the majority of the client base is still with banks, as these institutions are strong brands and distributors. The commercial viability of the robo advisers and fintech is yet to be proven.” Vassilis Papaioannou, Chief Investment Officer at London-based investment adviser Dolfin, is convinced that the arrival of robo tools improves efficiency in the market. “By bringing costs down, making more objective decisions and by filtering the asset class universe, it will definitely take a front seat among clients’ priorities and choices,” he says. “However, there is a role for the discretionary adviser who has the expertise to take the output of the robo adviser and refine it.

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RESEARCH FROM S&P Dow Jones Indices, among others, regularly concludes that a majority of active fund managers fail to meet the benchmarks they set for themselves. Investors putting money into passive tracker funds can at least be sure that performance will match their indices – for better or for worse. Hence the extraordinary growth in the use of index tracking exchange traded funds (ETFs). The key is choosing the right ETF, or other tracker fund, to invest in. What’s missing for many private investors is the ability to make that choice – and that’s where financial advisers and wealth managers of various hues come in. But what if such decisions could be made more quickly and cheaply using a computer algorithm? This is what most so-called ‘robo advisers’ do. They ‘on-board’ an investor by querying his or her appetite for risk and then offer a selection of funds that match these criteria. Take Wealthify, for example, which says: ‘Create a plan by choosing your investment style and how much you want to invest. You can start investing with just £1’. Its plans may comprise a number of funds, and asset allocation will be among those invested in cash, cash equivalents, shares, property, government bonds, corporate bonds, commodities and alternatives. Wealthify resembles many other robo offerings, including Nutmeg and Moneyfarm as well as those offered by established banking and investment brands such as UBS and Investec. But not all robos are the same. Take Investec’s Click & Invest, which launched earlier this year. This uses a similar onboarding process to determine what sort of investor you are and recommends an investment strategy. The fees are on a sliding scale – starting at 0.65 per cent for the first £100,000 invested and reducing in stages to £250,000, where the cost falls to 0.35 per cent. However, you have to have £10,000 to open an account. This seems to put paid to the notion that robo advice is great for those with smaller amounts to invest, who can’t afford financial advisers’ hefty fees, but won’t appeal to those wealthier clients with the cash to pay for a more personal,

Finance

There is a role for the discretionary adviser who has the expertise to take the output of the robo adviser and refine it “But as a starting point, a robo system can replace a human eye and run a million checks and do complex calculations – and that has to be the way forward. So, you can follow the robo route to take you down a purely quantitative investment path or you can factor in a human, discretionary function.”

DISTORTIONS AND BEAR MARKETS One of the worrying aspects of the way in which algorithms work is that they may all do the same things at the same time. While there are checks and balances, and stop-losses available, a massive ETF bubble may well be emerging – one which, in essence, is driven by automatic trading mechanisms. For example, it’s possible to look at the momentum that’s driven up the major tech stocks in the US. Many ETFs, whether they’re tracking major indices or tech indices or other criteria, are forcing stock prices to stratospheric levels. The result is self-fulfilling. As the prices of the big five – Alphabet, Amazon, Apple, Facebook and Microsoft – increase, they cause indices to be rebalanced. This, in turn, causes further momentum-driven funds to follow the charge and drive their prices even higher. What happens, then, when an algorithmic switch in the mechanics of ETFs, and indeed in robo advisers, says it’s time to sell? There’s almost bound to be an automatic and catastrophic sell-off that may accelerate into a crash. Other unknowns are how robo advisers will behave in bear markets. And how they will they cope in times of technical failure. The recent case of Barclays’ switch to its new DIY investment platform, Barclays Smart Investor, proved that it really wasn’t so smart. The UK bank is said to have been haemorrhaging clients, who are disenchanted by its tech incompetence.

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So far, however, we haven’t witnessed a serious accident. Moreover, as Vassilis Papaioannou explains, the regulator, the Financial Conduct Authority, needs to be assured that a firm’s robo offering is fit for purpose and that the provider is offering a transparent solution, not just selling access to a black box. Good news for investors, perhaps, but the regulators, central bankers and governments failed to spot and prevent the bubbles and excesses that caused the last financial crisis. Will they be any better at preventing the next one? It’s still relatively early days for robo advice, however. The chances are that when we look back at today’s market five or 10 years down the line, we’ll view the current robo offerings as quite crude. Innovation, largely by fintech firms in the financial services sector, is fast and furious. On-boarding and asset/fund selection are relatively simple processes to automate, compared with the behavioural aspects of client management. Perhaps future innovations will make inroads into human behaviour and offer more client-sensitive investment solutions. So, to our core contention: does robo advice spell the end of wealth management? Well, as an industry, no, because investors will always need routes to invest. But maybe the sun is setting on the age of the purely personalised advisory service. Technology brings greater efficiencies, and firms that don’t adopt it are bound to feel the squeeze at the margin unless the client is willing to pay for traditional human hand-holding. It may come down to value for money, which could mean that established wealth managers will be called upon to justify their approach in pounds and pence. n RICHARD WILLSHER is a freelance financial writer

Could robo get it wrong? A Harvard Business Review article in April said: ‘Every day, consumers experience more common shortcomings of artificial intelligence (AI): spam filters block important emails, GPS provides faulty directions, machine translations corrupt the meaning of phrases, autocorrect replaces a desired word with a wrong one, biometric systems misrecognise people, transcription software fails to capture what is being said. Overall, it is harder to find examples of AIs that don’t fail. ‘Analysing the list of AI failures, we can arrive at a simple generalisation: an AI designed to do X will eventually fail to do X.’ This is worrying. The annals of recent ‘flash crashes’ are worrying too: May 2010’s 1,000-point drop in the Dow Jones Industrial Average; October 2013’s US$6.9bn market capitalisation loss on the Singapore Stock Exchange; October 2016’s six per cent drop in the value of sterling against the US dollar, to name but three. Often the causes of such events have been shrouded in uncertainty, but ascribed in some degree to computer failure, malign cyberattack or automated trading misfiring. Investors considering the strengths, weaknesses, opportunities and threats of robo advice should also factor in the possibility of technology failing. Putting all your investment eggs in a robo basket seems an unwise asset allocation.

