SPECIAL R EPOR T GUERNSEY 2012 - .GLOBAL€¦ · // Legis Group // Louvre // RBC Wealth Management...

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G U E R N S E Y 2 0 1 2WEEKHFM

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ADMINISTRATIONCollaborative solutions for investment managers

CORPORATE GOVERNANCEHow Guernsey is adapting to changing market conditions

REGULATIONAn overview of Class B regulations, Level 2 proposals and AIFMD

001_HFMGuernsey-2012_Cover.indd 7 19/04/2012 15:42

Local expertise. International reputation.

Mourant Ozannes has an international reputation in offshore investment funds. We advise on the formation, structuring and regulation of investment funds in the Cayman Islands, Guernsey and Jersey and provide ongoing legal advice to offshore funds and fund managers. Our clients range from leading asset managers and fund promoters to start-up ventures.

To find out more visit mourantozannes.com/funds

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Untitled-3 1 18/04/2012 15:53

H F M W E E K . CO M 3

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lmost exactly one year ago I attended a post Guernsey Funds Forum debriefing where we analysed what we had learned and started to prepare for GFF 2012. In searching for a theme some bright spark came up with the Bond theme of “shaken but not stirred”. Those four words exactly caught our mood at the time.

We were fully aware of the global crisis wrapped around us and also that we couldn’t expect to come through it unscathed. But, those of us with grey hair and wrinkles have been at the edge of the abyss before and ‘chin up, chest out’ was the order of the day and we moved on to even greater success.

The year 2011 turned out to be a curate’s egg, good in parts. We finished 2011 up on funds under management reaching the dizzy figure of £261.4bn. Our open ended sector took the hit they often take during a recession, dropping over 4% in 2011. Closed ended funds steamed on to gain 8.8%.

So, it was business as usual for Guernsey in 2011, even if things were a little quieter than we would have liked.

We start 2012 still shaken by the threats that are building up around us but we are not stirred because each passing day gives us more evidence that those very threats will have the silver lining of new opportunities.

The Guernsey Investment Fund Association represents a third of the financial services workers in Guernsey and our membership is a very active bunch of people committed to maintaining and enhancing our position as a major international fund domicile. My task over the next two years is to marshal their efforts and to turn threats into opportunities. My grey hair and wrinkles tell me that is not going to be a problem.

Horace Camp

AG U E R N S E Y 2 0 1 2

Horace Camp is chairman of the Guernsey Investment Funds Association. A onetime managing director of Kleinwort Benson’s fund business and a former executive director of the Anson Group, he is now a non-executive director of several investment funds and management companies.

003_HFMGuernsey2012_Intro.indd 3 19/04/2012 13:41

4 H F M W E E K . CO M

G U E R N S E Y 2 0 1 2 C O N T E N T S

FINANCIAL SERVICES

RIGHT PLACE, RIGHT TIMEFiona Le Poidevin, deputy chief executive of Guernsey Finance, explores why conditions are right to consider redomiciling funds in Guernsey

LEGAL

THE BIG DULL GREY ONE AND THE TSUNAMIAndrew Munro of Ogier Fund Services explains how the fund administrator’s role is evolving to meet the international legislation facing the industry

FUND SERVICES

HOLISTIC CUSTODY OFFERING: PILLAR OF A THRIVING FUND COMMUNITYKeith Johnson and Lisa Haggarty, of Deutsche Bank, explain how fund administrators and investment managers are demanding more from their custody services and require a flexible solution

ADMINISTRATION

BENEFITTING FROM A COLLABORATIVE SOLUTIONPaul Everitt, managing director of Fund Corporation, explores the advantages of collaborative solutions available to investment managers from their fund administration providers

ADMINISTRATION

EUROZONE IN TURMOIL WHILE GUERNSEY STANDS STRONGPatricia White of Legis Fund Services Limited discusses how the fund industry in Guernsey is faring at a time when the eurozone economy remains fragile

ADMINISTRATION

A GATEWAY FOR STOCK EXCHANGE LISTINGSThe depth of experience within Guernsey ’s fund administration sector for listing on stock exchanges globally is well founded, as John Le Prevost of Anson Fund Managers explains

FUND SERVICES

FUNDS: THE RANGE OF CHOICES Kevin Gilligan of Louvre explains why Guernsey is an attractive choice as a centre for funds investing in world markets

LEGAL

UNCHANGING ELEMENTSRobert Varley of Babbé explains why Guernsey is in a better position than most offshore jurisdictions to comply with regulatory changes

ADVISORY

CORPORATE GOVERNANCEValerie Rouse and Anthony Williams of Mourant Ozannes discuss the introduction of the new corporate governance code and what lessons, if any, the Guernsey investment funds industry can take from the recent Cayman case of Weavering

ADMINISTRATION

GUERNSEY STANDS STRONGStuart Mauger of RBC Wealth Management explains how Guernsey has adapted to changes in the economic climate

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004_HFMGuernsey-2012_contents.indd 4 20/04/2012 08:58

Tel: +44 (0)1481 726034 Fax: +44 (0)1481 726029

E-mail: [email protected]

Headquartered in Guernsey, the Legis Group provides

multi-jurisdictional fund, corporate and trust structures

alongside supporting administrative services,

to institutional and private clients.

BEYOND EXPECTATIONLIES POSSIBILITY

Legis HFM Week Advert (April 2012)v3_Layout 1 05/04/2012 16:43 Page 1

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G U E R N S E Y 2 0 1 2

The global �nancial crisis initially came to a head in 2008, yet some four years later and the wave of repercussions continues, particularly in the eurozone but also through the ongoing global economic downturn.

As a leading international �nance cen-tre, Guernsey cannot be completely immune from these worldwide issues however the key indicators are suggest-ing that the island, led by its funds sector, is proving ex-tremely resilient.

�e �nancial crisis and its a�ermath have also brought a renewed focus on improved standards. Guernsey con-tinues to be consistently placed within the very top tier of fund domiciles and this is proving particularly a�ractive to investors and promoters seeking out quality.

As a corollary, there has also been a ra� of regulatory proposals, including AIFMD. At present, it seems as though Guernsey’s posi-tion outside the EU will enable it to o�er a less prescriptive regime for funds not touching this market and yet, access to the continent will be retained both in the medium and long term, thereby allowing the island to continue servicing struc-tures with a connection to Europe.

It is within this context that it is worth considering redomiciling funds in Guernsey.

�e most signi�cant develop-ment within the funds industry dur-ing the immediate post-crisis envi-ronment has been the drive for improved standards. �e Mado� scandal was the high-pro�le example of the worst practices within the sector but it was by no means alone and as such, there is now a demand from investors and pro-moters for quality service provision, strong corporate gov-ernance and robust regulation. It is precisely these factors which are Guernsey’s greatest assets as a funds domicile.

QUALITY SERVICE PROVISIONGuernsey has an investment fund industry with a heritage that stretches back half a century. During the past two decades, the sector has seen a gradual yet sustained shi� where the balance of business has moved from being large-ly retail, equity-traded/cash-based schemes to predomi-nantly institutional, alternative and niche funds.

The period included significant growth, particularly of esoteric asset classes through the middle of the last decade. This experience means that the island has built a wealth of expertise and first-class infrastructure for the structuring, management, administration and cus-tody of the widest range of funds.

The island plays host to a broad selection of admin-istrators, ranging from independent, boutique provid-ers to large, multinational organisations, many with be-spoke IT solutions. Guernsey’s fund industry can also draw on the services provided by the island’s banking, wealth management and risk management sectors.

In addition, it is supported by a comprehensive net-work of investment, legal, tax, audit, accounting and

actuarial advisers, including multi-jurisdictional law firms and global accountancy firms where there is specialist exper-tise.

This expertise and infrastruc-ture means that often Guernsey providers are asked to service schemes domiciled in another jurisdiction, such as the Cay-man Islands. Statistics from the Guernsey Financial Services Commission (GFSC) show that during 2011, the island’s service providers entered into 43 new contracts to provide either man-agement, administration or cus-tody services to non-Guernsey schemes. Many Cayman funds are currently administered in

Dublin and so the advent of AIFM may see increasing numbers of promoters considering a jurisdiction, such as Guernsey, which is likely to be able to offer an alter-native regime.

Indeed, it is not unheard of for promoters to be so satisfied with their experience of the island through the ‘non-Guernsey’ route that they decide to redomicile their funds to Guernsey. Certainly, this provides more weight and substance from a tax perspective as the ma-jority of services are provided from the jurisdiction in which the fund is domiciled.

There are many ways in which funds can be re- domiciled but very often this involves establishing a new structure in the new jurisdiction of choice and transferring the assets and winding up the existing

GUERNSEY CONTINUES TO BE CONSISTENTLY PLACED WITHIN THE VERY TOP TIER OF FUND DOMICILES. THIS IS PROVING PARTICULARLY ATTRACTIVE TO INVESTORS

SEEKING OUT QUALITY

”

FIONA LE POIDEVIN, DEPUTY CHIEF EXECUTIVE OF GUERNSEY FINANCE, EXPLORES WHY CONDITIONS ARE RIGHT TO CONSIDER REDOMICILING FUNDS IN GUERNSEY

RIGHT PL ACE , R IGHT T IME

Fiona Le Poidevin is deputy chief executive and technical director of Guernsey Finance, the promotional agency for Guernsey’s finance industry internationally. Her role includes assisting with business development in existing and emerging markets, providing technical support to industry and liaising with industry associations. Previously a senior tax manager, she has over 13 years’ experience in financial services in both the UK and Guernsey. She is a Chartered Accountant and a member of the Institute of Directors.

006_008_HFMGuernsey-2012_GuernseyFinance.indd 6 19/04/2012 17:38

F I N A N C I A L S E R V I C E S


fund, which is a process that can be both time-consuming and inefficient from a tax planning perspective.

However, Guernsey has migration provisions in its company law which, if the fund is a cor-porate from a jurisdiction with reciprocal leg-islation, for example Cayman, BVI, Malta and Ireland will allow the legal seat of the fund to be migrated without the need to establish a new ve-hicle in the island.

A notable development during 2011 was the migration from Jersey to Guernsey of the Cubic Property Fund Limited. It has been authorised as an open-ended, Class B scheme by the GFSC and has maintained its listing on the Channel Islands Stock Exchange (CISX). Subsequent to the migra-tion, shareholders voted in favour of a P Share is-sue which raised an additional £25.5m.

Guernsey funds can be established through a range of �exible investment vehicles such as com-panies, unit trusts, the Guernsey-pioneered Protected Cell Companies (PCCs), Incorporated Cell Companies (ICCs) and Limited Partnerships (LPs). During 2012, Guernsey is expected to make changes to its laws so that LPs can be migrated in to and out of the island. Also in 2012, Guernsey is set to introduce Limited Liability Part-nerships (LLPs) with legislation that will allow for the in-bound and outbound migration of LLPs.

Guernsey open and closed-ended funds are now pro-moted and sponsored by leading institutions in more than 55 �nancial centres globally. Statistics from the GFSC show that a total of 94 new open and closed-ended funds were licensed in the island during 2011.

One of the major advantages of using Guernsey entities is that they can be listed on the London Stock Exchange

(LSE), Euronext Amsterdam, the local CISX – which now has more than 4,300 listings – and the Hong Kong Stock Exchange (HKEx), among oth-ers. Figures from the LSE to the end of December 2011 show that there are more non-UK incorpo-rated entities listed on its markets from Guernsey than any other jurisdiction globally.

