By Dominic Wheatley, Guernsey Finance – Guernsey’s funds sector has developed over the past 50 years, since the first funds were formed in the island in the 1960s, and is now recognised as a leading centre of excellence for a range of alternatives. This process has been accelerated in recent years as shrinking returns from traditional investment fund strategies are making the alternatives sector more attractive to investors. Guernsey has built up and is now recognised for its expertise in alternatives, particularly private equity but also in infrastructure, Real Estate Investment Trusts, and alternative finance.
Some two-thirds of the GBP260 billion of funds under management and administration in the island are private equity assets. Major private equity promoters who have established operations in Guernsey include Apax Partners, BC Partners, Mid Europa, Permira and Terra Firma, and Guernsey has long been recognised as a preferred destination for private equity outsourcing. In 2016 Permira raised EUR7.5 billion with its Guernsey-domiciled global fund Permira VI, the largest buyout fundraising in Europe in 2016. Other significant launches have followed.
In recent years, the island’s investment funds industry has helped both institutional and private investors deploy capital into a range of infrastructure projects across the globe, including education and health, ports and shipping, communications, electrical generation and transition, airports, roads bridges and tunnels, wind and solar power, and water.
The need for investment into infrastructure in both developed and developing countries continues to grow, with an estimated GBP12 trillion required for investment between now and 2030 just to meet the UN’s Sustainable Development Goals. There are more than 25 infrastructure funds domiciled in Guernsey, valued together at more than GBP16 billion, managed by some of the world’s best-known managers, including Aberdeen, EQT and Macquarie.
Real Estate Investment Trusts
Real Estate Investment Trusts have surged in popularity for real estate investment. REITs offer tax advantages and may prove more attractive to investors as they provide easier access to property than direct investment, offer diversification of holdings, and the benefits of a professional investment manager.
A REIT must be tax resident in the UK, but the island’s experience and expertise in the administration of alternative assets, including real estate, makes Guernsey an excellent base to operate from. The International Stock Exchange, based in Guernsey, is now listing a quarter of all UK REITs, though Guernsey-based structures to date have been commonly listed in London.
Opportunities for alternative finance have risen significantly in the decade since the global financial crisis as traditional lenders have contracted under regulation or risk appetite. Over that time, Guernsey’s investment funds industry has seen growth in various types of financing arrangements including P2P, distressed debt, loan refinancing, social and student housing, collateralised debt, property, litigation and trade financing.
Guernsey has received a growing number of enquiries in the fintech arena, especially peer-to-peer lending, which is allowed under the island’s flexible yet robust regulatory regime. The island has more than 60 debt funds, both closed- and open-ended, collectively valued at nearly GBP10 billion.
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