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Getting to grips with uncertainty That we live in uncertain times is a given, but it means companies are having to reinvent the way they think about the future Words: Dave Waller IT’S NOW 15 years since former US Secretary of State Donald Rumsfeld uttered his infamous musings on uncertainty. “We know there are known unknowns,” he began, when speaking about the lack of evidence connecting Saddam Hussain to weapons of mass destruction and terror groups. “That is to say, we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know… It is the latter category that tend to be the difficult ones.” Rumsfeld’s head-scratching logic seems particularly apt for today’s world – one that’s travelled so far along the uncertainty trail that we’ve apparently turned ‘postfact’. We have so many known unknowns right now – from the destructive force of hurricanes, to the sweeping rise of the far right. How about a Brexit cliff lying up ahead, or warnings of failing food crops, oil supplies and water? Or a worldwide population crisis, the rise of global terror, and a game of nuclear brinkmanship being played out by the figureheads of the US and North Korea. Then there are the unknown unknowns, what Rumsfeld called the ‘difficult ones’. These days it’s almost impossible to have any solid sense of where we might be in 12 months – if indeed we’re here at all. “In the past, a successful business could have continued for 10 to 20 years, or even generations, largely unchanged,” says Ray Hammond, a futurologist who works with businesses to identify the challenges they can expect to face. “This isn’t the case today.” One reason for this shift is what fellow futurist Ray Kurzweil calls the Law of Accelerating Returns. This states that in one decade, our society now sees the kind of technological advances that used

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to take a century. This rapid escalation in capability is leading to an increasingly connected and inter-dependent globe, one that’s forced to shift and reset itself every time a new breakthrough arrives. “We live now both in reality and virtual reality,” says Allam Zia, Senior Consultant at BDO Greenlight. “When you add in tech disrupters, cyber-threats and the onset of artificial intelligence – which is scaring the living daylights out of some people and raising fears about jobs – it all adds to that feeling of us living in highly uncertain times.” It’s worth pointing out at this stage that nothing is actually ever certain, we just like to think it is. Even when events are going smoothly, the only certainty is that they will, at some point, dive down the dunny. Think back 30 years to Black Monday. US institutional investor Ted Aronson was one of many who, on the back of the Reagan boom, woke up that October morning with no idea a crash was coming. “We identify patterns and trends, but there’s a whole craziness going on in the market that’s more akin to The Twilight Zone,” he reasoned in its aftermath. Aronson was told by one statistician that the 1987 crash was a 25-sigma event – 25 standard deviations away from the mean. In other words, it was virtually impossible.

LEARNING CURVE So how can business best function at a time when our experience of such unknown unknowns is being turbo-powered by the matrix? Ray Hammond believes the only way to deal with the current level of uncertainty is through continuous, broad, personal education. “That’s the only antidote that enables people to keep up and take advantage of change,” he says.

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“The worst thing you can do is to go into work saying: ‘Thank goodness I’m done with school’. That attitude is the kiss of death today.” Organisations can change their approach too. In his book, Our Iceberg Is Melting, Dr John Kotter told the story of a penguin that discovered its colony was in imminent trouble, and how it got others to overcome their fear of change and do something about it. Kotter had spent 40 years studying the habits of leaders and organisations in the creation of his fable, and cooked up eight steps for dealing with change. They included: creating urgency; getting champions and sponsors involved; creating a vision for change that you can share; communicating that vision; and creating quick wins that show the benefits are being delivered as you go. It’s all about being prepared. “If you cross the road without looking, you’re inviting a problem,” says Wayne Atkinson, Group Partner at law firm Collas Crill. “Business is just a much more complicated version of that. Make sure everyone’s aware of the wider conditions, and show your workings. You can’t guess the pound will shift against the dollar. But being able to show you have processes in place is part of your responsibility as a director.” Yet not everyone is convinced that traditional change management methods are enough these days. Author and futurist Mark Stevenson believes that any company wishing to tackle uncertainty has to build a culture that has a healthy relationship with the future. “Companies find themselves blindsided by uncertainty because they’re not very literate about the questions the future is asking them,” he says. “And the questions

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it’s asking business now are: what are you going to do about your responsibility to the environment? What about your role as citizens, facing the retreat of democracy and the rise of inequality? And what are you going to do about the fact that, because the world is so uncertain and all this is happening, nearly 90 per cent of employees hate their jobs?”.

