On Wednesday I attended the very well-organised Guernsey Funds Forum at the Grange St Paul’s Hotel in London organised by Guernsey Finance. There were three very interesting panel discussions, excellently moderated by TV news anchor Alastair Stewart. The first of these concentrated on the perhaps rather predictable topic of the Alternative Investment Fund Managers Directive (AIFMD).
What I hadn’t predicted, however, was the degree of optimism expressed by the panellists about the Directive’s likely effect on the Guernsey funds industry. Indeed, despite many in the industry seeing the AIFMD as a badly-disguised act of EU protectionism, it was asserted by one panellist that the Directive would actually give Guernsey a competitive edge over many of its competitors, both onshore and offshore: Onshore, because Guernsey feels confident that it will easily be able to clear the hurdles set out in the Directive for third countries, and offshore because Guernsey has the track record, experience and professionals to operate in the more regulated environment AIFMD would bring.
Of course, only time will tell how and whether the EU will actually grant passports to those offshore island jurisdictions so distrusted by certain factions within European politics. I personally agree with Guernsey. Now that the Directive has finally been agreed by the European Parliament, the next steps will be dictated more by ESMA regulators who understand the industry than MEPs with a political agenda…. or at least that’s the hope.
One panellist on Wednesday, Benoit Le Bret (representing the EVCA) thought it inconceivable that ESMA could credibly raise barriers to keep out Guernsey when quasi-offshore jurisdictions within the EU like Malta and Cyprus would automatically benefit from the passport. A good point in principle, but forgets perhaps that the EU always had the feel of a club – albeit not as exclusive as it once was – with the perks that go with it.
On the other hand, Guy Rainbird of the Association of Investment Companies (AIC) queried whether most private funds really needed a passport – the abolition of private placement regimes in the EU is not a “dead cert” and is in any event a long way off.
An own goal for protectionism?
Whatever the end result, it must be ironic that a piece of legislation cynics first derided as blatant protectionism by Fortress Europe is now being seen by some as providing a competitive advantage to the offshore sector. The game is far from over but there is everything still to play for with the half time score at European Union 1-1 Channel Islands…