ROBUST YET PRAGMATIC REGULATION A major a�raction of re-domiciling funds to Guernsey within this post-crisis environment is that the GFSC has established a reputation for its robust yet pragmatic approach to regulation. For example, ‘fast track’ routes have been introduced which allow for the speedy launch of funds tar-geted at professional investors and yet, those in-vestors also have the security of knowing that all Guernsey funds are regulated.

In addition, the GFSC ensures that funds follow the appropriate local or international codes of cor-

porate governance and the fact that the island has a pool of experienced and well-quali�ed non-executive directors reassures investors and promoters that Guernsey service providers are working to the highest standards.

Indeed, Guernsey’s position as a well regulated, coop-erative and transparent jurisdiction has been reinforced by the fact that external agencies such as the UK Gov-ernment, the IMF, OECD and Financial Stability Board (FSB) continue to place Guernsey within the very top tier of leading international �nance centres globally.

�e a�ractiveness of the Guernsey environment within the post-crisis world is illustrated by some of the latest developments. For example, the results of an independent survey published earlier this year by www.FundDomiciles.com show Guernsey to be the most

FIGURES FROM THE LSE TO THE END OF DECEMBER

2011 SHOW THAT THERE ARE MORE NON-UK

INCORPORATED ENTITIES LISTED ON ITS MARKETS FROM GUERNSEY THAN ANY OTHER JURISDICTION

”



G U E R N S E Y 2 0 1 2

popular fund domicile among a sample of UK-based alter-native investment fund managers.

In addition, while the net asset value of investment funds under management and administration in the island fell in the second half of 2011, there has been growth from £200.4bn at the end of December 2008 to reach £261bn (US$417bn) at the end of December 2011, including an increase of 1.6% during last year.

In particular, the island continues to grow its reputation for excellence in alternative and niche funds, especially pri-vate equity. �is has been rea�rmed by a Private Equity News/State Street survey where 61% of Chief Financial O�cers (CFOs) responding said that Guernsey was their preferred destination for private equity outsourcing.

Jon Moulton, Chairman of Be�er Capital, gave a ringing endorsement of the island’s funds industry when speaking in front of more than 300 delegates at the Guernsey Funds Forum in London, May 2011. Jon, who has a house in the island and whose Guernsey-domiciled investment compa-ny is listed on the main market of the LSE, said: “Guernsey has a very good reputation; it works very well… Guernsey needs to carry on doing what it’s doing into the future and it will prosper.”

Another signi�cant �gure in the private equity industry is Guy Hands, Chairman of Terra Firma. As well as the private equity �rm establishing an operation in Guernsey, Guy has also decided to buy a property and live on the is-land. �is re�ects the fact that Guernsey is not just an ideal location for locating management companies but it is also a�ractive as a residence for the managers themselves.

�is is no doubt helped by the fact that Guernsey has a zero rate of corporate tax as standard, no withholding tax on dividends paid, no capital gains tax, no inheritance tax and no indirect sales taxes, and personal income tax re-mains levied at a maximum of 20%, with a cap of up to £110,000 on non-Guernsey source income or £220,000 on all income.

ATTRACTIVE ENVIRONMENTIn addition, Guernsey is able to provide an at-tractive �scal regime for funds. �e island is un-dertaking a review of its ‘Zero-10’ corporate tax regime but the politicians have already made it clear that the zero product and tax neutrality for Guernsey’s international client base will remain, irrespective of the outcome of the review.

�e exempt regime for the funds industry is not a�ected by the review. For example, collec-tive investment schemes remain exempt from Guernsey taxation. Indeed, the exempt regime is in the process of being modernised so that from later in 2012, exempt status will apply to any body forming part of the structure under which the scheme as a whole operates.

�e changes to the exempt tax regime illus-trate Guernsey’s commitment to continually providing an a�ractive environment for funds. In a similar vein, the island’s authorities are fully engaged in the discussions regarding AIFMD to ensure that Guernsey is appropriately represent-ed through the process and thereby best-placed

going forward in terms of having access to our closest markets.

At present, it seems as though Guernsey’s access to the continent will be retained both in the medium and long term thereby allowing it to continue servic-ing structures with a connection to Europe, while the island’s position outside the EU will enable it to o�er a less prescriptive regime for funds not touching this market.

Indeed, there have been articles in the Financial Times highlighting how hedge funds and private eq-uity funds in particular are already moving ‘o�shore’ in anticipation of the introduction of AIFM and its potential for signi�cantly increasing the regulatory burden and compliance costs of Ucits funds. In par-ticular, some promoters are starting to co-domicile their funds, o�ering both ‘onshore’ and ‘o�shore’ products in order to meet the demands of their par-ticular investors.

In the post-crisis environment, fund managers should look to make sure that they are in the right place at the right time. Guernsey’s long standing ex-pertise and infrastructure, combined with its robust regulation, strong corporate governance, tax neutral-ity and an AIFM alternative means that it is ideally placed for the redomiciliation of funds. n

THE ISLAND IS UNDERTAKING A REVIEW

OF ITS ‘ZERO-10’ CORPORATE TAX REGIME

BUT IT HAS ALREADY BEEN MADE CLEAR THAT

THE ZERO PRODUCT AND TAX NEUTRALITY

FOR GUERNSEY’S INTERNATIONAL CLIENT

BASE WILL REMAIN

”


issued by Royal Bank of Canada (Channel Islands) Limited (“the Bank”) on behalf of RBC ® companies that comprise the RBC Wealth Management network in the British Isles (“the BI subsidiaries”) The Bank is regulated by the Guernsey Financial Services Commission in the conduct of deposit taking and investment business and to act as a custodian/trustee of collective investment schemes in Guernsey and is also regulated by the Jersey Financial Services Commission in the conduct of deposit taking, fund services and investment business in Jersey. The Bank’s general terms and conditions are updated from time to time and details thereof and of the names and addresses of the main BI subsidiaries can be found at www.rbcwminternational.com/terms-and-conditions-British-Isles.html. Registered Office: PO Box 48, Canada Court, St Peter Port, Guernsey, Channel Islands, GY1 3BQ, registered company number 3295. Deposits made with the offices of the Bank as part of the C&I Services are not covered by (i) the respective Deposit Compensation Schemes in Jersey and Guernsey (“the CI Schemes”), unless the deposit is held in the name of a private individual or (ii) the UK Financial Services Compensation Scheme. Links to the official leaflets for the respective CI Schemes can be found on the Jersey and Guernsey pages of our website. Copies of the latest audited accounts are available upon request from either the registered office or the Jersey Branch: 19 - 21 Broad St, St.Helier, Jersey JE1 8PB.

® Registered trademark of Royal Bank of Canada.™Trademark of Royal Bank of Canada. Used under licence. ADV/12/404

Global custody | Fund services | Custodian trustee | Trade execution | Banking | Credit

To find out how our approach can help meet your business needs, please contact :

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Consistency. It’s all in our approach.Your dedicated relationship manager, supported by our global teams, will work with you to implement integrated wealth management solutions that consistently reinforce your strategic objectives. This partnership approach allows you to focus on growing your business, helping you move forward with confidence.

Strength where it counts

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HFM Week advert.indd 1 11/04/2012 3:19:30Untitled-3 1 16/04/2012 10:40

1 0 H F M W E E K . CO M

G U E R N S E Y 2 0 1 2

THE BIG DULL GREY ONEWhen I �rst came across investment funds, it was in the context of infrastructure funds, and the young me was struck by what an exciting business surrounded us in ev-erything dull, grey and quotidian. Nothing glamorous, but essential to the proper functioning of the world as we know it. I had never really thought about the glass of water on my desk in that way until that point in my life. An invisible world opened up to me.

We all know that dog owners come to look like their dogs (or is it the other way round?) over time. In the same way, it has struck me re-cently that some fund adminis-trators are starting to look like their clients. Or certainly, that’s how it feels to me sitting in Ogi-er Fund Services in Guernsey. Please please dear clients, don’t think for one moment that we think of you as canine friends or even affectionate pets for that matter. We are taking everything that is dull and grey and quotid-ian in relation to the operation of collective investment schemes into our camp.

If you think about Ogier Fund Services undertaking all the rou-tine back-o�ce work in relation to an infrastructure fund investing in dull grey water pipes, there is something beautifully poetic in taking that which is dull and grey and invisible overlying something that is itself dull, grey and invisible, and turning it into something exciting. But in a very nerdy way, what may for a fund manager be dull greyness around a fund’s daily functioning is truly exciting work for us. It also means busy fund managers can get on with the real business of running their funds. What a tragedy it is for investment managers having to tie up their fundraising and investing expertise in the daily grind. And these days the daily grind could easily �ll a manager’s day, leaving no time to get on with the substantive business of the fund.

In years gone by when a jurisdiction was chosen be-cause, for example, of its international tax neutrality, managers may have placed limited demands on their local administrators. Simple registered o�ce, some

company secretarial capability, simple provision of pay-ment processing and provision of board membership may have been the order of the day. But the demands of the modern industry have meant that local fund ad-ministration businesses have expanded their operations to meet the ever increasing demands and complexity of the commercial and regulatory landscape. Compliance and anti-money laundering services are now a manda-tory part of the package on o�er from local administra-tion businesses. A trawl through the services typically commissioned by our clients shows that the scope of day

to day functions being bought by clients is increasing and there is no reason to expect the trend to stop any time soon. �e current list of services also includes some non-traditional areas such as trea-sury services, which incidentally can help to signi�cantly o�set the overall administration costs of a fund, meaning that a manager is ge�ing full administration servic-es at what is in e�ect a signi�cantly discounted rate.

�e modern fund administra-tor is expected to be, among many other functions, part lawyer, part accountant, part regulatory and

compliance expert, part commercial manager, part sys-tems expert and part customer services function. It is a daunting list of demands. In response, Ogier Fund Ser-vices �nds it is increasingly recruiting not just quali�ed accountants who have for many years formed the back-bone of senior ranks of administrators, but also lawyers with relevant experience, as well as spending exponen-tially expanding amounts of time and money on training, internally and externally, sta� at all levels. It is a standard expectation that Ogier Funds Services sta� are profes-sionally quali�ed or studying towards a professional quali�cation of one sort or another.

THE TSUNAMII was reading an article on the Ogier intranet recently by one of our colleagues in our Tokyo o�ce about how things were in Japan one year a�er the tsunami. It struck me that our industry is currently facing a veritable tsu-

WHAT A TRAGEDY IT IS FOR INVESTMENT MANAGERS HAVING TO TIE UP THEIR

FUNDRAISING AND INVESTING EXPERTISE IN

THE DAILY GRIND

”

ANDREW MUNRO OF OGIER FUND SERVICES EXPLAINS HOW THE FUND ADMINISTRATOR’S ROLE IS EVOLVING TO MEET THE INTERNATIONAL LEGISLATION FACING THE INDUSTRY

THE BIG DULL GREY ONE AND THE TSUNAMI

Andrew Munro is a director with Ogier Fund Services in Guernsey. He currently heads the investment funds team in Guernsey, which services a range of closed-ended private equity and infrastructure funds. Prior to joining Ogier Fund Services, he was an advocate and managing associate with Ogier’s Guernsey legal practice, where he practised from June 2004 gaining wide experience of Guernsey funds and complex corporate and commercial transactions.

