Sinéad Leddy discusses a recent KPMG report that showcases Guernsey's role as a facilitator of global capital flows and the benefits that this brings to Europe.
A new report published by KPMG has revealed the extent to which Guernsey's funds industry facilitates the flow of capital globally, including £105bn of investment in Europe.
The report says that: "Guernsey is used as a conduit to facilitate the raising of capital from investors in different countries and subsequently to facilitate the deployment of this capital into global assets."
It says that of the £155bn of funds under administration (excluding fund of funds) in Guernsey, 46% of the assets are deployed into Europe (excluding the UK), 32% are deployed outside Europe and 22% are deployed specifically into the UK. It adds that 50% of investors are located outside Europe, which demonstrates that global investors are comfortable using Guernsey structures. The key reason identified for this is the Island being well respected and transparent with an established regulatory track record.
The report concludes that "... these statistics support the notion that Guernsey is utilised as a facilitator of global investment and, as a transparent jurisdiction, can play a major role as cross-border investment continues to grow."
ECONOMIC BENEFITS TO EUROPE
KPMG go on to state that Guernsey's role in this flow of global capital means that it is a conduit for £25bn of inward investment into the UK from overseas investors and predominantly non-European investors. Furthermore, non-European investors in Guernsey funds contribute £51bn of investment to assets deployed in Europe as a whole. In addition, there is £54bn of investment in Guernsey funds from European investors that is deployed in countries that are different from the underlying investor country, thus demonstrating inward investment into individual European countries.
ALTERNATIVE ASSET HUB
KPMG's research indicates Guernsey is a hub for alternative investment assets. Private equity is the dominant sector in the Guernsey funds market with 70% of all assets being deployed into this sector, predominantly located in the UK and wider Europe.
Infrastructure and property each account for 8% of the market. Infrastructure assets are predominantly located either in the UK (42%) or outside of Europe (55%). Property assets are predominantly located in the UK (37%) or wider Europe (53%).
CAPITAL MARKETS
One of Guernsey's key strengths in facilitating global investment is the ability for Guernsey entities to quickly and easily access a wide range of international capital markets.
This includes not just the locally based Channel Islands Securities Exchange (CISE) but also the exchanges in Ireland, Paris, Amsterdam, Frankfurt, New York, Toronto, Johannesburg, Australia and Hong Kong, as well as the London Stock Exchange (LSE).
Indeed, there are more Guernsey-incorporated companies listed on the LSE than from any other jurisdiction except the UK. Many of these of are entities established for cross-border investment, including a significant number of funds.
CONCLUSION
The KPMG report showcases the way in which Guernsey acts as a facilitator of global capital flows and the benefits that this brings to Europe, and especially the UK, through investment into predominantly private equity and the development of property and infrastructure assets.
Fund managers and their investors should remember that a key reason for Guernsey's position is its ability to offer quick and easy access to the international capital markets. The Island is well respected for its transparency, proven regulatory track record and expertise in listing entities of a wide range of stock exchanges globally.
An original version of this article was published in Investment Europe, May 2015.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
