By Allan Wood
Global Head of Business Development, Jersey Finance
European institutional investors are slowing down in deploying their capital, compared to recent years, despite having accumulated record levels of investable wealth.
This is due to tighter yields and strong competition in traditional markets, resulting in an increasing appetite among investors to look at foreign direct investment (FDI). Africa has risen to the fore in this context, as a market offering significant growth opportunity for such investors while also benefitting greatly from this timely opportunity – notably in South Africa, Kenya and Nigeria.
A study published in 2014 by Jersey Finance found that over the next 30 years, Africa needs to invest US$85 trillion in its infrastructure to support its growing population, and that in order to meet that demand it needs to attract in excess of US$6 trillion of FDI.
A win-win for Europe and Africa
To harness this mutually beneficial opportunity, navigating the global, and particularly the European, institutional investor landscape requires specific expertise.
The landscape is rendered even more complex by the COVID-19 pandemic, which is challenging operational platforms globally, including in Africa, and is heightening the demand for expertise, robust platforms and solid advice even further.
Whether raising capital for direct investment or seeking liquidity through a permanent capital vehicle as an exit strategy for current investors, it is vital for a fund or corporate vehicle to address the complex regulatory and legislative requirements of Europe.
Specialist and experienced fund domiciles, such as Jersey, that offer high standards of corporate governance and provide guaranteed and seamless market access, are essential in bridging the gap between Europe and Africa.
Rob Hersov, Founder and Chairman of Invest Africa, has experienced this first-hand:
“I do a lot of business across Africa, Europe and the rest of the world, and my family has been involved in Jersey with trusts and other investment platforms for around 40 years. Jersey is a league above everywhere else – professional, well-governed and transparent – my family and professional network would not choose anywhere else. It’s ideal that Jersey is located between the UK and France, for European travel, and it is certainly the most stable international finance centre.”
Substance and familiarity
Jersey, as a leading international finance centre (IFC), is at the forefront of global regulation and oversight. The Island introduced new economic substance legislation last year, for instance, which should give managers added confidence as fund managers need to consider the substance, governance and operational risk requirements of the investors themselves.
It’s a theme that came out strongly in some recent research Jersey Finance undertook with IFI Global, which found that investor familiarity is absolutely key when it comes to fund domiciliation decisions – investors don’t like regulatory or economic surprises, and domiciles that can offer reassurance are key to supporting long-term cross-border fund activity.
Jersey currently accounts for around £15.5 billion in deployed capital across African markets
Jersey’s alternative funds community has been reporting a rise in activity touching Africa in recent months. Specifically, South African fund managers now account for the eighth largest pool of capital globally in respect of Jersey-based fund promoters, according to a Monterey Insight report.
Fine-tuned expertise
With around a thousand regulated funds, total funds activity growing by 8% in 2019 to reach more than £345 billion of assets under administration, and the largest number of FTSE 100 companies registered outside of the UK, Jersey is clearly providing an appealing platform to support global managers, enabling them to access European investor capital, and ensure they meet their obligations.
While Jersey is at the heart of the European alternative funds landscape, it has been building a strong relationship with African markets for more than two decades. As a result, it has built up a formidable understanding of the African landscape – and it’s a relationship that continues to evolve, with Jersey increasingly acting as a bridge between Africa and capital raising in Europe. Jersey currently accounts for around £15.5 billion in deployed capital across African markets, including Egypt, Kenya, Uganda and South Africa.
A key part of Jersey’s appeal as an IFC is its geographical position and digital infrastructure, as Rupert McCammon, Founder and Managing Director of Capital Africa, has experienced himself:
“The connectivity that Jersey has with Africa and the rest of the world is superb and is an absolutely vital part of the investment business. Jersey sits in the perfect time zone which is within the bounds of European and African communication in the same day, and that makes a real difference.
“I’ve invested in and set up businesses across Africa, and the ease of communications, including speedy internet and easy travel, makes liaising with clients across the continent very simple – no matter where they are.”
Already this year, Jersey representatives participated in the South African Private Equity and Venture Capital Association (SAVCA) Conference and undertook a series of gatekeeper meetings in the country. This built on a range of ramped up activity at the end of 2019, when we hosted a lunch for more than 30 asset managers in South Africa, held a funds masterclass event for managers and professionals, and spoke at an Invest Africa event on the periphery of SuperReturn Africa.
Throughout 2020, Jersey will remain focussed on working with African managers and European investors, drawing on our expertise and experience as a jurisdiction to help both realise their objectives and potential.
Allan Wood
Global Head of Business Development, Jersey Finance
