Discussions at Guernsey’s Funds Forum 2024 centred around fundraising methods in a challenging environment, the rise of secondary markets, and the emergence of tokenisation and digital assets.
Read our top five key takeaways from the event below.
The value of the funds industry in boosting competitiveness should not be understated
The opening keynote speech was delivered by Miles Celic, CEO of TheCityUK. He detailed the many ways in which the financial services industry, both in Guernsey and the UK, positively contributes to the economy. In particular, he highlighted that the expertise that sits in financial hubs across the country strengthens the UK’s overall attractiveness, and Guernsey – one of the most integral parts of the British family of Crown Dependencies and Overseas Territories – is an added string in the bow of the UK’s financial services offer.
He added: “It is clear that Guernsey’s contribution to driving growth across the economy cannot be understated. The island’s investment also helps to bolster UK competitiveness, fostering innovation, particularly in areas like green and sustainable finance and FinTech.”
A challenging fundraising environment has given way to a creative market
Panellists agreed with the assertion that despite the current challenging market, there is still a lot to be optimistic about.
Naoshir Vachha, Partner at Anthemis, said LPs are generally taking longer in their decision-making cycles compared with previous years, which is creating a ‘long race’ for fundraising.
He said: “We have these headwinds, but we are better at dealing with them and we have better tools at our disposal.
“We’re spoilt for choice at the moment, there are still great investments to be made at the early stage. We're in a creative environment to deploy capital.”
One of these creative solutions comes in the form of continuation funds, said Lavanya Raghavan, Partner at White & Case LLP.
She said a confluence of factors over the past several years that has given a rise to a proliferation of these types of funds, which occur when a fund manager relocates assets to a new vehicle rather than exiting them.
Lavanya added that this is an area where there has been a lot of innovation and described continuation funds as ‘problem solvers’ that will always have a place in the market.
Sustainability credentials remain vital in a crowded marketplace
Another market segment that brings new opportunities for fund managers is climate change, said Naoshir.
Eve Ellis, Partner at Ropes & Gray, said ESG considerations have become an integral part of fundraising, and urged people to think about ESG ‘early and holistically.’
She said: “We have had an avalanche of regulatory change over the last decade.”
Fellow panellist Emma Silcocks, Group ESG Manager at Bluefield Partners LLP, an early adopter of the Guernsey Green Fund regime, highlighted the importance of sustainability credentials in light of ‘reporting congestion.’
She said: “Financial markets are subject to a massive amount of ESG regulation at the moment. If we want to attract capital into sustainable investments, we have to make it really clear to investors what the sustainability credentials of different financial products are.
“Fund managers in the sustainable investment space have to keep raising their game in ESG in order to meet the levels of engagement required by investors.”
Kobus Cronje, Managing Director at JTC Group Guernsey, added that ESG credentials are often the first questions that are asked when funds are launched.
“The positive thing is that Guernsey is ideally positioned to support that.”
‘Jurisdiction shopping’ is on the rise
Against the backdrop of a ‘truly global’ funds industry, Sarah de Ste Croix, Partner at Stephenson Harwood, said the current changing political environment opens up the market to ‘jurisdictional shopping.’
Eve added that sponsors have shifted desires and are looking at alternatives to the AIMFD Passport such as the National Private Placement Regime (NPPR). The NPPR provides a framework allowing non-EU Alternative Investment Fund Managers (AIFMs), such as those based in Guernsey, to market Alternative Investment Funds (AIFs) to professional investors across the European Union.
Naoshir agreed, adding that fund managers were becoming more comfortable with Guernsey as a well-established funds jurisdiction, particularly highlighting the efficiency of Guernsey’s financial products such as SPVs.
On what sets Guernsey apart from other jurisdictions, Kobus praised the ‘pragmatic and engaging regulator that is forward looking, always willing to engage with the industry and new market needs,’ citing the island’s fast-track authorisation scheme as an example of the regulator recognising the value of speed to market.
He also commended the island’s reputational strength and certainty enshrined in its overall legal framework, strength and calibre of service provider community, and strong protection of investor rights.
Tokenisation could be the answer to liquidity woes
Tokenisation, which refers to the rights of any kind of asset via blockchain represented by a digital token, was discussed as an emerging ‘efficiency tool.’
Matt Ong, CEO and Founder of Ctrl Alt, said tokenisation reduces paperwork, enabling fund managers to access more investors and tap into more capital.
He said: “Tokenisation is what we see as the next generation of funds structuring or accessing alternative assets.”
He added that tokenisation enables fractional investments, which, when listed on a secondary market, can create optionality for liquidity in areas that have previously been fairly illiquid.
Ctrl Alt is in the process of launching its first tokenised fund in Guernsey, and Matt praised the island’s supportive environment for innovation, flexibility of company law, and reputation as a domicile for institutional investors.
He said: “From a business perspective, Guernsey’s innovative structures like the ICC and PCC are really supportive for innovation and tech, so we take full advantage of that.”
