Jersey remains robust in the face of pressure and the industry continues to thrive, particularly for investment holding structures where real estate is a major asset class.

 

In recent years there has been an unprecedented series of challenges facing the financial services industry in Jersey. However, Jersey remains robust in the face of these pressures and the industry continues to thrive, particularly for investment holding structures where real estate is a major asset class. To compliment an already flexible range of options, the Jersey Private Fund product was introduced in April 2017 and has proved hugely popular, with over 200 such funds now established.

An asset class of choice
With interest rates likely to remain at lower levels for the immediate future, investors with free cash available for investment, particularly those based in the Middle and Far East, are attracted to the UK market, where the commercial sectors generally show rental stability and investment structures are able to deliver solid IRR, combined with regular flows of income that far exceed the returns available on cash deposits, or other more riskaverse investment products. A weak pound also presents a good buying opportunity for non-Sterling investors. It is not just the UK though; commercial real estate investment opportunities are being sought in Europe, in particular in Germany and the Netherlands but also in the likes of the Nordic region. The US is also attractive, but Jersey faces stiff competition from the Caribbean financial centres in structuring US transactions.

Why Jersey?
Jersey provides an ideal location in which to locate investment vehicles to access international property markets. The use of simple limited companies is common, but partnerships can be used, as well as Jersey Property Unit Trusts (JPUTs). The use of JPUTs, in particular, may be helpful for certain types of investor, in the context of recent UK tax changes. The government of Jersey is committed to the growth of the financial services industry and there is great co-operation between industry, government and the local regulator, to ensure that Jersey remains adaptable and competitive.

Investing in real estate via a Jersey fund or fundlike structure provides investors with the certainty of an indirect ownership interest in tangible assets, in the form of bricks and mortar but without the responsibility for managing a property themselves, or dealing with tenants and service providers. It also provides a conduit to participating in the ownership of highly attractive commercial properties that might ordinarily be beyond the reach of most individual investors.

A well-regulated jurisdiction
For these structures, Jersey can assist promoters in marketing their offering by providing a domicile of real substance in which to locate their structures. Jersey offers tax neutrality, has fifty years of experience with funds and benefits from political, fiscal and economic stability which, given continuing global turmoil, should be a source of comfort to promoters and investors alike. Indeed, Jersey has recently enacted specific “substance” legislation, which seeks to ensure that companies performing various prescribed activities generate an appropriate level of economic activity and demonstrate effective governance and oversight in the Island.

As well as funds, Jersey provides flexible structuring options for families and individuals looking to acquire real estate. The use of private trust company structures is increasing in popularity and these, together with the Jersey foundation, provide wealthy individuals with an effective means of protecting their wealth and managing succession and inheritance arrangements in an orderly manner.

Local expertise
There is a robust, technical infrastructure available with access to a wide choice of high quality functionaries and service providers. VG provides a full range of administration and fiduciary services to all types of Jersey investment vehicle. This infrastructure, combined with the Island’s highly developed legislative and regulatory framework, which has been subject to positive scrutiny by the OECD, the IMF and Moneyval among others, serves to demonstrate to investors that there exists in Jersey a framework of exceptional corporate governance to safeguard their interests.

Insight

21 March 2022

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