Allies aligned in ambition? The UK and Channel Islands Investment Management Strategy

13 December 2017

Written by Dr Andy Sloan

Dr Andy Sloan, Acting Director of Strategy at Guernsey Finance, discusses last week’s publication of the UK Investment Management Strategy II. He argues that a higher ambition of a global funds template could accelerate global distribution – a step the Channel Islands (as complementary, not competitive funds centres) are ideally placed to help the UK make – and suggests the UK recognises Channel Islands open-ended funds as a first move in enhancing its competitiveness.

I’ve spent much of the last decade in discussion with UK policy makers explaining the role that Guernsey, the Channel Islands, the Crown Dependences, all play in supporting the UK economy in general and City plc in particular. I’ve almost grown tired of communicating the fact that our funds sector provides over a billion in fees to the UK asset management sector. Almost.

This year, much of my dialogue with UK opinion formers has been to explain how Guernsey not only supports the UK economy but how, with a few changes, we can also help actively enhance City plc competitiveness post-Brexit.

The position is certainly confirmed by a read of the UK’s Investment Management Strategy II document published by Her Majesty’s Treasury last week: a revised strategy rapidly delivered by the Brexit Asset Management Taskforce.

The direction set out in IMS II (as I shall now christen it) is certainly similar (and complementary) to our own strategy in Guernsey. Many of the identified product areas are those which we have already identified. Much of our thinking has also centered on helping the UK get products to market more rapidly.

The UK’s focus on mutual fund recognition (MFR) as a route to improved global distribution of UK funds is very much aligned with our own thinking. We see global distribution as the big issue going into 2018: global distribution is the theme of our GF Guernsey Funds Masterclass in February.

Guernsey is a clear supporter of the concept of mutual regulatory recognition. Guernsey Finance has worked with TheCityUK’s International Regulatory Strategy Group on that approach this year and we believe mutual recognition has the potential to be a catalyst for international regulatory coherence through a patchwork of bilateral or multilateral agreements. See a previous post here.

It’s at the fund level where the global prize could be more immediate. There are numerous regional passport initiatives in Southeast Asia, Latin America and, of course, in Europe. Whilst a patchwork of bilateral MFR agreements would be a positive move, a global template, bridging all these initiatives, would be a route to accelerate global distribution. This is Guernsey’s vision and ambition.

The fact that the UK intends to ensure that a UCITS based product will still be available for UK managers is similarly good news. Again, this could provide a fillip to global distribution. UCITS is an EU product and a global brand. Building on a global template, the UK has the opportunity to create a similarly global brand - open sourced and potentially more powerful.

Guernsey has recognised expertise in alternative asset management and administration and is recognised as providing an excellent platform for rest-of-world distribution. Guernsey is also recognised for its excellence of regulatory funds regimes (our AIF regime has twice been positively assessed by ESMA).  Such strengths put us in a strong position to help the UK develop such a template. 

In the meantime, UK recognition of our open-ended funds regime would complement, not compete with, the UK product set and better place the UK to face the competitive threat of Luxembourg and Dublin. We are, after all, allies aligned in ambition! 

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