EMBRACING CHANGE Stevenson is basically saying that any company wishing to deal with uncertainty simply has to lean into it. By contrast, anyone still clinging to the idea of shareholder value as a priority won’t be adopting the kind of long-term, systemic thinking that these ever-shifting sands require. Says Stevenson: “A number of CEOs I sit down with will tell me: ‘I can’t do anything. My hedge fund investors will crucify me if I try to do the right thing.’ But ask Unilever CEO Paul Polman and he’d say he spends his time courting the investors he wants.” Stevenson likes to use Unilever as an example. A company with two billion customers, it uses its scale to be a force for change in social justice, inequality and climate change, and to become an environmentally positive company – making a net contribution to the world’s eco-system, not taking from it – by 2030. Stevenson reckons that, since he invested in Unilever a couple of years ago, its share price has gone up 50 to 60 per cent. “On the one hand, that’s because Unilever is now thinking systemically, and so is managing itself better,” he says. “And because the company is taking those citizenship issues seriously, guess what? It’s attracting all the best young talent. Management teams that address these questions find themselves outperforming the market time and time again.” As the Unilever example suggests, uncertainty isn’t necessarily a bad thing. In the wake of Black Monday, an army of economists warned that the financial world was coming to an end. Yet large-cap stock prices rose about 12 per cent in 1988, and around 27 per cent in 1989. Investors such as Warren Buffett used the crash as a buying opportunity, picking up assets they’d long had their eye on, suddenly at rock-bottom prices. Amazon would later prove able to ride out the dotcom crash at the turn of the century, by focusing its business plan on brand recognition, not short-term income, even as its shares dropped to as low as $10. According to Forbes, those shares may be worth $2,000 by 2019. Uncertainty continues to breed opportunity today. The likes of Uber and Airbnb have famously taken advantage of change, introducing new models that only serve to drive the uncertainty even further. So, how well are other more traditional companies preparing themselves in this new reality? “We’re finding companies are becoming much better at preparing for change, because it’s inevitable and they have to,” says Allam Zia. “Law firms wouldn’t have had permanent continuous improvement functions 10 years ago. They do now.” Stevenson highlights one broader trend that may be bolstering us all against uncertainty. The world, he reasons, is moving away from hierarchical

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These days it’s almost impossible to have any solid sense of where we might be in 12 months – if indeed we’re here at all

organisations that are built on economies of scale but are vulnerable to change, towards networks that thrive on the economies of distribution. “Stuff like education, power and manufacturing used to be done by big monolithic organisations, but is increasingly going to be distributed, co-owned and co-managed by a host of smaller ones,” he says. “This networked governance and management handles uncertainty much better. It’s a more nuanced way of doing things – if one node goes down, you can get around it quite quickly.” The overall message here, from large established firms to nimble start-ups, is that the world is moving, and you simply can’t stand there waiting for certainty to suddenly bed in. It’s all about being prepared for those unknowns, whether they’re known or not. As Wayne Atkinson put it, look both ways before you cross the road. And if Stevenson is right, you’d better ask yourself the real question: what contribution will you make when you reach the other side? n DAVE WALLER is a freelance business writer

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Business

How does a

With companies having to work so much harder to retain the public’s love, how does a brand come back from the dead once it’s fallen out of favour?

Words: David Burrows

THESE DAYS, IT seems that companies

can wreck their reputation with just one ill-judged tweet. For others, it takes slightly more catastrophic circumstances. United Airlines, BP, Hotpoint and Barclays spring to mind in this category, for a whole host of different reasons. Damage to a brand can be swift, especially with social media giving

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customers an easy outlet to vent their spleen against a company. However, Nichole Culverwell, Director at PR company Black Vanilla, insists that, in most instances, reputations aren’t destroyed overnight. “Brands may seem to have been brought down quickly, but usually it’s a result of a long-term accumulation of failures.” She points to BlackBerry as a case in point. “With BlackBerry, brand erosion was slow-build. The product didn’t keep up with innovation from rivals or respond to people’s changing habits.” BlackBerry’s cause wasn’t helped by its social media team tweeting from their official account using an iPhone. Culverwell says a headline-grabbing

‘reputational crisis’ is usually, on closer inspection, the result of a long series of ill-judged decisions. Chris Chilton, Managing Director (Operations) at PR firm Orchard, agrees that brand damage can be cumulative in nature. “A brand can become jaded and potentially out of touch if it fails to mature and evolve in line with its market. This will mean really listening to customers and making positive changes to align with their conscience, beliefs and values.”

BRAND IDENTITY In order to understand why companies can fall out of favour, we need to look at exactly what constitutes a brand and why it’s so important. Adam Riddell, Director

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at Crystal PR in Jersey, insists it’s about far more than a slick logo. “Reputation lies at the very heart of the modern brand. And this is linked to service, product, quality and sustainability. It’s also about corporate behaviour – how ethics and corporate governance are defined.” In essence, brand is the identity of the business – what it stands for, and how it is and wants to be perceived. One of the definitions of PR is ‘what you do, what you say and what others say about you’. Brooke Kenyon, Managing Director (Client Services) at Orchard, says this maxim is equally applicable to brand. “Endorsements from brand ambassadors, opinion formers, even competitors are very valuable.” So how can a brand become undone? The answer is in a multitude of ways. Launching a woefully sub-standard product in a highly competitive market, harming the environment or providing pitiful after-sales service are unlikely to do you much good. Disrespecting your customer base is usually pretty damaging too. As a PR own-goal, Gerald Ratner’s reference to his own products as “crap” takes some beating. One damaged brand that springs to Chilton’s mind is taxi giant Uber. “Arguably their product is very successful, welcomed by the market, and in line with customer expectations. Their business has, however, been beset by reputational issues in the