010-011_HFMGuernsey-2012_Ogier.indd 10 18/04/2012 12:13


L E G A L

nami of signi�cant new legislation with international di-mensions. I hardly need to remind the readership of the UK’s new Bribery Act, which came into force last year, the imminence of the e�ects of FATCA and Dodd Frank, the slow burning AIFMD, not to mention the new code of corporate governance, which we have had since Janu-ary 2012 in Guernsey. Indeed, one of our compliance of-�cers induced a cold sweat moment in me recently when he returned from a conference and presented me with a comprehensive list of some ��y pieces of new legislation proposed in various parts of the world in some guise or other, which will or could impact our operations.

Fortunately, with a presence in 10 centres around the world, our recent decision to open for both legal and �duciary services in Luxembourg during 2012 and our exponential growth in Asia, Ogier is well versed in the truly international.

But it was considering FATCA, which brought the expansion of scope of services into sharp relief for me. Ogier is currently devoting considerable resources to analyse the impact of FATCA for its business and that of its clients. Ogier is also looking at its systems and pro-cedures with a view to implementing any changes which may be needed in good time. �e company is planning

to enter into a FATCA agreement with the IRS before the 30 June 2013 deadline. In the context of Ogier Fund Services, the considerable investment made in sys-tems, for example in working with SunGard Investran to bespoke the platform for Ogier, will pay signi�cant dividends as reporting and data analysis requirements increase. It will also make it easier to respond to future FATCA type legislative requirements. I would predict that the tsunami of international legislation will pre-cipitate consolidation within the fund administration industry with those entities that have not made the in-vestment in systems and processes to enable them to cope with the increasingly complex requirements falling by the wayside.

Writing an article on new companies’ legislation in Guernsey a few years ago, I quoted Jon Kabat-Zinn “you can’t stop the waves, but you can learn to surf”. How appropriate those words are again here and now as we face the legislative tsunami. However, I would now add a closing thought that there is another option: you can learn to surf or you can get someone else to learn to surf for you. A friendly fund administrator near you will be learning to surf the tsunami so that you don’t have to. n

OUR INDUSTRY IS CURRENTLY FACING A VERITABLE TSUNAMI OF SIGNIFICANT NEW LEGISLATION

WITH INTERNATIONAL DIMENSIONS

”

010-011_HFMGuernsey-2012_Ogier.indd 11 18/04/2012 12:14


G U E R N S E Y 2 0 1 2

The strength and resilience of Guernsey’s funds sector continues to bring opportunities for Guernsey-based �nancial �rms and it is increas-ingly important to have the expertise of locally based custodians to underpin the sophisticated investment fund community.

Having had an established custody service through its Channel Islands o�ces for more than 35 years, Deutsche Bank continues to play a part in positioning Guernsey as a major European centre for custody business and believes strongly that custody is one of a number of crucial pillars that support the fund industry.

It is becoming increasingly clear that fund administrators and investment managers are demanding supplementary services in addition to their existing custody facility. Guern-sey bene�ts from being home to a number of global institu-tions, like Deutsche Bank, that have the capability to act as a ‘one-stop-shop’ and meet these demands.

CUSTODY GROW TH�e rise of custody business in Guernsey accompanied the growth of the retail funds industry in the 1970s, allied to the growing accessibility of the stock market to the general pub-lic as a result of privatisations in the 1980s. Subsequent UK tax legislation changes have also fuelled the growth and at-tractiveness of the Channel Islands’ custody services.

Today, Deutsche Bank has a formidable reputation for global custody solutions, looking a�er in excess of €13trn of assets globally, with the Channel Islands o�ces alone acting as custodian for assets valued at several billion euros.

�e �rst-class reputation Guernsey has as a jurisdiction for specialist funds is proving valuable, with alternative as-set classes, including real estate, hedge and private equity funds, now representing a major proportion of the total value of funds business. �is has been a major growth area for Deutsche Bank, with recent new custody business en-compassing Shariah-compliant funds, property, new energy, green and sustainability funds, as well as more traditional fund of funds structures.

In addition, as is widely expected, a change to Guernsey’s rules for non-Guernsey funds will mean that rather than those funds having to go through a long approval process with the Commission, a Guernsey licensee will take re-sponsibility for the due diligence process. �is will enable

KEITH JOHNSON AND LISA HAGGARTY, OF DEUTSCHE BANK, EXPLAIN HOW FUND ADMINISTRATORS AND INVESTMENT MANAGERS ARE DEMANDING MORE FROM THEIR CUSTODY SERVICES AND REQUIRE A FLEXIBLE SOLUTION

HOLISTIC CUSTODY OFFERING: PILLAR OF A

THRIVING FUND COMMUNITY

012_013_HFMGuernsey-2012_DB.indd 12 19/04/2012 16:34


F U N D S E R V I C E S

custodians in Guernsey, who have the right corporate governance and oversight processes in place, to o�er non-Guernsey funds a quicker turn-around time.

Having the right infrastructure is also important in managing the transfer of business from other cus-todians. Deutsche Bank’s custody, client adoption and relationship management teams have a wealth of experience in working together to en-sure e�cient and seamless transition of business from previous custodians. For instance, by having that appro-priate framework in place, Deutsche Bank in Guernsey recently took on a complex protected cell company structure comprising 70 cells, with only minor interruptions to the day to day operation of the fund and the investment manager’s ability to trade.

HOLISTIC SERVICEWith the kind of custody services demanded by investment manag-ers becoming more sophisticated, there has to be a �exible approach. As well as seeking custody solutions, there is also a need for bespoke support in other areas, such as lending, banking, foreign exchange and hedging, and if that can be managed by one organisation, it is a compelling proposition.

Lending, for instance, is an area where funds increasingly require support. Access to liquidity assists the investment manager to e�ectively manage their cash �ows, giving them the �exibility to take advantage of investment opportunities as and when they arise, without the need to wait for proceeds to become available through subscriptions or from the sale of other assets. A liquidity facility can also be a valuable tool for the fund administrator when it comes to managing investor redemptions.

While a number of other established banks and credit or-ganisations have been withdrawing from lending, Deutsche Bank has maintained a strong balance sheet and Tier 1 capi-tal ratio throughout the credit crisis, and its ability to o�er credit has stayed strong. �is is equally the case in the Chan-nel Islands, where Deutsche Bank has the capabilities to pro-vide lending services to funds.

Foreign exchange (FX) hedging is another area of great importance to investment managers who need to minimise the currency risk which may arise when the fund is holding assets which are not denominated in base currency, or in instances where there are di�erent currency share classes in issue.

�is is a facility that can be readily accessed through Deutsche Bank’s Channel Islands-based Treasury Team. Globally, Deutsche Bank is a dominant force in the FX mar-ket – with around 15% of the market - enabling it to top the Euromoney FX Survey for the past seven years.

Bespoke reporting is also high on the wish list for fund ad-ministrators, which is why Deutsche Bank’s �exible report-ing package, that can be tailored to clients’ speci�c needs, is so a�ractive.

PARTNERSHIPS�is year Deutsche Bank celebrates its 40th year of being present in the Channel Islands. In those 40 years what has helped achieve success has been a willingness to form long-term, strategic partnerships with our clients. As well as acting as cus-todian and banker for large funds, it has also been important to support more bespoke custody business, such as alternative asset classes and new fund launches.

Tailored solutions are crucial, which is why it is important to be-come the custodian of choice to fund administrators and manag-ers. We pride ourselves on ge�ing to know their business, so that we can adapt our custody and banking services, as well as a range of addi-tional facilities to meet their needs. �is is why the global reach o�ered by Deutsche Bank is so a�ractive – it means our clients bene�t from a worldwide network of direct agent

relationship, access to complementary specialist �nancial so-lutions and markets globally.

With Guernsey’s growing reputation as a centre for spe-cialist funds, its network of fund managers and administra-tors will continue to require a responsible partner to provide them with dependable custody services. Alongside this, it is becoming more and more important to have complemen-tary pillars in place to ensure success in a challenging envi-ronment, and Deutsche Bank in the Channel Islands is well placed to support the fund industry in all areas. n

DEUTSCHE BANK CONTINUES TO PLAY A PART IN POSITIONING

GUERNSEY AS A MAJOR EUROPEAN CENTRE FOR CUSTODY BUSINESS AND

BELIEVES CUSTODY IS ONE OF A NUMBER OF CRUCIAL

PILLARS THAT SUPPORT THE FUND INDUSTRY

”

Keith Johnson, head of custody, Deutsche Bank International Limited, joined Deutsche Bank in 2007 as director to focus on developing the custody offering. He supports the businesses in the Channel Islands and Cayman. Keith is also responsible for custody business reviews and leads the development of the online banking platforms.

Lisa Haggarty, joined Deutsche Bank in May 2007. She is currently relationship manager within the Financial Intermediaries Team and has responsibility for custody and fund clients. Lisa has worked in the finance industry for nearly 20 years, beginning her career with NatWest Bank. She spent ten years with MeesPierson in various banking and credit roles before moving to Investec Bank and subsequently joining Deutsche Bank. Lisa is IMC qualified and holds a diploma in Fund Administration.

012_013_HFMGuernsey-2012_DB.indd 13 19/04/2012 16:34

Refreshing

www.babbelegal.com

PO Box 69, 18-20 Smith Street St Peter Port, Guernsey GY1 4BL Tel +44 (0)1481 713371

CORPORATE & COMMERCIAL / TRUST & FIDUCIARY / FUNDS INSURANCE / PROPERTY / DISPUTE RESOLUTION / INSOLVENCY

Untitled-1 1 01/06/2011 10:55


A D M I N I S T R AT I O N

The o�shore investment fund industry has a long heritage and over several decades has seen signi�cant growth. In Guernsey it has been one of the major success stories of the island’s economy and has evolved from a pre-dominantly retail, mainstream equity and cash

fund-based sector to now incorporate signi�cant expertise in structuring, managing and administering alternative, niche and increasingly esoteric asset class funds, particu-larly private equity and real estate structures. However, in recent years and in the wake of the global �nancial crisis, the industry continues to face challenges arising from market uncertainty and volatility, regulatory demands, pressures on fees where income is o�en based on a proportion of as-sets under management, and rising service level expectations.

At the same time many prospec-tive start-up investment manag-ers have been frustrated in their searches for seed capital and have been unable or reluctant to com-mit too much resource to building a sizeable team without the guaran-tee of the associated fund launch. Furthermore, when all of these factors come together, many fund managers have been looking at their fund administration relation-ships and seeking service provid-ers who do more than simply ‘sell a product’.

A COLLABORATIVE SOLUTIONAt Fund Corporation, we see many positive opportunities arising from these market conditions and increasingly are �nding that the solution for both parties is to be creative and enter into collaborative, partnered arrangements. I am not referring to the so�, ‘management speak’ sort of part-nership, but one where both sides recognise the need to be open, transparent and �exible on time invested and fee and incentive structures. Essentially, experienced professionals working with experienced professionals.

To put it another way, where a prospective investment manager recognises they do not have the required breadth of experience within their team, nor the �nancial resources at launch to procure those resources, it may pay them to engage with a service provider who is willing to commit director time to engaging at a deeper level to collaborate

on structure, administration processes, fund-raising op-tions and many more aspects of launching a fund. �e en-gaged administrator can provide experience from a range of previous engagements, replacing some of the need for the investment manager to recruit dedicated sta�. �is can reduce the �nancial burden, shortcut decision-making, enhance returns and make the whole project more likely to launch.

