ECI believes that the offshore finance sector in the Channel Islands is a strong, robust and growing sector with a number of positive dynamics making it an ideal area for mid-market, private equity investment.
Trusts and private wealth management are the foundations on which the Channel Islands’ reputation has been built, with a good number of well-established, reputable firms continuing to offer innovative and high-quality products and services across multiple jurisdictions. Looking to the future, strong growth in this area is expected to be further driven by the sharp increase in HNWIs in the emerging economies both in the long and short term.
In recent times, fund administration has proven to be somewhat more challenging with the usual practice of charging fees based on AuA becoming problematic for some in a time that has seen a decrease both in terms of the number of funds and their value.
Although there has been a move towards more minimum fee arrangements, which provide some protection to those who service clients at the smaller end of the market, minimum fees account for a much smaller percentage of the total revenue for larger funds, meaning that those fund administrators with the largest clients have been hit hardest by the current ebb in the size of funds.
However, despite this challenging environment, there remain a number of clear growth opportunities within the Channel Islands fund administration arena, including the following:
- The diversification of products and services: the provision of additional services such as additional reporting (driven by regulatory changes and limited operational capacity in-house).
- The growing trend towards outsourcing (again driven by regulatory demands and a trend that is particularly being seen among previously self-administered funds in the US).
- A shift in jurisdictional focus: the Cayman Islands had the early march on hedge fund administration but ECI believes that regulatory pressures, weaker infrastructure and the high turnover of fund administration professionals on the islands has decreased confidence in the jurisdiction, and the Channel Islands, along with Dublin, Malta and Luxembourg, are winning this business.
- New clients: while some types of client have been struggling, others are weathering the storm more successfully and there is still new business to be won (e.g. family offices, who are now taking in external money and require additional operational capacity, niche, emerging markets-focused funds and funds with non-correlation strategies).
Overall, the Channel Islands have an excellent and longstanding international reputation, are known for high-quality products and services and will continue to attract business across the spectrum of offshore finance on this basis. Moreover, the islands’ image and level of success is enhanced by the fact that both Jersey and Guernsey take a very firm stance on implementing and adhering to local and international regulations and, for all these compelling reasons, ECI’s view is that the offshore finance sector in the Channel Islands is one to watch.
The Business services team would be delighted to hear from companies and advisers within this sector and our details can be found below.