Changing alternative investment landscape has led to evolution of international finance centres
IFCs have evolved by staying relevant as well as ramping up capabilities to facilitate the growth of fintech
Across the world, investors are facing a growing range of economic risks. Events such as the ongoing questions about US-China relations and the consequences of Brexit are leading to an unpredictable market environment. In such an environment, it is no surprise to see investors continuing to look to alternatives to stay diversified and deliver long-term returns.
According to Deutsche Bank’s annual Alternative Investment Survey, Asian hedge funds are seeing an overwhelmingly positive sentiment from investors, with 36% of investors planning to increase exposure to Asia this year. Amid the global uncertainty, non-EU managers are looking for greater support to continue marketing their funds to investors through tested private placement regimes.
Staying relevant to support alternative deals’ growth
It is critical for any responsible, forward-thinking international finance centres (IFCs) like Jersey to stay relevant in the market by operating in a continually evolving way. A recent example is the implementation of Jersey’s economic substance legislation, which requires entities carrying out specific types of business to demonstrate adequate economic substance in that jurisdiction. KPMG considers the new law a potential gamechanger for groups operating in Asia, especially with respect to their approach in using, managing and operating offshore companies going forward.
With the global surge of alternative investment deals and private placements in recent years, there is an increasing market demand from fund managers to rationalize fund structures and enhance the efficiency of the authorization process. Such demands require a robust regulatory infrastructure and a deep pool of talent, including technology, legal and tax experts who can deliver to a high standard while keeping an eye on what is happening in domestic and international markets.
A favourable digital environment to fulfill managers and investors’ demands
Digital innovation has brought many changes in the alternative investment space, for example in improving the fund management process, client servicing and efficiency of compliance. The use of AI is becoming a feature in algorithmic trading, quantitative funds and wealth management.
Some IFCs are making investments in ramping up capabilities and infrastructure, facilitating the growth of fintech. One of the key focuses is to create an environment which can handle data securely and smartly. These are crucial to providing the most competitive regime for fund managers and investors to support their ambitions of looking for the best investment opportunities around the world and, in turn, higher returns for clients.
In order for IFCs to better support the fund managers and investors who they serve, they must continue to roll out innovative products, harness global links and offer a strong and nimble regulatory framework. Those who do so best in the coming years will find themselves in a leading position to benefit from the global race to find suitable domiciles which comply with different regulatory regimes.
An Kelles is business development director, Greater China, Jersey Finance.
12 Aug 2019