Obviously, this approach means both parties need to be �exible with fee arrangements. �e administrator in-vests time and e�ort to assist the investment manager in exchange for longer term bene�t.

THE START-UPWe have worked with a few clients recently where we have developed this very same sort of solution. �e results so far have been very satis-factory for everyone. For example, we were approached by a �nancial consultant specialising in real es-tate �nancing who, over the last couple of years, had developed an innovative �nancing model for real estate investing.

Having perfected the concept and begun discussions with various counterparties for the establish-ment of an investment structure, he approached Fund Corporation with a view to us providing admin-istration services. We spent time talking through the steps from con-cept to launch and it became clear

that there were signi�cant obstacles to be overcome. Our client did not possess all the relevant experience nor avail-able assets to easily bring in the resources needed to get the concept ‘over the line’. He also could not commit to a standard time-spent launch fee arrangement with us.

We had a strong sense that the investment rationale, and therefore opportunity, was a�ractive. We were willing to be entrepreneurial and quickly came to an agreement on how we would help in the development and launch of the structure in exchange for longer term partnership arrange-ments.

TAKING THE LONG VIEWWith another client, the credit crunch came at just the wrong time, meaning launch plans were delayed and their

FUND MANAGERS HAVE BEEN LOOKING AT THEIR FUND ADMINISTRATION RELATIONSHIPS AND

SEEKING SERVICE PROVIDERS WHO DO MORE THAN

SIMPLY ‘SELL A PRODUCT’

”

G U E R N S E Y 2 0 1 2

Paul Everitt is a co-founder and the managing director of Fund Corporation of the Channel Islands Limited. He has 22 years’ experience in the finance industry and since moving to Guernsey in 1998 has specialised in fund administration services.

PAUL EVERITT, MANAGING DIRECTOR OF FUND CORPORATION, EXPLORES THE ADVANTAGES OF COLLABORATIVE SOLUTIONS AVAILABLE TO INVESTMENT MANAGERS FROM THEIR FUND ADMINISTRATION PROVIDERS

BENEFITTING FROM A COLLABORATIVE SOLUTION

015_016_HFMGuernsey-2012_FundCorp.indd 15 18/04/2012 12:09


G U E R N S E Y 2 0 1 2

overall business plan needed signif-icant re-appraisal. As a result, our original relationship needed reas-sessment. Over several months we discussed the changing market op-portunities and di�culties of fund-ing during such uncertain times. Instead of imposing the strict terms of our contracts we agreed to wait and see what might develop. As it turns out, our client now has sig-ni�cant market opportunities and we have agreed a long-term joint venture that both sides are happy with because of the honest, robust relationship built through those initially di�cult times.

RAISING CAPITALAs well as easing �rst time or young fund managers and/or promoters through the critical corporate governance, regulatory, risk management and administrative processes, in a personable, strategic and bespoke manner, while cru-cially maintaining investor needs �rmly at the core, a key component of the partnered solution is o�ering the ability, if required, to assist with fund promotion, distribution and capital raising. An extensive and global network of profes-sional intermediary and client contacts including invest-ment advisers, private banks, family o�ces, accountants, lawyers, trustees, �nancial advisers and investment clubs is crucial to this activity and a key di�erentiator amongst many fund administrators. At Fund Corporation, we are �nding that this value-added service is increasingly a�rac-tive to prospective and existing clients and helps to estab-lish, cement and enhance an e�cient, involved and robust fund administration relationship.

NETWORKING STAKEHOLDERS�ere has been a shi� in the dynamic between all stake-holders in the investment fund industry: promoters like to deal with counterparties who can e�ect introductions to sources of capital or solutions for di�cult portfolio in-vestments; promoters have to work closer with fund ad-ministrators to make sure they adhere to new regulatory


demands; and even investors can require additional measures from fund administrators to provide se-curity and risk analysis about their investment decisions.

Given these shi�s, managers have started to look at the services provided by fund administration �rms with increasing scrutiny. To cope with ongoing volatile global markets and �uctuating investor con�dence, �rst and foremost a fund administrator needs to have the industry knowledge and tech-nical capability to deliver services that are both sophisticated and �exible and which provide security

to stakeholders involved. Nevertheless, much also rests on the fund administrator drawing together a bespoke solu-tion, rather than relying on a generic, ‘one size �ts all’ ap-proach.

Fund administrators can add value and provide the nec-essary ‘glue’ to network parties, establishing the most ef-fective solutions. Gone are the days where e�ective fund administration meant just ‘ge�ing the work done’ and being as unobtrusive as possible. �e best administrators are becoming more agile and pragmatic when it comes to meeting the needs of fund stakeholders. E�ective relation-ships are the cornerstone of success.

However, these in-depth, partnered solutions are not for everyone. Larger investment managers may have strong enough in-house teams so that all they need is a pure outsourced service provider. �e range of services required may be limited. Other fund administrators may not have the experience, or inclination, to put in the in-vestment that the partnered solution requires. However for those of us who can, it provides signi�cant a�raction in terms of the quality of long-term client relationships and �nancial reward; but importantly given today’s market, it gives a boost to the chances of new investment managers successfully launching. Fund Corporation’s experience is that a collaborative, partnered-solution approach is cer-tainly helping to yield positive results in today’s challeng-ing times. n

THE BEST ADMINISTRATORS ARE BECOMING MORE AGILE

AND PRAGMATIC WHEN IT COMES TO MEETING THE NEEDS OF FUND

STAKEHOLDERS

”

015_016_HFMGuernsey-2012_FundCorp.indd 16 19/04/2012 17:41

ABN AMRO in Guernsey is licensed to act as Custodian/Trustee for open and closed ended funds, domiciled both locally and overseas.

As part of a global financial group, we have a wide ranging sub-custodian network for the support of these services which are integrated into our banking, lending and treasury offering. Our specialist team of relationship officers is dedicated to the provision of the highest quality Custodian/Trustee services. We do not outsource, all our back office functions are delivered from our Guernsey office.

If you require superior service from a Custodian/Trustee independent from any fund administration provider, please contact:

Stefano Finetti [email protected] 01481 751215

Tom Lees [email protected] 01481 751803

Mariana Enevoldsen [email protected] 01481 751900

www.abnamroprivatebanking.gg

Custodian/Trustee Services from ABN AMRO

ABN AMRO (Guernsey) Limited (Registration No: 13263) – ABN AMRO (Guernsey) Limited is licensed in Guernsey under The Banking Supervision (Bailiwick of Guernsey) Law, 1994 and The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. ABN AMRO Asset Management (Guernsey) Limited (Registration No: 21077) is a wholly owned subsidiary of ABN AMRO (Guernsey) Limited – ABN AMRO Asset Management (Guernsey) Limited is licensed in Guernsey to conduct controlled investment business under The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and complies with the rules promulgated by the Guernsey Financial Services Commission, including the Collective Investment Schemes (Class B) Rules 1990. The information contained in this document is intended for general information purposes only and should not be applied to individual circumstances without detailed professional advice. The information does not constitute an offer or advice regarding any financial, banking, insurance or other product or service. To the fullest extent permitted by law, ABN AMRO (Guernsey) Limited, its parent companies, subsidiaries, affiliated entities, directors, employees and agents shall not have any liability, on whatever basis, contractual or not, for any direct or indirect damages to any person acting or refraining from acting as a result of any material contained in this document. ABN AMRO (Guernsey) Limited places funds with its parent company, ABN AMRO Group N.V., thus its financial standing is linked to ABN AMRO Group N.V. Depositors may wish to form their own view on the financial standing of ABN AMRO Group N.V. based on publicly available information, including reports and accounts which are obtainable from us on request. For quality control and security purposes, it is ABN AMRO (Guernsey) Limited policy to record all external telephone conversations made via its company telephone system. Such recordings will remain the sole property of ABN AMRO (Guernsey) Limited. ABN AMRO (Guernsey) Limited is a participant in the Guernsey Banking Deposit Compensation Scheme. The Scheme offers protection for ‘qualifying deposits’ up to £50,000, subject to certain limitations. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Details are available from – www.dcs.gg, Telephone: +44 (0) 1481 722756 or P.O. Box 380, St Peter Port, Guernsey, GY1 3FY.

25298 ABN Gnsy HFM Adv.indd 1 19/04/2012 11:53Untitled-4 1 19/04/2012 15:14

Anson Registrars is Guernsey’s only locally owned CREST compliant share registrar, one of only a

small number in the world, with operations in Guernsey, the United Kingdom, British Virgin Islands,

Cayman Islands and coming soon - Jersey and the Isle of Man.

Serving a truly international client base, Anson Registrars delivers a professional and tailor-made

service to the highest standard. For innovative solutions to your share registration and dealing

requirements steer a brighter course with Anson Registrars, the leading light in share registration.

Call our registrars on +44 (0)1481 711301 or write to Anson Registrars Limited, PO Box 426,

Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 3WX

www.anson-group.com

A leading light

100448 Anson.indd 1 18/04/2012 16:57Untitled-1 1 19/04/2012 09:21



While the debt crisis continues to plague the eurozone there is a constant fear of the impact in the wider global economy. Concerns remain that the eurozone is in recession a�er GDP fell 0.3% in the �nal three months of

2011, with a further contraction anticipated in the �rst quarter of 2012. Manufacturing downturn is greater than expected and unemployment in the 17 countries adopt-ing the euro has hit its highest since the currency began in 1999. �ankfully, the UK has dodged a double-dip re-cession for now, with the economy growing by 0.3% in the �rst three months of the year, and the manufacturing sector expanding at its fastest pace for 10 months in March.

By contrast, while the Guern-sey fund industry showed a mod-est 1.6% increase in assets under management and administration in 2011, this re�ects 30% growth over the two year period and 47% growth in the last four years since the end of 2007, out-performing competing jurisdictions and a commendable achievement in the current economic climate. Our ability to avoid the worst of the impact of the global recession is a�ributable in part to recogni-tion of the essential requirement to position Guernsey as a top-tier jurisdiction.

Guernsey is recognised as a leader in global regulation and co-operation following positive assessments by the IMF and OECD; both organisations published reports commending the island’s high stand-ards of regulation and Guernsey is included in the OECD white list. Notwithstanding this the Guernsey Financial Services Commission (GFSC), while robust, has a repu-tation for its pragmatic and open-door approach placing it ahead of our competitors.

OBSTACLES FOR NEW BUSINESS�e cost and implementation of changes in compliance and regulation can act as obstacles to new business �ows, topical issues currently being AIFMD, FATCA, and Dodd Frank. �e UK Bribery Act also came into force in July 2011 with unknown extraterritorial reach and severe

penalties for non-compliance. �ose a�ected must dem-onstrate they have adequate procedures in place identify-ing bribery risks and ensuring procedures are in place to mitigate the risks identi�ed.