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US – sexual harassment allegations, being sued by Google, the resignation of a Senior Vice President over a scandal, and dashcam footage showing the founder losing his temper with a driver. “Issues like these suggest that the fastgrowing business, which is in the spotlight, has failed to put measures in place to protect its reputation, and its business is suffering as a result.” The idea that product is the be-all and end-all is also some way off the mark. Customers may boycott a product not

Multinationals realise it’s not good enough for companies to just ‘say something’, they have to be seen to be doing something

on grounds of quality but because, for example, it comes to light that they’ve used child labour or haven’t paid their fair share of tax. Indeed, tax has proved a thorny issue for the likes of Amazon, Google and Starbucks, which came under fire for not paying UK tax on sales despite large-scale business operations in the country. As Riddell explains, the widespread call for better corporate behaviour brought about a response. “Reputational decisions were made in the boardroom and tax payments were made to satisfy public demand. We wouldn’t have seen this happen 10 years ago. Multinationals realise now that it’s not good enough for companies to just ‘say something’, they have to be seen to be doing something.” Clearly the reputational damage felt by the likes of Amazon, Google and Starbucks wasn’t irredeemable – they weren’t battered brands in the way Ratners or, more recently, Bell Pottinger were. Other companies have disappeared not because their product was poor or they’d been embroiled in scandal, but because their business model let them down. In many ways, Kodak was a pioneering company, but it didn’t manage its operations in an agile way and soon had a business model that wasn’t fit for purpose. Kodak sold arguably the best digital printers in the marketplace, but rather than

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work with partners, the company decided to build its own. The result was that it lost ground in terms of speed to market and competitive advantage. So, if a brand is battered – how can it be rebuilt? Chilton says it partly comes down to ethics and clear communication. “Customers understand that people in charge of business sometimes make mistakes. It’s what they do next that really matters. Often it’s possible to be honest, transparent, apologetic, even remorseful, and gain the empathy and support of customers, then move on.” This point is echoed by Culverwell: “You have to be honest and open about the problem. VW’s response to the emissions scandal has at times been praised. Compensation has been generous and they’ve put the customer first, even if it’s cost the company more. In cases like VW, you need to show integrity and demonstrate that you’re addressing the issue. When a brand’s reputation takes a hit like this, the first people you need to call are your PR team not your legal team.”

PICKING UP THE PIECES Rebuilding a brand, whether it’s just tired or has been hit by controversy, can often take time. If the product is poor quality or outdated, you won’t be able to advertise your way out of trouble. If the product is sound, but maybe the brand name has lost its allure, then there is real opportunity. Old Spice is one brand Adam Riddell highlights. “Old Spice has, over years, been viewed as a product for the over-50s. But the company launched a successful and humorous campaign aimed at a younger audience. The product is exactly the same, it’s just how it’s perceived that’s changed.” The concept of reinvention also applies to much-berated brands such as Skoda. In the days before perestroika, Eastern-bloc-

there is more robustness and resilience if the reputational responsibility is shared across the management team under an unrelated brand identity.

Customers understand that people in charge of business sometimes make mistakes. It’s what they do next that really matters

manufactured cars like Skoda were referred to as ‘skips on wheels’ – known for being cheap yet often unreliable. But fast forward to this year and Skoda – now owned by VW – has won multiple awards. “Skoda has allied itself with another brand to win favour and target a completely different demographic,” Riddell says. Brooke Kenyon describes Skoda as a successful ‘challenger brand’. “People like the underdog – they like competition and they want the small challenger to do well,” she says. Looking at things from the top down, a charismatic leader is often an asset to a business. But are some companies too heavily reliant on the personality of the founder? Undoubtedly companies such as Ford, Disney, Apple and Virgin have attached themselves closely to the person at the helm. Kenyon argues that while there are many examples of successful businesses named after their founder,

VULNERABLE SECTORS When it comes to riding the storm, are certain industries more resistant than others to bad press? Culverwell says: “Retailers and possibly phone companies are more resilient – in the majority of cases the consumer isn’t at risk if something goes wrong. However, with healthcare companies, for example, especially where ethics and child safety are concerned, when their reputations are called into question it can be very damaging.” The baby milk scandal in the 1970s is one example. Multinational milk companies including Nestlé were accused of causing infant illness and death in poor communities by promoting bottle feeding and discouraging breast feeding. The reputational damage associated with such an emotive scandal was huge and long-standing. Unquestionably the biggest threat to reputational damage in the coming years will be linked to cyber security. It’s not a case of if but when a brand is targeted. “Cyber security is a huge challenge and is very relevant to the Channel Islands, given the number of financial companies here,” Culverwell says. “When a security issue arises, you have to move very fast. Not being prepared means you’ve left your brand open to serious damage.” n DAVID BURROWS is a freelance business writer

Are some brands immune? You could argue that ‘no frills’ airlines such as Ryanair show a degree of immunity – the company is often criticised over customer service but this doesn’t stop people using it. However, Nichole Culverwell, Director at PR firm Black Vanilla, doesn’t buy this argument. “Ryanair’s brand is associated with cut-price fares,” she says. “However, the company’s CEO, Michael O’Leary, was disrespectful towards customers. He took the ‘no frills’ image too far and had to improve customer service to win business back.”

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The service improvements weren’t massive – a more flexible booking system and increased cabin baggage allowances. No-one expects silver service from Ryanair, but the company had discovered there was a line it couldn’t cross. Having regained customer trust, however, the company’s share price took a hit in September after the airline was forced to cancel thousands of flights due to pilot

shortages. Only time will tell whether this brand truly has the ‘stickability’ with customers it boldly claims.

