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Jersey Finance Spreads Its Offshore Gospel To US

Tom Burroughes, Group Editor , September 10, 2020

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A year after the promotional agency of the island set up a New York office, it spoke to this news service about how Jersey is positioning itself to US-based clients who are interested in what the European jurisdiction has to offer.

When Jersey recently amended its limited partnership rules, this was the kind of move that a US-based cheerleader for the jurisdiction wanted to bang the drum about.

The European island, a few miles off the French coast but an independent entity, changed the Limited Partnership (Jersey) Law 1994 in mid-July. It introduced a new statutory basis for LPs, which are frequently used for alternative fund structuring, to be migrated from other jurisdictions, providing greater legal certainty for managers and investors. At a time when legal stability is at a premium, such a change makes plenty of sense. 

Philip Pirecki, who is the US business development lead for Jersey Finance, is pleased about these moves. The promotional agency for the island’s financial sector opened its New York office last March, following a similar office opening by the organization in Dubai a year before. And in his drive to proselytize Jersey’s virtues in the US, the new limited partnership law changes come in handy.

In a separate move, Jersey is rolling out its limited liability corporation structure with an eye towards the end of 2020. Modeled on both the Cayman and Delaware LLCs, it offers the US market a familiar structure which can be used in various ways, such as a fund or a manager, he told this publication. 

Pirecki said that this and other features of Jersey’s financial services industry are starting to get a wider hearing among the advisors, intermediaries and financial professionals he engages with in the US. 

“Five years ago people thought I was coming from New Jersey and now people understand the proposition,” he said. “Our first year has been spent engaging with the intermediary market in the US, mainly law firms, about what Jersey can offer.”

Pirecki has a background in hedge funds and mergers and acquisitions, working in London and the US, before working at Jersey Finance. Originally from Jersey, he moved to the US as a child and regularly returns – circumstances permitting – to both places. 

He argues that Jersey bridges the regulatory gap between US managers and European investors – a gap that isn’t likely to narrow on its own any time soon, given the state of politics on both sides of the Atlantic. And Brexit of course adds new uncertainties – but Jersey is not directly affected because it is not part of the UK and isn’t an EU member state anyway.

“Beyond funds, Jersey can be part of a global structure for non-US families who have a family member living in the US, or vice versa, where a US family has a family member living in the UK, Europe, the Middle East and elsewhere,” he said. The well-trodden path of US managers who have a global investor base is through the Caribbean. With respect to European investors, that now poses a problem – one that Jersey can help bridge.”

“The US is a common law-based jurisdiction….there is a lot in common with Jersey-based vehicles….small changes can be done early,” he continued. 

Figures telling a story
Pirecki likes to rattle out a set of statistics which he said show that Jersey has a compelling proposition. Only 3 per cent of the alternative investment fund managers sell into more than three European countries, which means the overwhelming 97 per cent don’t and have more focused channels in mind, giving Jersey a shot at winning some of that business. In fact 75 per cent of all investment into alternative investment funds arises from three countries. Firms that want to market throughout the whole of Europe would opt for a Dublin- or Luxembourg-based structure, but if a more targeted market is the game, then Jersey makes more sense, he said.

Jersey is also outside the full scope of the European bloc’s AIFMD regime covering alternative investment funds, making Jersey a cheaper, faster and more efficient hub for alternative investment vehicles, Pirecki continued. Access to Europe is retained by Jersey through its bilateral treaties with EU states.

“Think of Jersey as a mini-London,” he said. 

Reaction to Jersey Finance’s US office has been very positive, he said, adding that a lot of US-based investment and wealth management figures weren’t previously aware of its benefits.  

Pirecki is also keen to stress a point about “substance”. Jersey has economic “substance” – a crucial quality in the evolving world of offshore centres, he said. In simple terms, this means that businesses registered there must have a physical presence in the place, with actual activity - staff, offices, meetings etc - rather than just be a set of addresses or brass plates. In fact, Jersey Finance has brought out a fund domiciliation white paper that looks at why substance matters. The paper noted that issues such as Brexit, substance, and transparency have shot up the agenda when firms and people have chosen to domicile there.

“Some jurisdictions are going to find the substance requirements tough to comply with. It will be a multi-year scaling problem in those cases where there isn’t a deep well of professional infrastructure,” he said.

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