Brexit uncertainty is hitting Channel Islands fund selectors on several fronts with concerns the UK could become a rival offshore centre, while uncertainty connected with the country’s exit from the European Union upsets portfolios, a Portfolio Adviser survey has revealed.
PA quizzed a dozen fund selectors and wealth managers based on Jersey and Guernsey about their relationship with the UK asset management industry and how they think Brexit will affect their businesses.
Brexit uncertainty
It found the general feeling on Brexit is neither overwhelmingly positive or negative with 30.77% cautiously optimistic and 30.77% neutral. Some 23.08% said they were slightly negative and at the extreme ends, only 7.69% were deeply pessimistic and 7.69% were overwhelmingly positive.
“Until we know what it is, it’s not possible to make a judgement,” said one respondent, summing up the consensus view.
Similarly, when it comes to how Brexit might affect businesses, more than half (53.85%) said they are unsure and waiting to see how events unfold. At the positive end of the spectrum, more than a third (38.4%) believe Brexit will be primarily beneficial and good for business.
Mark Bousfield, managing director of Ravenscroft, which has offices on both Jersey and Guernsey, says while it is impossible to tell what the outcome will be, Brexit is not likely to be detrimental to his business, which is to provide solid investments and advice to help clients meet their long-term investment objectives.
“Brexit or no Brexit that relationship and focus will drive the success of our business,” he says. “Ravenscroft now employs more than 100 people across five offices, has £6.5bn of assets under administration, has made a number of acquisitions to round out our investment offering and opened an office in Monaco – that’s more than enough to keep us busy.”
Looking beyond Europe and the UK
Indeed, the survey findings suggest Channel Islands investors are not necessarily dependent on the UK market. Most respondents (61.54%) said they were only engaged to a “certain extent” with the UK market and just 15.38% said they were “very much engaged”.
This sentiment was further borne out in some of the qualitative responses, which revealed investors are eyeing investment opportunities further afield than the UK and Europe, in areas like emerging markets.
When asked about whether they feel closer to the UK or continental Europe when doing business and following investment trends, one respondent said: “We look to invest from a global, rather than UK or European perspective.”
And when it comes to clients, wealth managers are also looking to expand beyond the UK and Channel Islands.
“The Channel Islands client base is becoming more and more emerging market based and they see the UK as a small part of their investible world,” said one respondent.
Another said: “[We are] very much international, like our clients.” “We look at a far wider opportunity set than just the UK,” added another.
Barry Hardisty, head of managed portfolio services at Jersey-based Enhance, says it is important to be in the markets that assets are likely to flow to if they move away from London and the Channel Islands after Brexit.
He says Enhance is in the fortunate position of already having a London office, as well as business lines in Singapore, Switzerland, and the Caribbean.
“We just need to make sure those links are strong,” he says. “We need to make sure we are spread in terms of our geographic process and make sure the technology is nimble.”
The threat of the UK as on offshore centre
The ongoing air of political uncertainty has raised fear among some fund selectors that following Brexit, the UK could pose a threat to the Channel Islands’ dominant position as an offshore investment hub.
One respondent said: “I am concerned the UK could become a competitor in offshore markets, ie become a huge offshore market.”
However, Hardisty says while it is a credible threat that offshore trust companies with head offices in the Channel Islands end up headquartering out of London, it would take a long time for the infrastructure to get set up.
“Thankfully for us we have a London office that is growing like diddly-o and they use the same platform and software as us,” he says. “For us, we are a bit agnostic about it.”
Similarly, Mike Byrne, chairman of the Jersey Funds Association, believes the Channel Islands possesses valuable attributes, particularly in closed-ended alternative funds, that would help protect it from such a threat.
“We have significant expertise in this space and a 30-year track record of quality of service and depth of experience,” he says. “We’re focused on this sector and selected by many global asset managers as their fund domicile of choice.”
Like Hardisty, Byrne says for any jurisdiction to compete effectively against this level of expertise, “there’s a lot of catching up to be done”.