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We love events, loud or discreet, and we are passionate about making them the best they can be. Our services range from full organisation to simply advising on equipment hire and we cover anything and everything in between! We approach all challenges with a hands on colourful attitude. Contact Simon to discuss your requirements T: 01534 865885 E: Simon.Gasston@delta-av.com | W: delta-av.com Unit 4 | Springside | Trinity | Jersey | JE3 5DG

THE AGENDA The Agenda is compiled by BL’s Fashion and Lifestyle Editor, Thom O’Dwyer, with additional material by Danny Cobbs

gets festive

1. SCARLET WOMAN Since it was founded in 1951, Italian powerhouse brand Max Mara continues to create dynamic, sophisticated, elegant, timeless clothes. This is the label of choice for professional women the world over. Or, as the label succinctly puts it: ‘We design for modern women with big ideas’. Most notably adored for its coats and its modern approach to creating wardrobe classics that transcend seasons and frivolous fashion trends, Max Mara is a fashion institution. Beautiful flowing fabrics, streamlined silhouettes and clean lines define every collection. Now under the creative direction of Ian Griffiths, the iconic brand continues to produce the refined separates and signature outerwear that have made it the height of power dressing at its most refined. The poinsettia-red, camel-hair Pappino Coat pictured here – which dramatically opened the AW17 show – exudes couture. Typically oversized, with dropped shoulder seaming and wider notch lapels, it's a winter warmer that has the 'Wow' factor in spades! £1,738, www.matchesfashion.com

INSIDE THE AGENDA: ACCESSORIES, CARS, DRINK, FASHION, FOOD, FOOTWEAR, FRAGRANCES, FURNITURE, JEWELLERY Everything you need for a more stylish life.

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THE AGENDA 2. BAGS OF STYLE London-based designer Melissa Del Bono launched her luxury brand meli melo in 2005, introducing top-quality handbags and accessories with her timeless London-chic look. It became a go-to label for fashion insiders and A-list celebrities such as the Duchess of Cambridge, Sienna Miller and Kate Moss. The newest handbag collection – the Severine Bag – is the result of an inspired collaboration with one of the brand’s most devoted customers, American socialite, fashion icon and New York It-Girl Olivia Palermo. Combining the DNA of Del Bono’s creative flare and Palermo’s New York cool has resulted in the ultimate metropolitan sophistication. We’ve had the Baguette Bag, the Bowler Bag, the Barrel Bag and the Backpack. Now we’ve got the cutting edge, hard-lined architectural Bucket Bag – the season’s most desired must-have handbag. In the finest Italian matte-finish calf leather, the bag has a flat zip closure, top handle and a distinctive floral ikat print lining. The oversized knot holds a long tubular strap, so it can be easily transformed into a cross-body bag, and it's embellished with statement gold charms to add a touch of New York street-cred style. A real humdinger of a contemporary classic! £600, www.melimelo.com

3. SPARKLE LIKE YOU MEAN IT Ladies, when you’re looking for something to update your favourite man-tailored blazer for the new season, look no further than Gucci. The superglam faux pearl brooch pictured – yes, brooches are front-page news again – is finished with dangling tassels and vibrant crystals for playful movement and added sparkle. The ruby red centre jewel adds an additional je ne sais quoi exotic touch. Watch this striking baroque bauble enliven a simple sweater or workaday woollen dress when slipping from day to night. Definitely this season’s most dazzling, sine quo non fashion accessory. £545, www.mytheresa.com

4. GET THE PARTY STARTED Where would party people be at Christmastime – or any other time of year for that matter – without Waitrose? Whether you’re throwing a lavish bash or a smaller, more intimate gathering, there’s a mouth-watering selection of sophisticated sweet and savoury bites to serve at your festive party, or even as a light starter on the big day itself. With great quality, guaranteed freshness, inventive finger food ideas and a massive choice, Waitrose can’t be beaten. The delicious, kaleidoscopic selection of festive nibbles pictured here are eye-popping smoked salmon beetroot and spinach-flavoured blinis, and utterly elegant king prawn, mango and coconut terrines. Holiday entertaining made easy. Thanks, of course, to wonderful Waitrose. Blinis, £7/12 pack; Terrines, £5.99, 160g/2s, www.waitrose.com

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5. SWEET DREAMS Beauty is in the eye of the householder. And if palatial, romantic, almost decadent opulence is your thing, look no further than Cadence. As winter sets in, get deep and moody in the bedroom with darkened-down walls and a jewel-toned centrepiece like the gorgeous bed pictured here. Deep, rich colours combined with even richer velvety textures, this upholstered sleigh-style bed creates a lavish boudoir that simple oozes luxurious living. The headboard, with its plush buttoning and precious ruby red hue, creates an atmosphere of drama and unrestrained romance. £989, www.livingitup.co.uk

6. FASHION REBOOT There isn’t a single red-blooded fashionista in the galaxy that at this very minute isn’t lusting for and salivating over these horribly hip graffiti-embellished ankle boots by Dolce & Gabbana. They’ll definitely be on every fashion-conscious lady’s wish list for Santa! The ultra-smooth calf leather boot is scrawled with cool, amorous inscriptions and features a graphic checkerboard pattern chunky heel. These boots were meant for walking, whether worn with ripped denim jeans or a little black dress for a real rock ’n’ roll edge. Fabulous footwear with a street-savvy touch. £875, www.mytheresa.com

