A new report published by PwC in the Channel Islands has found there are opportunities and challenges for future growth as funds in Jersey grew to £265bn in September 2017 and £269bn in Guernsey.
The report, titled ‘Asset and Wealth Management Revolution: Putting the Channel Islands Centre Stage’ predicts that alternative asset classes will increase sharply as investors diversify to offset volatility.
The alternatives’ share of global assets under management is estimated to more than double to $21.1trn (£15.2trn) in 2025. Real assets are also predicted to show the most rapid growth, with close to $78trn (£56.2trn) being spent globally on infrastructure between 2014 and 2025 and real estate doubling by 2025 to $2.2trn (£1.5trn). Private equity is set to expand annually by 9.8% between 2020 and 2025.
‘The growing interest in alternatives is excellent news for Jersey and Guernsey, which have unparalleled knowledge and experience in closed-ended long-tail investment strategies. This niche is the islands’ greatest asset, and recent decades have highlighted the Channel Islands’ capacity for strategic agility and innovation,’ said Roland Mills, partner at PwC.
The report, which has had input from local funds industry leaders, also identifies four interconnected trends that the sector needs to focus on to drive growth. These are tackling squeezed margins, developing a clear strategy for the future, the importance of scale and operational efficiency, and integrating technology.
Mr Mills added: ‘We must continue to innovate with clear propositions and respond to the evolving market with new, relevant products and refreshing existing solutions. Our high level of regulatory compliance and tax transparency will serve us well going forward, but we must get better at telling our story in a clear and compelling way.
‘Undertaking detailed reviews of existing business models and products is vital to ensure that tax structuring, transfer pricing and governance remains fit for purpose.’
Growth markets in North America and Asia should also be a focus, alongside the UK and Europe. ‘In new markets, we need a clear market entry study and to be able to present a coordinated and compelling proposition on the relevance of our jurisdiction and how we can add value.’
PwC partner Evelyn Brady said that technology and automation could also help, adding: ‘The islands have a real opportunity to be an innovation sandbox for many of the large multi-national service providers that operate here and the governments’ abilities to offer incentives, such as tax credits, to stimulate and support such investment is compelling. But we must act now.’