Concerns regarding AIFMD, which initially threat-ened to signi�cantly impact our fund industry, have been signi�cantly allayed since the �rst dra� of the directive. November’s Level 2 regulations, concerning rules re-lating to third countries and de minimis calculations, resolved many of these concerns and Guernsey is well positioned for the �nal outcome by o�ering an equiva-lent regime. Opportunities may also present themselves for Guernsey in terms of providing an alternative form

of regulatory regime for those products which have no EU con-nections, bearing in mind that the industry cost of implementing the requirements of the AIFMD should not be underestimated. We have seen a positioning of fund managers se�ing up their opera-tions and funds (particularly pri-vate equity vehicles) in Guernsey in an endeavour to avoid any nega-tive aspects of the �nal outcome of the legislation.

�e dra� FATCA regulations were released by the IRS in Febru-ary this year and represent a com-plex set of rules designed with the objective of limiting tax evasion by US persons. Impacted organi-sations may need to adjust their existing operating model in order to avoid a punitive withholding

tax of 30% on US investments and become compliant, as well as review their new business take-on procedures. To further exacerbate the challenge, the regulations will re-main �uid up until and beyond the �rst deadline in June 2013.

�e Dodd Frank Act prompts changes to the ways hedge funds must operate to be�er protect investors, af-fecting investment advisers with a place of business in the US and certain custodians. �ose a�ected should have registered with the SEC by the February 2012 deadline and consideration must be given to technology, opera-tions and infrastructure to meet the new regulatory re-quirements, which among other things requires the ap-pointment of a compliance chief for each fund.

OPPORTUNITIES MAY ALSO PRESENT THEMSELVES

FOR GUERNSEY IN TERMS OF PROVIDING AN

ALTERNATIVE FORM OF REGULATORY REGIME FOR PRODUCTS WHICH HAVE NO EU CONNECTIONS

”

G U E R N S E Y 2 0 1 2

Patricia White is managing director of Legis Fund Services Limited, a Chartered Accountant and a Chartered FCSI and has over 20 years experience in the offshore finance industry.

PATRICIA WHITE OF LEGIS FUND SERVICES LIMITED DISCUSSES HOW THE FUND INDUSTRY IN GUERNSEY IS FARING AT A TIME WHEN THE EUROZONE ECONOMY REMAINS FRAGILE

EUROZONE IN TURMOIL WHILE GUERNSEY STANDS STRONG

019_020_HFMGuernsey-2012_Legis.indd 19 19/04/2012 17:44


G U E R N S E Y 2 0 1 2

�e importance of good corporate governance is un-derpinned in the a�ermath of the Weavering scandal em-anating from the Cayman Islands. �e publication of the Finance Sector Code of Corporate Governance by the GFSC, containing principles and guidance for adherence to good corporate governance, and requiring submission of an annual assurance statement to con�rm the same, is welcome and provides assurance that Guernsey does not underestimate the importance of these principles.

With a growing number of con�icting cross-jurisdic-tional and cross-functional regulatory requirements, businesses need to take a more universal approach to compliance and risk management. As a well regulated ju-risdiction, the increasing focus on compliance and regu-lation means Guernsey is well positioned compared to those adopting a lighter touch approach.

EXTENDING ITS REACH�e Guernsey fund industry now looks beyond tradi-tional UK and eurozone markets, securing and further developing growth from non-traditional emerging mar-kets. �e versatility of Guernsey’s fund regime and prod-uct types means that we have an a�ractive o�ering for jurisdictions such as Mena, India, China and Russia.

Guernsey’s Registered Fund regime, available for open-ended and closed-ended funds, facilitates a three-day approval process which is a popular choice for pro-moters who can demonstrate an established track record, combining both a speedy approval process with the secu-rity of regulatory oversight. Authorised Qualifying Inves-tor Funds also o�ers a three-day process, the most appro-priate choice being a�ected by the requirements of the detailed disclosure in the o�ering documents. Licensing of a GP can also be fast-tracked to a ten-day process. Competing jurisdictions can only achieve this turna-round time through their unregulated fund regimes.


We are seeing an increasing demand for listed funds, the perception being that the listing authority provides an additional layer of regulation and oversight as well as potential liquidity. LSE statistics show that for non-UK companies Guernsey is the jurisdiction of choice. �ere are signi�cantly more Guernsey companies listed on the LSE main market and the SFM than any of our competi-tor �nance centres.

Playing host to the Channel Islands Stock Exchange, which is an internationally recognised Market Author-ity and FSA approved, further enhances our service of-fering. Its competitive pricing and responsive approach makes it an a�ractive alternative to other exchanges.

As a jurisdiction, we are seeing growth in funds of hedge funds, private equity business and alternative as-set classes generally including infrastructure, Shariah compliant and green funds.

Guernsey has an exceptionally well-developed pri-vate equity infrastructure in terms of its regulatory en-vironment and legislation, for both limited partnership law and company law. Tax laws facilitate organisational structuring through a tax neutral environment; no tax liability is payable in this jurisdiction.

�e Private Equity News/State Street CFO survey reports that more than 61% of participants indicated Guernsey as their preferred destination for private eq-

uity outsourcing and Guernsey was ranked as the highest placed jurisdiction in the FundDomiciles.com Stability Index 2011.

We have a track record of working with promoters and Shariah advisers to structure funds which comply with the fundamental principles of Islamic �nance and recognise the importance of maintaining the Shariah-compliant status of the funds. Similarly, we understand the values which underpin green funds, whose invest-ments are focused on sustainability and ‘clean’ technol-ogy or energy and which have evolved from the ethical funds that have been present in the investment market for some time.

�e �exibility of our fund regime also sees Guernsey gaining a reputation as a centre of excellence for more esoteric asset classes such as �ne art, wine, timber, and rare and classic cars.

Overall, I remain cautiously optimistic for the remain-der of the year. While the Guernsey funds industry con-tinues to see growth, new fund launches continue to take longer to get to market as fund raising remains di�cult. Investors take an extremely cautious approach to invest-ment while economic uncertainty continues and markets will remain sensitive to any negative data emanating from the eurozone.

While the possibility of a signi�cant upturn in the pace of growth for the remainder of 2012 is highly unlikely, the UK economy has avoided recession and growth is likely on some level. With Guernsey funds promoted or sponsored by leading institutions in more than 55 �-nance centres, and with over 50 years of proven �nancial services experience, an excellent track record, a �exible regulatory environment, good infrastructure and po-litical stability, Guernsey is a highly respected domicile which I expect to fare well in this di�cult economic cli-mate and continue to stand strong. n

THE GUERNSEY FUND INDUSTRY NOW LOOKS BEYOND TRADITIONAL UK AND EUROZONE MARKETS,

SECURING AND FURTHER DEVELOPING GROWTH FROM NON-TRADITIONAL EMERGING MARKETS

”

019_020_HFMGuernsey-2012_Legis.indd 20 19/04/2012 17:44

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Ogier is one of the leading providers of offshore legal and �duciary services. We advise on BVI, Cayman, Guernsey and Jersey Law and associated �duciary services through our network of of�ces across the globe.

Ogier has over 850 professional and support staff, including over 200 lawyers and 300 professional administrators with the strength in depth to deliver service excellence to our clients.

We offer a proactive and �exible approach and have the expertise to handle the most complex offshore structures across all time zones.

To �nd out more about how Ogier can assist you, please visit us at www.ogier.com or e-mail us at [email protected]

Information on the Ogier Group and details of its regulators can be accessed via our website

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Untitled-3 1 16/04/2012 10:37


G U E R N S E Y 2 0 1 2

For centuries Guernsey has enjoyed a very close trading relationship with the City of London. While folklore tells us London’s streets are paved with gold, the Guernseyman knows they are paved with granite. In 1840, Blackfri-ars Bridge was paved with se�s of Guernsey

granite and later in 1862-74, Guernsey se�s were again used for London Bridge, the Strand and the �ames Em-bankment.

Today, Guernsey continues to provide support and ser-vices to the City of London but the nature of the supply has moved on from granite se�s to become a conduit of �nancial services for an international client base. More and more businesses from around the world are now look-ing to use the Channel Islands as their gateway for doing business with the City, and with elsewhere. In 2010, the then Lord Mayor of London commented while visit-ing Guernsey: “�e Islands are an important conduit for business to and from London, and comple-ment the City’s o�ering in areas including banking, wealth manage-ment and specialist insurance.”

GUERNSEY’S AFFINITY WITH STOCK EXCHANGESAn example of this conduit work-ing exceptionally well for both the City and Guernsey with its inter-national client base is the number of local companies now listed with the London Stock Exchange.

�e London Stock Exchange has announced its 2011 year-end statistics showing that Guernsey, as a jurisdic-tion, was home to more companies listed on its markets than any other non-UK jurisdiction (see Total market list-ings by jurisdiction on p23). Guernsey’s 108 companies listed on the LSE markets was comfortably more than from any one of the major economic powers of the USA, Russia or India. Within its own group of competitor cen-tres Guernsey was clearly 50% ahead of Jersey, Ireland or the Isle of Man and more than double that of Bermuda, Cayman or the BVI.

Interestingly, Guernsey’s dominance as a non-UK juris-diction hosting listed entities on the LSE’s markets is just part of a bigger picture. It surely is no coincidence that Guernsey is home to the Channel Islands Stock Exchange?

�e CISX is a success story in its own right, having at the end of last year over 4,300 securities admi�ed to its o�cial list. �is compares favourably with the London Stock Ex-change, which lists over 2,500 companies of which nearly a third come from foreign countries.

One of the strengths of Guernsey as a jurisdiction is that its incorporated companies are well recognised and respected by stock exchanges around the world.

�e CISX’s Spring 2012 edition of its magazine Bulle-tin reports that of its own listed securities, some also hold dual listings on Euronext Amsterdam and the exchanges of Frankfurt, Toronto and Australia, among others.

Dual listing on stock exchanges is not a new concept but it certainly has started to gain a momentum of its own as

issuers strive to �nd the best solu-tions to satisfy their every increas-ing requirements and demands. Whereas perhaps in the past a company might have selected one jurisdiction for its good points and accepted a compromise on other points, internationalisation means no company need be wedded to any one jurisdiction.

Obtaining a dual listing on stock exchanges is just one example of ‘menu shopping’ within multiple jurisdictions, picking from each country whatever is best for the company.

Many a Guernsey company may �rst list its shares on the CISX for the regulatory and international

recognition such a listing provides and then obtain a sec-ondary listing on an exchange in the jurisdiction where most of its prospective investors will reside and so like to trade their shares in the company. In this example the menu items being satis�ed are ‘recognition’ and ‘e�ective trading platform’.

However, while being a Guernsey company it is not necessary to list �rst on the CISX before seeking a listing elsewhere.

Anson Fund Managers Limited has and does admin-ister Guernsey companies listing their shares solely on London’s main market, AIM and the Special Funds Mar-ket (SFM); NYSE Euronext Amsterdam, the Irish stock exchange and even the Budapest stock exchange. �rough their Crest compliant registrar business, Anson Registrars Limited, they have over the years seen Guernsey compa-

ONE OF THE STRENGTHS OF GUERNSEY AS A JURISDICTION

IS THAT ITS INCORPORATED COMPANIES ARE WELL

RECOGNISED AND RESPECTED BY STOCK EXCHANGES AROUND THE WORLD

”

THE DEPTH OF EXPERIENCE WITHIN GUERNSEY’S FUND ADMINISTRATION SECTOR FOR LISTING ON STOCK EXCHANGES GLOBALLY IS WELL FOUNDED, AS JOHN LE PREVOST OF ANSON FUND MANAGERS EXPLAINS

A G ATE WAY FOR STOCK E XCHANGE L ISTINGS

John Le Prevost is the CEO of Anson Group which delivers fund administration and Crest compliant registration services in Guernsey and also in the United Kingdom. John has over 35 years experience of fund administration, stock exchange listings and registration services across many jurisdictions.