7. ON THE SCENT Manhattan’s hippest up-market parfumier, Bond No 9 takes its name from its cooler-than-cool address in New York’s NoHo. Just in time for Christmas, this red-hot fragrance brand has launched the world’s premier perfume and lipstick duo. Teamed up with jungle red lippie, the Nolita eau de parfum is a classic, ladylike, sweet freesia scent, with an unexpected wake-up hit of tangerine and fleeting notes of lilies, rose, jasmine, soft amber and sandalwood. Gorgeous! And totally delicious. Guys, this is the perfect stocking present for the lady in your life. Get shopping! £280, www.selfridges.com

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THE AGENDA

8. KEEPING WATCH Why not lend your new season look a highly visible dose of Gucci brand recognition with this statement-making timepiece? Let’s face it, girls – if you’ve got it, flaunt it. The watch is cleverly crafted from plexiglass in the label’s iconic trademark Christmassy red and bright green colours. With fun fashion watches making a big comeback – not everybody can afford a Rolex or even wants one – this piece will ensure you’re either bang on time or fashionably late, depending on the occasion. Go for it, ladies! £450, www.mytheresa.com

9. DON’T SWEAT IT Believe it or not, the sweatshirt-and-jeans combo became a catwalkworthy look at this season’s menswear shows. Yep, the branded sweatshirt is back with a vengeance. Wear it on its own for a sporty casual look, or over a shirt for a smarter look. From hugely popular men’s wear label Ami, the Parisian-cool, pillar-box-red sweatshirt pictured here is emblazoned with the label’s bold brand logo. Crafted in loop-back cotton jersey with a classic crewneck, the terry towelling logo appliqué is outlined in white felt for a preppy collegiate look. Ami was launched in 2011 by Alexandre Mattiussi. With stints at Dior, Givenchy and Marc Jacobs under his belt, the designer’s aim was to create a stylish and comprehensive collection of wardrobe staples eschewing overtly trendy references. Blurring casual street and classically chic styles, the label has amassed a huge male global following. This clobber is pocket-friendly too, and will make any fashion-conscious guy happy come Christmas morning. £155, www.stuartslondon.com

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10. INTO THE WOODS This is furniture that gives a whole new meaning to the old saying about sleeping like a log. Fun, statement stuff for the home if ever there was. The manufacturer, MeroWings, is the brainchild of London-born designer/entrepreneur Meena Valail, who – despite studying natural sciences at university – in 2005 founded a furniture and home accessories company in Stuttgart, Germany.

Her first product, the patented Melo Wing pillow, was inspired by bird wings. It literally envelopes the sleeper’s neck in comfortable bliss. By 2009, the business had expanded, and its now best-known product line, The Forest Collection, was introduced. The sole intention was to bring nature into the home. The Trompe-l’œil Nordic birch and ash soft furniture in the collection look amazingly realistic, making for an eye-catching conversation piece in any home environment. The unbearably comfortable seatlounger adapts to every body contour, begging you to sink into it. This faux woodland log promises a cozy escape after a festive blow-out. Trunk seat-lounger, £245; cushion, £54; stump ottoman, £155, www.merowings.com

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THE AGENDA

11. HISTORY ISN’T DESTINY Forget Alfa Romeo’s more recent and less modest successes because, writes Danny Cobbs, the new Giulia Quadrifoglio (QV) gives a two-fingered salute to any doubters or naysayers of the famous Italian marque. Ample amounts of carbon fibre throughout (including a carbon fibre prop shaft) and a Ferrari-inspired 2.9-litre twin-turbo V6 503bhp engine mean the Giulia QV is more fun, fast and light than the German opposition. Seriously, this is the best car Alfa Romeo has produced in the past 25 years. They are bang on the money with the Giulia’s styling, too. It really is a beautiful thing to behold, both inside and out. Clean, simple lines give the bodywork a visual balance between its long bonnet and short overhangs. The cabin retains that same simplicity, yet is no less enchanting or enticing for this fact.

And in the time-honoured tradition of sports cars, it’s rear-wheel drive only. On-tap torque of 440lb ft is dished up by a vectoring diff that's able to send 100 per cent of thrust to either wheel. Dial up the race mode from its rotary controller menu and this otherwise docile and highly practical four-door saloon remaps its engine, quickens the gear changes to its eight-speed ZF auto transmission, and firms up the suspension to become an accomplished, composed track-car. From a standing start, 0-62mph is reached in 3.9 seconds and it carries a published top speed of 198mph. Alfa Romeo is asking just over £60k for the Giulia QV – which seems a small price to pay for something this phenomenal. £61,595, www.alfaromeo.co.uk

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12. RAZZLE DAZZLE ‘EM Girls, if you can’t give ‘em the old razzle-dazzle at Christmas, when can you? Having honed his skills at Oscar de la Renta and Versace, New York-born but London-based designer Michael Halpern launched his eponymous debut collection of glam, colour-burst evening wear for AW17 at February’s London Fashion Week. The collection was a virtual Studio 54-infused glitter bomb of flamboyance. Pictured here is the perfect spectacular seasonal ensemble. Hyper femininity, unabashed glamour, and a nod to classic haute couture. The acid green top with a high draped neck and long flared sleeves is dripping with drop dead gorgeous, sparkly 1970s style. A love letter to the divine decadence of the disco era. For a striking on-brand look, pair it with the glittering, ultra-wide-leg tulle trousers, heavily encrusted with multi-colour sequins and hand-sewn paillettes and cut to a fluid, flared silhouette. The trouser cuffs are long enough to pool around your sky-high stilettos. Go on, girls – let the disco diva in you take over! Top, £855; trousers, £1,391, www.matchesfashion.com

