Geoff Cook, CEO of Jersey Finance discusses investor trends and key features that make a good financial centre

Competent financial centres play a significant role in attracting foreign investment into a country and indirectly elevating the financial and economic position of both a country and a region. It is therefore pertinent for these destinations to possess certain legal infrastructures as well as other relevant features to operate as a financial hub.

Characteristics

Above everything, competent financial centres must have the rule of law. If one were to invest capital outside their home country, one needs to know that their investment will be fully protected and secure.

"Particularly in this day and age where cybercrime becomes alarmingly rampant, data protection is one of the important infrastructures a financial centre should have. Investors also want to know that their legal interest and rights are respected, that there is integrity and safety around their assets," said Geoff Cook, CEO of Jersey Finance.

Apart from that, having a broad pool of expertise within the centre also plays an important role in determining the continuous success of the financial centre. Investors need to be confident in the people that are managing their money. The financial services providers should also command a strong understanding of cross-border transactions in order to operate within legal requirements while meeting international standards. Lack of these main characteristics will lead to a high exposure to risks such as security of the value invested, contravening with regulations of other countries and breaching
international standards.

Additionally, transparency and confidentiality are also two factors to be aware of when operating in a cross-border environment.

"The international community are very concerned about bad actors in the system such as corruption, moving proceeds of crime, non-disclosure of tax, etc. There also should be a balance between transparency and confidentially as companies still need to respect the client's legitimate rights to compliant confidentiality-only sharing information through controlled circumstances such as only with the governments, otherwise their data is completely protected," he added.

Furthermore, influences such as political stability, fiscal stability and legal consistency in tax regulations for example, are also crucial in retaining investors.

Jersey as a financial centre

Jersey has four main sectors: international cross-border banking, private wealth (common law trusts, Shari'ah compliant trusts, foundations and companies for carrying value cross-border), alternative funds industry (private equity, hedge funds, commodities, infrastructure and non-conventional assets), company formation and listing. The state has one stock exchange, but is recognised in nine other stock exchanges in the world.

Jersey Finance is the representative body for the finance industry in Jersey- a private-public sector partnership between the financial services industry and the Jersey government. As of January 2016, it has 107 companies listed worldwide, with a value of just over $3 billion in market capitalisation and 95 companies on the London stock exchange markets-making it the largest foreign company listed on the London stock exchange as there are more Jersey companies listed compared to other jurisdictions.

Jersey is one of the few jurisdictions that have dual listings in Asia and Europe, and Europe and the US. It is active in private wealth management around the world, with capital raising vehicles of big conglomerates incorporated in the jurisdiction. The only market that Jersey is not extensively present in is South America.

"I think we've become quite well-known as the preferred jurisdiction for investment in the European real estate and that is the biggest activity in the Middle East through Jersey. Middle East investors tend to still be into very tangible things. We've become experts in managing and administering real estate investments," highlighted Cook.

Jersey also has Islamic finance capabilities. The first Sukuk in Europe was structured in Jersey over 20 years ago.

"We did some work with the Islamic finance council of Britain a few years ago and they examined our legal system. They looked at our various laws, at our regulatory environment, and the product set that we have. And the scholars agreed that it was entirely fit for purpose for Islamic products and services," said Cook.

Companies such as Gatehouse Bank, IDB, Gulf-based sovereign wealth banks' have structured their instruments in Jersey through a number of firms that specialise in Islamic finance transactions.

Investment trends

"What's topical at the moment is to acquaint people with a strong level of demand for the commercial real estate in the UK and the continent. Particularly commercial real estate in the UK regions such as Manchester, Birmingham and Glasgow which have strong upside growth opportunities," said Cook.

There is an increase of investments into cities outside of London. This is because in London, yields are down three to four per cent; however investors are still able to reap a five to eight per cent yield in other parts of the UK. Jersey Finance finds that institutional investors and ultra-high net worth individuals have increasingly been looking for opportunities. Another growth area is investment into the southern European countries such as Spain and Portugal, from US and Middle East based investors. This also includes cities such as Paris and Madrid.

"We've also seen investors buying distressed real estate assets from banks in those countries [Spain, Italy and Portugal]. Bascially they believe that the Euro zone has stabilised enough to make investments attractive, having to buy at very low prices," said Cook.

He explains that this has been a very active trend over the past 24 months and is still going on. It was suggested that it may however cool off from now forward due to the upcoming of the EU referendum.

© Banker Middle East 2016