022_023_HFMGuernsey-2012_Anson_NEW.indd 22 19/04/2012 17:45



nies list on all the home markets as well as abroad using the TSX Venture Exchange in Canada and Hong Kong’s stock exchange and recently the GXG Markets for small to medium European businesses.

While many Guernsey investment funds have become listed on many exchanges, a more recent new user has been the hedge fund sector. In November 2006, MW Tops Lim-ited had a most successful €1.5bn raising on Euronext Am-sterdam and two years later dual listed on the LSE main market. BlueCrest AllBlue Fund Limited �rst listed in May 2006 and now has on the LSE main market a capitalisation in excess of £900m.

ANOTHER SUCCESS STORYPrivate equity funds have been a success story too, with HarbourVest Global Private Equity Limited’s $830m rais-ing on Euronext Amsterdam in December 2007.

�ere really is no limitation as to what a listed company might invest in or trade in and for Guernsey, that’s the in-terest of administering such companies.

Increasingly, many a listed Guernsey company is no lon-ger a regulated collective investment scheme. A growing number are trading businesses in their own right or the holding company of trading businesses operating in other jurisdictions. For example, in our own stable of clients we have Mytrah Energy Limited owning wind farms in India and the Doric Nimrod Air One & Two companies owning aircra�.

�is wide potential of underlying activity provides an interesting dimension to company administration and enhances the inherent knowledge and skills of the work-force. Coupling this variety of activity to a broad range of listing requirements from so many di�erent exchanges has helped Anson carve out for itself a niche skill in a challenging market.

As a true Guernseyman I have absolute faith in the ability of this island to go from strength to strength re-gardless of the external hurdles to business which appear from time to time. �e island once had a formidable ship building industry, then came privateering followed by ex-porting Guernsey ca�le to the Americas and beyond; next came quarrying and of course our export of granite se�s

to London, and then tomatoes, �owers and tourism. �ey all have had their time as important drivers of the island’s economy.

Today the island can be viewed as a gateway to London and beyond for all types of �nancial services including list-ing a Guernsey company on a variety of stock exchanges, be they a main market or a specialist sector market. Per-haps in a few years time we might be viewed as becoming a niche gateway into and out of Europe, who knows?

What is known is that Guernsey’s �nance industry has the ability to look ahead and round corners and view the future in a positive light. When one door closes, invariably another opens, and sometimes two or three. �e tenacious Guernseyman will survive and prosper and so too, hope-fully, will his ever increasing international client base. n

TOTAL MARKET LISTINGS BY JURISDICTION

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G U E R N S E Y 2 0 1 2

It is difficult enough to choose the right invest-ment field in these uncertain times, but it is just as difficult to choose where to base a fund and what structure to use. Some centres offer low-cost solutions, but at the expense of very limited legal protection; other traditional centres offer

a strong regulatory framework, but only at a prohibi-tive cost. Key developments in recent years have high-lighted the more serious international finance centres, which offer an excellent balance between cost and reg-ulation, while also being at the forefront of innovation in the fund world.

We have noticed in recent years that regulation can actu-ally be seen as an attraction for fund promoters. The ‘regula-tion-lite’ funds in some centres have learned to their cost that flexible investment rules can mean unbalanced portfolios, that limited controls are often accompanied by limited pow-ers to deal with fraud or mal-practice and that investors are beginning to realise the merits of good regulation as a pre-req-uisite. In a climate where rais-ing new money is as difficult as it has ever been, security is winning out over expediency.

REGULATION AND INNOVATION?You might think that regulation and innovation are incompati-ble creatures. Surely regulators are only interested in stifling creativity, since it appears to be the enemy of investment security? But most regu-lators have realised that what is required is to offer a range that covers tightly controlled products aimed at a mass market audience at one end, and lightly regu-lated products aimed exclusively at the professional investor, at the other. The first key step to making this work is to adopt high standards at all levels, enforced through the service providers under the regulator’s di-rect control. The second is to offer flexible corporate

structures within this framework, using structures such as protected cell companies and limited partnerships.

GUERNSEY’S APPROACHGuernsey, base for the Louvre Group, is an excellent example of this approach. Guernsey is an indepen-dent jurisdiction, with its own tax laws and regulatory regime under the authority of the widely respected Guernsey Financial Services Commission (GFSC).

While the regulator’s primary concern is investor protection, the industry is keen to develop new prod-ucts and to avoid an excessive burden of regulation.

This seeming conflict has been well resolved by routine consultation, ensuring that regulation is pragmatic, and by joint working parties on the development of legisla-tion. While there has been a steady tightening up of com-pliance (examples include: new conduct of business rules, new capital adequacy rules and new corporate gov-ernance guidelines), there have also been a number of modernising laws includ-ing a completely overhauled companies law and investor protection law, as well as the development of new regula-tory approaches such as the registered fund (a fast-track approval process). This adds to Guernsey’s impressive re-cord of innovation, which in-cludes the use of a protected cell company for umbrella

funds, limited partnership law with limited liability law on the way, and law on intellectual property.

OTHER CENTRESNone of this is to deny the popularity of other fund centres such as the Cayman Islands and the British Virgin Islands. However, Guernsey still has a key role to play. While the relative lack of regulation in these centres is attractive in many ways, there are real prac-

THE KEY WORD FOR THE INVESTOR IS CHOICE. CHOICE OF PLACE OF

INCORPORATION, CHOICE OF REGULATORY FRAMEWORK,

CHOICE OF FUND STYLE, CHOICE OF INVESTMENT

POLICY, CHOICE OF GEOGRAPHICAL FOCUS

”

KEVIN GILLIGAN OF LOUVRE EXPLAINS WHY GUERNSEY IS AN ATTRACTIVE CHOICE AS A CENTRE FOR FUNDS INVESTING IN WORLD MARKETS

FUNDS: THE RANGE OF CHOICES

Kevin Gilligan is managing director, Louvre Fund Management Limited. He specialises in the structuring and ongoing management of open- and closed-ended alternative investment funds. Kevin currently sits on a number of investment management and fund company boards across a wide range of asset classes and jurisdictions.

024_025_HFMGuernsey-2012_Louvre.indd 24 19/04/2012 17:47


F U N D S E R V I C E S

tical problems in administering a fund in these loca-tions, a problem exacerbated by time zone differences. For many, providing administration in Guernsey is one way to solve these problems, with a practical time zone and the benefit of higher regulatory standards with so-called ‘non-Guernsey schemes’ still requiring GFSC approval.

Our own experience at Louvre is that many clients are now actively seeking to re-domicile Cayman and BVI funds to the island. This is surely an endorsement that regulation in Guernsey is as much a benefit as a burden. Coupling this with a realistic pricing structure, it is clear why Guernsey is proving very competitive as a fund provider.

EU FUNDS AND THE AIFM DIRECTIVEOffshore investors have typically avoided the EU as a fund jurisdiction. The merits of tighter regulation within an Undertakings for Collective Investment in Transferable Securities (Ucits) fund have tended to be outweighed by other factors. The key negative is that Ucits have limited investment powers. The end result has been the growth of non-authorised funds, which might conveniently be described as hedge funds, and can only be made available to a limited pool of inves-tors.

Following the financial crisis of 2008, the EU set it-self the task of regulating hedge funds. This appeared to be driven by a conviction that such funds were re-sponsible for the crisis although there is little evidence

that such funds did more than bring the crisis to a head. There followed much debate around the proposed Alternative Investment Fund Managers (AIFM) Directive in the EU. The end result reflects extensive industry consul-tation and is likely to result in a common EU passport for AIFMs and, more significantly, a passport for non-EU funds which measure up to the same standards. Guernsey is already fa-miliar with these issues, having for some years had UK recognised fund status for its ‘Class A’ funds.

TAXATION As you might expect, the taxation of funds in Guernsey is straightforward. Currently the standard rate of company tax in Guernsey is zero but, as an added insurance, most funds can claim tax-exempt status for a nominal an-nual fee. Partnerships are the only exception, where in essence the arrangement is transpar-ent with the tax burden falling on the investor as if he had a direct stake in the investment. This means that investors can mitigate tax and enjoy a degree of flexibility in approach.

INVESTMENT CHOICEFinally, of course, the investor has to choose the field of investment. The range now offered is huge. At Louvre we administer funds invest-ing in equities, fixed interest, commodities, de-

rivatives, currencies, property (including forestry) and trade finance. These may include hedge funds, private equity funds, limited partnerships and fund of funds. In addition, we offer Shariah-compliant funds, with our office in Dubai acting as an essential link.

A DEPENDABLE CHOICEFor fund promoters, Guernsey is an attractive choice as a centre for funds investing in world markets. The range of funds which have been attracted is notable, with private equity and hedge funds a particular suc-cess story. So attractive has Guernsey proved that sev-eral household names in the industry such as Terra Firma and BlueCrest have relocated their main offices to the island. A key factor here is Guernsey’s closeness to the City of London, while the level of local technical expertise is first class.

The key word for the investor is choice. Choice of place of incorporation, choice of regulatory frame-work, choice of fund style, choice of investment policy, choice of geographical focus. In my experience, Guern-sey has a very strong claim on investors seeking to in-vest internationally: high standards, flexible legislation and professional expertise are key factors, in tandem with real personal service, prompt response times and a commercial can-do attitude. n

The Louvre Group was founded in Guernsey in 1976 and now has a presence in Guernsey, BVI, Cayman Islands, Dubai, Geneva, Hong Kong, Liechtenstein, London, and Singapore. It specialises in fund establishment and administration, and fiduciary services.

024_025_HFMGuernsey-2012_Louvre.indd 25 19/04/2012 17:47

At Butterfield in Guernsey, we work hard to establish long-term relationships with our clients and stay on course with their goals. We specialise in assembling the right people, products and services to create solutions that will meet your financial requirements. It is a skill we have honed over 150 years and although much has changed with the passage of time, an entrepreneurial spirit and an unrelenting focus on our clients’ needs remain at the heart of everything we do.

To find out more about Butterfield Guernsey’s wealth management services, which include: Custody, Lending, Private Banking, Discretionary Investment Management, and Fiduciary Services, please contact Jason Woodhard, Manager – Business Development on +44 (0) 1481 733217 or email [email protected]

www.butterfieldgroup.com

The Bahamas I Barbados I Bermuda I Cayman Islands I Guernsey I Switzerland I United Kingdom

Moving forward togeth er

Butterfield Bank (Guernsey) Limited is licensed under The Banking Supervision (Bailiwick of Guernsey) Law, 1994, as amended, and The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended; Company Registra-tion No. 21061. Butterfield Bank (Guernsey) Limited is a participant in the Guernsey Banking Deposit Compensation Scheme. The Scheme offers protection for ‘qualifying deposits’ up to £50,000, subject to certain limitations. The maximum total amount of compensation is capped at £100,000,000 in any 5 year period. Full details are available on the Scheme’s website www.dcs.gg or on request. Butterfield Bank (Guernsey) Limited tel: +44 1481 711521. Deposits with Butterfield Bank (Guernsey) Limited are not covered by the Financial Services Compensation Scheme established in the UK under the Financial Services and Markets Act 2000, nor are deposits covered by any equivalent scheme outside of the Bailiwick of Guernsey. There is currently no Financial Services Ombudsman Scheme operational in Guernsey. Butterfield Bank (Guernsey) Limited and Butterfield Trust (Guernsey) Limited are licensed and regulated by the Guernsey Financial Services Commission under the Regulation of Fiduciaries, Administration Business and Company Directors, etc, (Bailiwick of Guernsey) Law, 2000, as amended. Company registration No 31645 Registered Office both at: Regency Court, Glategny Esplanade, St Peter Port, Guernsey GY1 3AP. Both companies are registered under the Data Protection (Bailiwick of Guernsey) Law 2001.