13. FIRST FOOTING Statement footwear and Christian Louboutin are one and the same, like two peas in a pod. The two seasonally hued trainers, pictured, would definitely go over well at Santa’s workshop up north, and they’ll sure as hell make waves at the office Christmas party. Fun, funky, flamboyant perhaps, but rooted in dead classic shoe design. The red Loubikick spiked high-top suede trainers are Louboutin’s newest and hottest trainers. Inspired by 1990s basketball boots, the round-toe shape is enhanced with richly decorated side panels featuring holly berry-shaped metal studs, crocodile-effect leather panels and pinked edges, as well as logo-embossed runner and patent leather heel counters. The green Louis high-top trainers in soft, supple suede are toughened up thanks to the toning green, signature spike embellishments. The ultimate Christmas shoes. Get dancing! Red trainers, £995; green trainers, £865, www.matchesfashion.com

14. COOL CONNEXION In the fashion industry, brand collaborations have become a regular, and common, design and marketing strategy. Despite claims that the industry has become oversaturated with collaborations, this long-standing fashion staple carries on with gusto. We’ve had Victoria Beckham x Target, the budget retail chain. H&M has teamed up with any number of leading fashion houses over the years. And luxury brand Louis Vuitton has hooked up with an impressive list of hot contemporary artists – including the Chapman Brothers and New York pop artist Jeff Koons. The latest high-profile collaboration is Japanese avant garde designer Junya Watanabe x The North Face. The American manufacturer of high performance outdoor gear may seem a strange bedfellow for the designer, but combining Junya’s visionary aesthetic and North Face's utility values, this is teamwork at its best. The coat pictured intermixes contrasting textures and colours, offset by the faux fur trim on the hood and trademark North Face series of pockets. This is big, bold, butch outerwear that pushes the boundaries of fashion and function. £2,000, www.matchesfashion.com

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THE AGENDA

15. COLD WEATHER CASUAL With its headquarters in Acosta, Italy, premium casualwear brand Napapijri started in 1987 manufacturing travel bags. The eclectic imagery of its branding – the company’s name itself is a variation on the Finnish word for the Arctic Circle – accentuates the themes of travel and adventure. The flag of Norway is also closely linked to the label’s DNA as its brand logo – further evoking extreme conditions, dramatic landscapes and the tradition of mountain exploration. Combining innovative materials and close attention to style, the label has attracted a steadfast following worldwide. Shown here, the bright-white knitted wool-mix beanie, proudly featuring the Norwegian flag logo, is a typical example of the outdoorsy brand’s ruggedly classic, masculine, sporty style. Cool, casual and nothing to frighten the horses on the slopes! £35, www.stuartslondon.com

17. PERFECTLY PEARL The world’s most famous clothes horse, Jackie Kennedy Onassis, once said: “Pearls are always appropriate, though not just for queens and celebrities. Every woman deserves to wear pearls.” Thanks to Stella McCartney – and many other designers and jewellery makers – every woman can literally drench themselves in pearls. Pearls are back big time, faux though they may be. Pictured here, five shouldergrazing tassels of lustrous almost-pearls swing freely from a flower-shaped base featuring a sparkling crystal centre for a dramatic, eye-catching pair of statement earrings. The perfect finishing touch for after-dark dressing. £435, www.mytheresa.com

16. TAKE ME TO YOUR FREEZER Outerspace Vodka is a five-timesdistilled spirit with an ultra-smooth, mega-clean taste. Made in Iowa, US, from premium Iowan corn, the liquid’s final filtration is – no joke – through a four-billionyear-old meteorite! The result? A taste that's, quite literally, out of this world. Presented in a unique bright green alien head glass bottle, the potent ABV 40 per cent spirit with a great taste and edgy design has attracted something of a cult following in the UK since its launch, especially with hip media types. Pull it out of the freezer on Christmas Eve for an ice-cold shot when your mates come calling, and you’ll put a festive smile on everyone’s face. Exclusive to 31dover.com, it hit the UK on 12 April marking the anniversary of the first human space flight, when Yuri Gargarin blasted out of the earth’s atmosphere on Vostok 1. Literally, Christmas spirit at its finest. £34.95 70cl, www.31dover.com

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18. ANGELIC ASSAULT Cooler-than-cool dude Gresham Blake dresses cooler-than-cool celebrities Ray Winstone, Jimmy Page, Plan B and Fatboy Slim. You’ll also find his famously eclectic silk ties being worn by David Dimbleby on BBC’s Question Time and sported by dapper newsreader Krishnan Guru-Murthy over on Channel Four News. Just in time for Christmas comes Gresham Blake’s exclusive and limited edition Cherub Tie. The 100 per cent silk tie features a host of sweet woven cherubs in full flight. But typical of Blake’s wicked, ironic, tongue-in-chic sense of humour, these devilish little cherubs are definitely not ones of the Hark the Herald Angels variety. Look closer and you'll see that these naughty angels are all toting AK-47 assault rifles. £75, www.greshamblake.com

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Directory To advertise in the directory in print or online contact Carl Methven on + 44 (0)1534 615886 or carl.methven@blglobal.co.uk

Great learning boosts performance It’s a simple fact of business that people who know how to use their IT systems properly are more productive and happier at work. At ALX Training, it is our mission to ensure that every person we work with can use their essential applications properly, saving time, smoothing processes and creating a more productive workplace.

