2020 was a year like no other; the pandemic, the US election and Brexit were just three major events that provoked change and uncertainty. The year taught us how to adapt and transform at speed; what would have taken years previously was accomplished in a matter of months, particularly in the business sphere. Rapid change proved to be one of the themes of the year and embracing this enabled the funds industry to remain strong throughout 2020 – and in Guernsey it’s stronger than ever. Kees Jager, Head of Fund Administration Services at Intertrust Group in Guernsey, looks at what the future holds for funds and how Guernsey has responded to this evolving market.
Though the Covid-19 pandemic took its toll on financial markets, the funds industry has remained healthy. There’s been a lot of activity to establish new funds as many took advantage of the suppressed valuations in markets. Guernsey is growing in popularity as the location of choice for many fund managers, with more than 1,000 currently domiciled in the island. The 2020 Monterey Insight Guernsey Fund Report further demonstrated this by reporting that total net assets were US$428.4bn in 2020, up 4% compared with 2019. Guernsey is attractive to fund managers as it offers substance, security, and stability, as well as a high standard of professional services expertise and a flexible and pragmatic regulator. What has also proved key for Guernsey during these unprecedented times is the island’s forward-thinking and market-leading solutions.
Like the rest of the world, the funds industry has rapidly become more tech-focused. This has changed how fund administrators operate as it’s allowed for processes to be automated and completed more quickly and accurately, allowing administrators to build stronger relationships with their clients and provide a more personalised service.
At Intertrust Group, our digital transformation journey was bolstered by our acquisition of leading technology company Viteos in 2019. Our technology has enabled us to tailor processes to operate efficiently and offer clients a seamless and more effective experience, unleashing the potential of our funds products.
The technology we have in place clearly differentiates us from our competitors and played a big part in helping us more than double our assets under administration (AUM) in Guernsey last year through new and existing business. The Monterey Insight Report showed that Intertrust Group in Guernsey’s AUM was up from US$2.5bn to US$5.7bn, moving us eight places up the rankings to 15th. We’re pleased to have also been ranked 5th for new business by total fund assets and expect similar AUM growth over the next 12 months as we continue to enhance our technology.
One of the factors contributing to our performance has been the massive growth of infrastructure funds, an area in which Guernsey has something of a specialism. The iCON V fund, for example, is already 50% committed despite only launching in autumn last year. Equitix is experiencing similar growth. There’s a lot of interest in infrastructure funds at the moment and that’s something we in Guernsey are benefiting from.
The top 10 funds launched in 2020 were also featured in the report, two of which we helped establish and provide ongoing administration for. We assisted Bansk Group with the launch of its new private investment fund structure and supported with the establishment of the first Omani infrastructure-focused fund, Rakiza.
Guernsey has proven to be resilient with strong infrastructure allowing for a smooth switch to virtual meetings. The Guernsey Financial Services Commission also recently introduced a fast-track regulatory approval regime for migrations of investment funds and their managers to Guernsey. The island is also set to update the rules of its Private Investment Fund, expanding the fund regime with two additional models. This will remove the requirement for manager involvement and provide a streamlined route to market for managers not looking to a large investor base.
Another trend we expect to see continue into 2021 is the rise in client demand for environmental, social, and corporate governance (ESG) reporting in relation to funds. Even though it’s a small area compared to other funds, it’s gaining momentum quickly and we’re accelerating what’s possible in reporting by building databases and portals for clients to have access to the real-time ESG data that they need.
Guernsey has a strong commitment to green and sustainable finance. Last year the island launched the world’s first regulated Green Fund product with its Green Fund Rules to assure investors that their portfolio is helping mitigate environmental damage and climate change, a significant step for the local funds industry and one that helps clients navigate an increasingly complex area.
There’s no doubt that technology is the driving force behind the future success of the funds industry. The tech takeover is happening with speed, and innovative jurisdictions like Guernsey will be in high demand.
With our customer-centric approach and futureproof technology, we’re optimistic that our funds business will continue to go from strength to strength. If you’d like to learn more about our tech-enabled approach, get in touch with our experts today.