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L E G A L

As I write these words, the view from my of-�ce window has changed from dark, posi-tively ominous clouds to a clear blue sky and bright sunshine. It might be a li�le early to claim this is a metaphor for the global funds industry but, at the very least,

Guernsey appears to have enjoyed – and o�ered to par-ticipants in the funds market – some shelter from recent storms.

�e past 12 months have been characterised by a series of tumultuous problems a�icting the entire industry. But the fact that Guernsey has continued to grow in terms of funds under management and administration, when some other funds domiciles remain in decline, demonstrates the strength of Guernsey as a funds domicile. In particu-lar, most of the challenges over the past 12 months have proven to represent opportunities as far as Guernsey is concerned.

RESPONDING TO CHALLENGESLooking at some of the challenges that have arisen over the past 12 months it is possible to see a pa�ern that has favoured sensibly regulated juris-dictions such as Guernsey. �e on-going dialogue between the funds industry on the one hand, and the EU on the other, regarding the Alternative Investment Fund Man-agers (AIFM) Directive, and the subsequent Level 2 proposals, has continued to provide more than its fair share of headaches and exas-peration. However, notwithstand-ing the general disappointment at the initial Level 2 proposals, the general mood in the market ap-pears to be unchanged; it is clear the European Commission intends to engage with Guernsey (and Jersey, with whom Guernsey has joined forces in its discussions with the Commission) in a positive manner. For its part, Guernsey is perhaps bet-ter positioned than some other o�shore centres to comply with the new regime from 2018 onwards.

Perhaps the dominant theme of the past 12 months, as it was over the previous few years, has been a general lack of investor con�dence and relative scarcity of capital. �is has meant that capital providers have had a much stronger position vis-a-vis investment managers than in the past; it has also meant that managers feel obliged to look for ways

in which they can o�er a more a�ractive overall package to investors. Aside from the commercial terms a�aching to an o�ering, managers have in particular looked at the regulatory environment. It is clear that institutional in-vestors and many high-net-worth-individuals (HNWIs) now take comfort in a regulated environment, provided the regulator still allows su�cient �exibility to pursue a�ractive investment strategies. �e Guernsey Class B Regulations have proven to be very helpful in this regard, allowing funds to be marketed to a range of institutions, while providing considerable �exibility as to the nature of the fund’s assets. It helps that while the GFSC’s approval is required for a fund which proposes to operate as a Class B fund, the team at the commission who deal with these applications has demonstrated a level of proactivity and commercial nous which puts them well ahead of most regulators. �e Guernsey-registered fund regime, which is highly analogous to Cayman’s administered funds regime, has been very popular too.

On a similar note, the ability to o�er a listed fund prod-uct remains a strong selling point and a number of manag-ers have taken advantage of the strong reputation of the

Channel Islands Stock Exchange (CISX) with this in mind. �e CISX o�ers similar advantages to a listing in London, although at a lower cost and with greater speed and �exibility of response.

�e impact of US regulatory initiatives does not o�er any ad-vantages or disadvantages peculiar to Guernsey-domiciled funds. �e likely e�ect of the Foreign Account Tax Compliance Act (FATCA) appears to be simply to add an-other cost of doing business to the industry as a whole; most Guern-sey service providers who are po-tentially a�ected by the Act are already pu�ing in place the mecha-

nisms to secure compliance. While there might have been some initial reservations

about incurring this expense, the all-pervasive nature of the legislation suggests that few will consider it safe to ig-nore it. Similarly, the Dodd-Frank Act, which will have a signi�cant e�ect on participants based in the US, does not now look likely to cause misery to Guernsey funds. �e Volcker Rule is expected by some to have a bene�cial ef-fect, as money currently held on a proprietary basis by US investment banks will need to be accommodated some-

G U E R N S E Y 2 0 1 2

MOST OF THE CHALLENGES OVER THE PAST 12 MONTHS HAVE PROVEN TO REPRESENT

OPPORTUNITIES AS FAR AS GUERNSEY IS CONCERNED

”

Robert Varley joined Babbé in early 2011 having previously been managing partner, and regional head of private equity for a large Cayman Islands law firm’s Dubai office. He is recognised as a leading private funds practitioner, having worked on a variety of hedge funds, private equity, real estate and various Shariah-compliant funds. He has practised in the Caribbean, Middle East and Far East as well as London and the Channel Islands.

ROBERT VARLEY OF BABBÉ EXPLAINS WHY GUERNSEY IS IN A BETTER POSITION THAN MOST OFFSHORE JURISDICTIONS TO COMPLY WITH REGULATORY CHANGES.

UNCHANGING ELEMENTS

027_028_HFMGuernsey-2012_Babbe.indd 27 19/04/2012 16:37


G U E R N S E Y 2 0 1 2

where when those banks divest themselves of their proprietary trading activities; this is expected to bene�t the funds industry as a whole.

Perhaps one of the ho�er topics in Guernsey is the on-going scru-tiny of non-executive directors for funds. While a high-pro�le Cay-man Islands non-executive director suggested in the Fi-nancial Times that there is nothing wrong with having 650 directorships, the Guernsey Financial Services Commis-sion takes a rather di�erent view and has, for some years, been trying to ensure the number of directorships held by any individual is su�ciently small as to allow him or her to provide proper oversight of the fund’s executive manage-ment. �e Commission has – wisely in my view – avoided trying to set out an exact number, since the demands of any given directorship, and the ability of any given individ-ual to meet them, are likely to vary considerably; as a rule of thumb, a modern non-executive director of a Guernsey-domiciled investment fund should be looking to the non-executive directors of FTSE 100 companies as inspiration and not to a GP in a medical practice.

It would be facile to pretend Guernsey is not immune to allegations of directors failing to adequately perform their duties – this is a global phenomenon and over the last year or so Babbé have been asked to advise on a number

L E G A L

of Guernsey cases where such al-legations have been made or might potentially be made. However, Guernsey does seem to be ahead of the curve in pushing towards a more value-added model for non-executive directors.

As be�ts an island that is mostly comprised of granite, it is the un-

changing elements which give Guernsey its strength. �e regulatory regime continues to avoid radical change, although the Class B Regulations, which have most rel-evance to open-ended funds, are being overhauled at pres-ent. �e registered funds regime, which allows a fast track towards regulation, remains popular. Political stability and tax neutrality remain solid.

�e ultimate strength of the island, though, remains the quality of its people. �e funds practices of the Guernsey law �rms continue to enjoy steady growth and it would be surprising if we saw the kind of wholesale defections and sta� reductions which have convulsed the legal practices of some other jurisdictions in recent times. �e range and depth of experience of the administration, accounting, custody, banking and directorship service providers to the funds industry in the island remain hard to beat, and it is upon these solid foundations that we can expect to see further steady growth and development over the coming year. n

AS BEFITS AN ISLAND THAT IS MOSTLY COMPRISED OF GRANITE, IT IS THE

UNCHANGING ELEMENTS WHICH GIVE GUERNSEY ITS

STRENGTH

”

027_028_HFMGuernsey-2012_Babbe.indd 28 19/04/2012 16:38

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Untitled-3 1 16/04/2012 10:39


A D V I S O R Y

In the world of o� shore funds, corporate govern-ance is dominating the headlines as the investment funds industry continues to learn from the hard lessons of the 2008/2009 global � nancial crisis. With onshore regulators scrutinising their island neighbours ever more closely, o� shore regulators

are under pressure to ensure that internationally accept-able standards of corporate governance are enshrined in local law, while at the same time balancing the competing market demand for � exibility.

Guernsey has already heeded these warning signs and demonstrated once again its ability to adapt to changing market conditions to the bene� t of all its key stakehold-ers. � is article discusses the new Code of Corporate Governance which came into e� ect on 1 January 2012, queries whether the ripples of the recent Cayman decision of Weavering will be felt in Guernsey, and � nally submits that Guernsey’s existing regulatory framework already provides a robust system of checks and balances for the bene� t of investors and funds alike.

THE GUERNSEY CODEGuernsey authorised or registered funds together with their Guernsey licensed service providers, if established as corporate entities, are now subject to the Finance Sector Code of Corporate Governance (the “Code”) issued by the Guernsey Financial Services Commission (the “Com-mission”).

� e Code came into e� ect on 1 January 2012 and ap-plies to all companies licensed under Guernsey’s main regulatory laws, including � e Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended (the “POI Law”). Underlying special purpose vehicles or investment holding companies are not included. Although it does not apply directly to investment funds established as limited partnerships, it will apply to a corporate general partner licensed under the POI Law. Companies which report against the UK Corporate Governance Code or the As-sociation of Investment Companies Code of Corporate Governance are deemed to meet the Code.

� e Code is intended to supplement other corporate governance requirements and applicable law. It consists of eight principles (“Principles”) along with second level guidance on meeting those Principles and the approach is one of “comply or explain”. It is non-prescriptive, allowing the company concerned to adopt a corporate governance strategy that is proportionate and appropriate to the na-ture, scale and complexities of the particular business.

Non-compliance with the Code does not automatically

render a company liable to any sanction or proceedings but the approach taken for adoption of the Principles and the explanation for any non-compliance will be ma� ers for consideration by the Commission as part of its ongoing supervision.

THE EIGHT PRINCIPLES1. Companies should be headed by an e� ective board of

directors which is responsible for governance.

2. Directors should take collective responsibility for di-recting and supervising the a� airs of their company’s business.

3. All directors should maintain good standards of business conduct, integrity and ethical behaviour and should op-erate with due care and diligence and at all times act honestly and openly.

4. � e board should have formal and transparent arrange-ments in place for presenting a balanced and under-standable assessment of the company’s position and prospects and for considering how they apply � nancial reporting and internal control principles.

5. � e board should provide suitable oversight of risk man-agement and maintain a sound system of risk measure-ment and control.

6. � e board should ensure the timely and balanced dis-closure to shareholders and/or regulators of all material ma� ers concerning the company.

7. � e board should ensure remuneration arrangements are structured fairly and responsibly and that remunera-tion policies are consistent with e� ective risk manage-ment; and

8. � e board should ensure that satisfactory communica-tion takes place with shareholders and is based on a mu-tual understanding of needs, objectives and concerns.

Directors of companies subject to the Code must con-sider and minute discussions relating to it periodically at board meetings. � ey are also required to con� rm to the Commission on an annual basis by means of a wri� en as-surance statement that they have considered the e� ective-ness of their corporate governance practices and, in the context of the nature, scale and complexity of the relevant

G U E R N S E Y 2 0 1 2

Valerie Rouse is a senior associate at Mourant Ozannes. Rouse specialises in offshore collective investment schemes and regulatory issues and has considerable experience in this area through employment for many years in the offshore finance sector. Before joining the firm in 1997, Rouse spent three years with the Guernsey Financial Services Commission.