Appleby is one of the world’s largest providers of offshore legal advice and services. Uniquely positioned in the key offshore jurisdictions of Bermuda, BVI, the Cayman Islands, Guernsey, Isle of Man, Jersey, Mauritius and the Seychelles, as well as the international financial centres of London, Hong Kong and Shanghai. We are also the only firm to have offices in all three British Crown Dependencies. Our services include:

Our trainers are renowned for their product knowledge, and their friendly and energetic attitudes to training help them get the best from every person they teach.

l Corporate l Dispute Resolution l Private Client & Trusts l Property

Learning starts at induction We are well-known for our range of Microsoft Office courses which includes Office 365, Excel, Outlook, PowerPoint, Word, Project, SharePoint and Visio but our clients know we can do much more.

Members of the Jersey and Guernsey offices regularly advise London City and international law firms on all legal aspects of offshore corporate, finance and investment fund transactions and arrangements in the Channel Islands.

Not only do we train on well-known accounting packages such a Xero and QuickBooks but we create courses on bespoke in-house systems. We design unique courses specifically for your organisation, so that your staff learn precisely the information they need to work efficiently and effectively.

For more information visit our website www.applebyglobal.com/our-expertise

We know there’s no better place for your new colleagues to start learning than during their induction programme, so we develop bespoke induction courses that give your new starters all the information they need to hit the ground running. We can even deliver content online, so training can be ongoing and continuous.

Michael Cushing Managing Partner, Jersey +44 (0)1534 818 395 mcushing@applebyglobal.com Wendy Benjamin Managing Partner, Guernsey +44 (0)1481 755 603 wbenjamin@applebyglobal.com

Ashburton Investments is a new generation investment manager building on a solid foundation to provide global investors with multi asset, specialist emerging market and equity products. As part of the FirstRand Group, one of South Africa’s largest financial services institutions, Ashburton has a strong footprint in Africa and understands volatile emerging markets. Ashburton believes that taking a broad-brush view of emerging markets is no longer effective and it is important to make country by country judgements enabling its specialism in Africa and India. For more than 30 years multi asset has been the cornerstone of the business, with the product set evolving over time to suit ever changing market conditions and understanding clients’ needs to effectively manage risk and access more sources of return. Globally, Ashburton Investments has over £8.8bn under management as at June 2017 with offices in the Channel Islands, United Kingdom, South Africa, and the United Arab Emirates. For more information please do not hesitate to get in touch: Laythamm Malorey E: laythamm.malorey@ashburton.com T: +44 (0)1534 512010 Tim Townsend E: timothy.townsend@ashburton.com T: +44 (0)1534 512106 www.ashburtoninvestments.com

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Independent and Professional We offer a full range of management and fiduciary services to our domestic and international private clients: l Family office - bespoke assurance l Wealth management - your strategy l Trustee - impartiality with vision l Corporate services - attention to detail l Good governance - a helpful eye l Strategic guidance- controlled ideas We aim to assist in the provision of personal service to meet your requirements. Ask us. Being vigilant and proactive in the face of a fast changing legal, economic and fiscal landscape. We can provide the focus to your solution. Try us. Our team has many years of experience dealing with a wide range of clients in different countries. We look to provide good corporate governance to achieve your aim. Contact us: www.baccata.co.je Tel: 00 44 1534 870670 or Nicholas Falla nfalla@baccata.co.je Mrs Ann Williams awilliams@baccata.co.je Mrs Áine O’Reilly aoreilly@baccata.co.je Licensed by the Jersey Financial Services Commission in the conduct of trust ompany business

Carey Olsen is a leading offshore law firm advising on British Virgin Islands, Cayman Islands, Guernsey and Jersey law across a global network of eight international offices. We are a full service firm working across banking and finance, corporate and M&A, investment funds and private equity, trusts and private wealth, dispute resolution, insolvency and property law. Our clients include global financial institutions, investment funds, private equity houses, multi-national corporations, public organisations, sovereign wealth funds, high net worth individuals, family offices, directors, trustees and private clients. We work alongside all of the major onshore law firms, accountancy firms and insolvency practitioners on corporate transactions and matters involving our jurisdictions. Our advice is delivered by an approachable and experienced team of commerciallyminded lawyers, led by 48 partners, who help our clients achieve their objectives. We have the expertise and resources to handle the most complex international transactions combined with a personal approach to business. Contact: guernsey@careyolsen.com T +44 (0)1481 727272 jerseyco@careyolsen.com T +44 (0)1534 888900 www.careyolsen.com

Deloitte LLP Deloitte LLP offers professional services to the UK and European market. The company has the broadest and deepest range of skills of any business advisory organisation and employs over 14,400 exceptional people in 28 offices in the UK and Switzerland. We provide professional services and advice to many leading businesses, government departments and public sector bodies and publish many influential studies and thought leadership pieces. Deloitte LLP employs 160 professionals across the Jersey, Guernsey and the Isle of Man offices. It is the UK member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its global network of 150 member firms, each of which is a legally separate and independent entity. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. For further information please do not hesitate to contact: John Clacy, Partner, Guernsey Email:jclacy@deloitte.co.uk Phone +44 (0) 1481 724011 Greg Branch, Partner, Jersey Email: gbranch@deloitte.co.uk Phone: +44(0)1534 824325 www.deloitte.com

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