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Guernsey has reason to be optimistic

23 August 2019

Written by Cyril Swale Grant Thornton

Earlier this year Grant Thornton published a global economic report, interviewing 5,000 mid-market business leaders. The feedback revealed a more downbeat outlook for 2019 but, as Grant Thornton Director Cyril Swale explains in an article for HedgeWeek's Guernsey Fund Services 2019 special report, there are opportunities for Guernsey.

Global optimism was a net 39%, 15% down on where the sentiment was in the summer of 2018, and the weakest optimism score since Q4 2016.

But we said it was not all bad news. Yes, the headlines appear daunting, but there are good reasons for business leaders to hold their nerve. Despite increasing downside risk, economic fundamentals remained strong and opportunities exist, even in a global economy where growth may be slowing, but it is still growing. Our recommendation was that businesses should think creatively about international markets. Only 11% of the business leaders interviewed expect a decrease in exports in the coming year. And new technologies can enable access to these new markets quicker, less expensively and with less risk.

While uncertainty is rife, growth is far from impossible in dynamic organisations. We are focusing both on and off-island in the development of investment funds in 2019. An external focus for our funds team this year is South Africa. There is a lot of positivity in this market for Guernsey.

South African fund managers are seeking to satisfy investor demand for offshore diversification – driven by geopolitical uncertainty and a weaker rand – and competition in that market is growing.

They are seeking stability and security and a strong reputation for international compliance, cooperation and transparency – all classic Guernsey attributes. The island trades on a reputation for being faster, less expensive and more flexible.

The island also has a history of financial services dealings with South Africa over decades, and is already one of the top jurisdictions for South African offshore funds. The island has been described as the “perfect stepping stone to international markets”, with global distribution capabilities which come without the burdensome regulation and cost of a UCITS product.

We are also working hard closer to home, to promote the benefits of a Guernsey fund rather than the European “default” of a UCITS or alternative investment fund (AIF).

The distribution of Guernsey funds throughout Europe is undertaken through National Private Placement Regimes.

Apart from managers who wish to market securities to investors in more than a handful of EU member states, NPPR is likely to provide a cost and time-efficient method of marketing, and managers can benefit from a degree of regulatory optionality and avoid the more onerous aspects of AIFMD.

NPPR for Guernsey funds is tried and tested, has unrivalled speed of execution, and offers significant cost savings over the lifetime of a fund.

Combined with Guernsey’s offer of tax neutrality and certainty, expertise and experience in alternative investment funds, highest standards of compliance, and a breadth of product range, the island has a compelling investment funds offer when positioned against key European rivals.

The original version of this article first appeared in the HedgeWeek Guernsey Fund Services 2019 Special Report, April 2019. To access the full report, click here.

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