VALERIE ROUSE AND ANTHONY WILLIAMS OF MOURANT OZANNES DISCUSS THE INTRODUCTION OF THE NEW CORPORATE GOVERNANCE CODE AND WHAT LESSONS, IF ANY, THE GUERNSEY INVESTMENT FUNDS INDUSTRY CAN TAKE FROM THE RECENT CAYMAN CASE OF WEAVERING

CORPOR ATE GOVERNANCE

Anthony Williams is a senior associate at Mourant Ozannes. Williams joined Mourant Ozannes in 2008 from Australia where he specialised in corporate litigation. He specialises in banking and finance litigation and contentious trust disputes. He also has a particular interest in funds litigation and advises a wide range of investment funds, investment companies and fiduciaries.

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G U E R N S E Y 2 0 1 2

company, are satis�ed with the degree of compliance with the Principles for the relevant period.

WEAVERING – WHAT DOES IT MEAN FOR GUERNSEY?In August 2011, the Grand Court of the Cayman Islands handed down its judgment in the case of Weavering Macro Fixed Income Fund Limited (in liquidation) (the “Weavering Fund”) v Stefan Peterson and Hans Ekstrom (the “Weavering Judgment”). It triggered a wave of interest in the industry for the extent to which the Court has sought to estab-lish how directors of open-ended funds should approach the dis-charge of their �duciary and other duties to the funds of which they are directors.

Notwithstanding the excitement generated by some of the commen-tary in the industry concerning the Weavering Judgment, the short point is the case is remarkable in that for the �rst time, the Court has considered the extent and scope of directors’ duties in the context of an open-ended investment fund, and the interplay of those duties with the obligations delegated to and assumed by professional ser-vice providers including invest-ment advisers and fund managers.

�e Judgment summarises the duties owed by directors to their companies. Although these duties were expressed in the context of a Cayman fund, they are likely to be adopted in Guernsey. Of particular relevance to fund governance will be the series of important statements that the Court made in relation to the duty of directors to perform a high level supervisory role, particularly in respect of the powers they have delegated to others.

It is common ground in the industry that the facts un-derlying the Weavering Judgment were extreme. In that case, the liquidators of the Weavering Fund alleged that the directors of the fund were in wilful default and neglect of their duties as directors, an allegation which was upheld by the Court. In the Weavering Judgment, the defendant di-rectors were described as “automatons” who signed what-ever documents were put in front of them without “making enquiry or applying their minds to the ma�er in issue, on the assumption that the other service providers have all performed their respective roles (actual or perceived) and therefore do not need to be supervised in any way whatso-

A D V I S O R Y

ever”. It was held that they in e�ect rubber-stamped the advice they received concerning the performance of the Weavering Fund.

While it would be easy to dismiss the Weavering Judg-ment as an extreme case, the Guernsey investment funds industry would be wise to heed the benchmark set by the Court in relation to the supervisory role to be exercised by directors in relation to the performance of the appoint-ed service providers. It is important to note in this regard that the Court stated that the Weavering Fund’s manage-

ment structure was entirely conventional (except perhaps for the composition of its board of directors), in that it had appointed an administrator, custodian and invest-ment manager, each of whom undertook to perform the roles typically assumed by those types of service provid-ers. �erefore the comments of the Court may be applied equally to other conventional fund structures.

Importantly, while the Court acknowledged that “in the context of open ended investment funds, investment management, administration and accounting functions are invariably delegated to contracted professional service providers…”, the directors of the fund must continue to exercise an independent judgment by con-ducting a review of the perfor-mance of those service providers in an inquisitorial manner. While this may sound obvious to profes-sional fund directors, the Court also raised the bar in relation to the reasonable care, skill and diligence to be exercised by directors in rela-tion to their duties. �e Court held that directors of open-ended in-vestment funds must have a proper understanding of the �nancial re-sults of the fund’s investment and its trading activity as part of their overall supervisory role.

While there will always be ex-treme cases in any forum, lessons

can be learned from the Weavering Judgment, particularly in respect of the supervisory role which directors are now expected to undertake. However, in light of the new Cor-porate Governance Code, it is submi�ed that Guernsey’s corporate governance regime is well placed to tackle these issues and prevent, to the best extent possible, the poten-tial pitfalls expressed in the Weavering Judgment.

BACK TO THE CODE�e Code is a binding code of practice. While it does not codify or amend any existing laws, it adds another layer of focus on the increasingly important requirement for ap-propriate corporate governance. By requiring a board to provide an annual wri�en assurance statement con�rm-ing its satisfaction with its degree of compliance with the Code, it necessarily requires the board to consider that compliance in the context of the nature, scale and com-plexity of the business in light of its common law �duciary and other duties. n

WHILE THE CODE DOES NOT CODIFY OR AMEND ANY EXISTING LAWS, IT ADDS ANOTHER LAYER

OF FOCUS ON THE INCREASINGLY IMPORTANT

REQUIREMENT FOR APPROPRIATE CORPORATE

GOVERNANCE

”

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Deutsche Bankdb-ci.com

Looking for a global custodian in the Channel Islands? Deutsche Bank has the solution.Deutsche Bank in the Channel Islands provides a complete global custody solution for openand closed-end funds worldwide, complemented by banking, treasury and credit facilities.

To discover more about our custody solutions, please contact:

Keith JohnsonHead of Custody Solutions Tel: +44 1481 702206Email: [email protected]

Lisa Haggarty Relationship Manager, Financial Intermediaries Tel: +44 1481 702153 Email: [email protected]

Deutsche Bank International Limited is regulated by the Jersey Financial Services Commission and licensed by the Guernsey Financial Services Commission to conduct Banking and Investment Business

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G U E R N S E Y 2 0 1 2

There has been no shortage of events rocking the Guernsey custody world over the years – the birth of Ucits, the spectacular growth of fund of hedge funds in the early noughties and level-ling o� with the market volatility of 2007-08, the impending Alternative Investment Fund

Managers Directive (AIFMD) and the current dominance of private equity as an asset class. �ese opportunities, chal-lenges and threats have ba�ered Guernsey’s rugged, but beautiful coastline, yet the island still continues to go from strength to strength.

�e last �ve years have also seen a signi�cant shi� in in-vestor in�uence and the return of the segregated custody account. Investor wealth has exploded in various emerging regions in-cluding Latin America, South Africa and Asia. High-net-worth individuals from these areas are in a position to create private fund structures that would be the envy of an open-ended fund. �ey can be relatively quick to market and do not su�er the short-termism that ‘herd’ mentality encourages in a crisis. Such individuals can, to some extent, dictate their own terms, while receiving their own valuation from an independent custodian. If not quite large enough to go it alone, high-net-worth clients can take advantage of the Protected or Incor-porated Cell Company platforms available in Guernsey.

RBC Wealth Management (operating through Royal Bank of Canada (Channel Islands) Limited and its subsid-iaries), one of the world’s top 10 largest wealth managers, will be celebrating 40 years in Guernsey in 2013, and the corporate and institutional business division has been pro-viding custody and fund administration services through locally licensed subsidiaries on the island for more than 25 years. �e division has more than $35bn in assets under custody for third-party institutional and high-net-worth clients. �ey bene�t from the continuing strength and stability of the RBC group, whose disciplined approach, risk-focused strategy, strong balance sheet and diversi�ed business mix have helped it to withstand the recent market turmoil.

Guernsey’s ability to adapt, innovate and evolve to the challenges referenced above leaves it well positioned to deal with global economic and �nancial developments. Further,

there are three key factors that favourably di�erentiate RBC Wealth Management in Guernsey in light of these changes. First, a global reach is important in discovering opportuni-ties and providing clients with a highly personalised service and access to the full suite of banking, credit, FX, escrow, �duciary and, if required, capital market services.

Second, RBC Wealth Management has assembled a tal-ented team that can help identify and implement bespoke solutions where speci�c requirements are in demand. For instance, the island is home to a number of more ‘esoter-ic’ funds; such as successful litigation funds, ground rent funds, wine funds and farmland funds, to name but a few,

and RBC Wealth Management is o�en asked to perform the role of �-duciary custodian to such structures. �is is a service that we are capable of providing, ensuring suitable due diligence is performed at every stage.

�ird, the full acquisition of RBC Dexia Investor Services by RBC, due to close mid-2012, will provide con-siderable complementary capabilities to the rest of RBC. As a top 10 global custodian that serves a diverse base of institutional investors, RBC Wealth Management will be able to leverage RBC Dexia’s access to the European market and also access its range of advice and services, including global

custody, fund and pension administration, shareholder ser-vices and treasury services.

�e Guernsey Financial Services Commission’s (GFSC) key objective is to protect the global reputation of the is-land with a �rm yet transparent approach to regulation. We are con�dent that Guernsey will meet the third-party crite-ria of a well-regulated jurisdiction required by the AIFMD, and it is reassuring to note that several key industry play-ers have maintained or recently established a presence in Guernsey. �e detail around depository liability will be closely watched by the custody industry and may result in additional costs to meet obligations and potential liabilities, particularly around the appointment of third-party sub cus-todians.

Like other �nancial centres, Guernsey has had to navi-gate carefully the recent �nancial uncertainty of the world economy and markets, but it is now well placed to capitalise on long-term growth opportunities in the custody sector, and as a consequence we at RBC in Guernsey are excited about our next forty years on the island. n

GUERNSEY’S ABILITY TO ADAPT, INNOVATE AND

EVOLVE LEAVES IT WELL POSITIONED TO DEAL WITH GLOBAL ECONOMIC AND

FINANCIAL DEVELOPMENTS

”

STUART MAUGER OF RBC WEALTH MANAGEMENT EXPLAINS HOW GUERNSEY HAS ADAPTED TO CHANGES IN THE ECONOMIC CLIMATE

GUERNSE Y STANDS STRONG

Stuart Mauger is head of business development for RBC Wealth Management’s Corporate & Institutional business in the British Isles and is responsible for the provision of global custody and fund administration services.

034_HFMGuernsey-2012_RBC.indd 34 19/04/2012 17:49

Timezones are irrelevant when you can make decisions as quickly as us.

Louvre Fund Management Limited

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Independent strength. International expertise.

Being committed at all times to excellence, and being privately owned, allows us to provide totally impartial advice and enables us to make senior level decisions extremely quickly.

We offer first class fund administration services, personally delivered – wherever you are in the world.

Please contact our Managing Director, Kevin Gilligan, to discuss your needs on +44 (0)1481 748955 or [email protected]

25018 Louvre ad 273x203 HFM.indd 2 18/04/2012 17:55Untitled-3 1 19/04/2012 13:49

where?

If you want an innovative financial solution there’s one place you should look

Guernsey combines 50 years’ financial heritage with a modern, well regulated infrastructure.

The result is an international financial centre with the pedigree, experience and expertise to meet even the most exacting of needs, be they across banking, fiduciary services, investment funds, insurance, asset management or overseas pensions.

Add to this our reputation for innovation and a broad range of service providers, including a full set of support services and you can see why Guernsey offers an ideal location for your business.

Make Guernsey your first port of call.

Telephone: +44 (0) 1481 720071 Email: [email protected]

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