JFA Dinner 2011

Update on the Funds IndustryGlobally and in Jersey

By Nigel Strachan, Chairman of the JFA

2010 – what happened?

• Difficult year for funds globally but Jersey still showing steady growth

• Globally, funds suffered – 3 things lacking:

- Leverage

- Liquidity

- Clarity with regards to international regulation

• How did we get here?

Last 5 years…

Before 2005: pre credit bubble

• Steady growth in the global and Jersey funds industry

• In line with growth in leverage available for PE and Real Estate deals

2005 – 2007: the credit bubble

• Proliferation of cheap leverage available

• Many more players entered the funds market

• Record prices & multiples of leverage

• David Rubenstein, Carlyle

2008…

• Feb 2008 - Northern Rock nationalised

• Mar 2008 - Bear Stearns collapsed and was bought by JP Morgan Chase $10 per share

• Sept 2008 - Lehman forced to file for chapter 11 bankruptcy protection

• Oct 2008 - US authorised $700Bn bailout bill & Iceland’s banks are nationalised

• Nov 2008 - Citigroup stock crashes 60% in 1 week – US government agrees bail out

• Dec 2008 - Bernie Madoff arrested for $50Bn Ponzi scheme

2008…

Outraged Lehman employees stage a protest by blocking the entrance to the bank’s headquarters…

2009…

• Jan 2009 - RBS announces biggest loss in UK corporate history & government takes controlling stake

• Mar 2009 – Lloyds Banking Group

• Banks constrained - corporate leverage dried up

• Fewer deals in the market, both in value and volume

• Workouts and restructuring become major themes for most funds globally and in Jersey

• Funds with dry powder – good time to invest

2010 Fund Activity Globally

• Deal activity rebounded, $1 trillion of dry powder + expiring investment periods = pushed prices up

• Credit conditions improved + but high prices made funds active shoppers but reluctant to close deals

• Exits gained real momentum in Q4

• Secondary transactions between funds

• Confidence in the economic recovery grew

• Strong equity markets created better conditions for corporate acquisitions, funds and IPOs

2010 Fund Activity Globally

• Fund-raising conditions remained challenging

• Tight allocations to alternatives

• Lack of clarity on the AIFMD

2010 Fund Activity in Jersey

• Q3, Q4 2010 - NAV of funds administered in Jersey increased by £8.8bn (up 5%) from £175.9bn to £184.7bn – 6 quarters of growth

• Q3, Q4 2010 - total number of funds in Jersey increased by 54 from 1,287 to 1,341. The total number of unregulated funds increased to 122 (year on year growth of 100%)

• Q3, Q4 2010 - the asset value of private equity funds administered grew by £6bn (18.4%)

• Quality and substance

JFA 2010 / 2011

Products and Strategy

• Working with industry to ensure range of products and strategic direction for Jersey funds in line with market demand

Education

• Full calendar of monthly seminars for 2011

Legal & Technical

• Consultation with industry, JFSC and Jersey Finance on a no. of issues to include Codes for Funds and the Prospectus Order

• Working with JFSC to ensure regulation is appropriate for alternatives within the IOSCO framework

• Working toward s AIFMD implementation

JFA 2010 / 2011

Marketing

• Profile

• Conferences (Super Return, EuroHedge and Real Estate)

• London Funds Event

• New branding and web site

• Strong brand for JFA - more easily recognisable by our target audiences

• New website www.jerseyfunds.org

2011 Good News for Jersey

• Existing clients - AIFMD agreed compromise text is positive for Jersey + greater certainty for Jersey funds marketing into the EU

- Private placement to continue at least to 2018

- Passports from 2015 (if needed) - Jersey is well placed to comply with the requirements to obtain a ‘passport’

• New clients - funds raising money outside EU - Super Return Berlin – mood and feedback

• New separate and incorporated limited partnerships - to be introduced imminently in Jersey, and these will provide yet further choice for fund managers

• Jersey still ranked the highest of all the offshore jurisdictions – 4th consecutive year & recognised by the IMF as being in the ‘top division’ of international finance centres

• Conclude

2011 Good News for Jersey