Gulf investors tap into Jersey's expertise
Given Jersey's longstanding experience in creating and servicing property investment structures, it is little surprise that the jurisdiction should be a logical choice in which to domicile funds tapping into the booming real estate markets of the Gulf, especially given the region's deep-rooted ties with members of the island's financial and legal community.
Few Jersey firms have longer relationships in the Middle East than Voisin and Volaw Trust, which were jointly responsible for launching some of the very first Shariah-compliant funds in 1996. These predominantly property funds were among the first to seek to address the requirements of Islamic law. This trend has developed steadily over recent years as investors from the region increasingly seek investment products that adhere to Islamic rules on permitted investments.
The oil price surge and the recent repatriation of capital have helped to drive a boom in infrastructure investment in the Middle East. Jersey structures are more in demand than ever as vehicles for structuring capital flows into the construction and real estate sectors. Voisin has been in the forefront, structuring at least five Shariah-compliant real estate funds focused on inward investment into the Gulf in the past year.
Volaw established an office in Dubai in 2006 and is one of just a handful of foreign firms with a licence to do funds business in the Dubai International Financial Centre. Through its Dubai and Jersey offices, Volaw provides administration and corporate governance services to a diverse range of investment funds and securitisation structures.
Activity in the Middle East has helped to balance the flow of property fund business into Jersey from the UK, which has remained the island's most important property fund market even after its withdrawal of the stamp duty land tax exemptions that made Jersey unit trusts and limited partnerships particularly attractive vehicles for investing in UK real estate.
An important attraction of Jersey to property fund promoters and investors is the flexibility of its structures. From the introduction of umbrella funds in the 1990s to the more recent launch of protected cell and incorporated cell companies, the island has pioneered cost-efficient and legally watertight structures that allow different categories of investors and assets to be accommodated within a single investment structure.
Incorporated and protected cell companies have been used by fund promoters both to add property portfolios to other asset classes and to establish separate diversified property funds. The latter funds incorporate real estate portfolios covering different geographical regions within the structure; the assets can be held in legally segregated fund cells, protecting investors from losses in other portfolios.
An important development for Jersey property funds was the 2004 launch of the Expert Funds regime, which introduced a fast-track authorisation process for alternative funds aimed at sophisticated investors. Although the regime was mainly aimed at hedge funds, around half of the Expert Fund vehicles launched in the first year were for property investment.
In February this year, Jersey launched its Unregulated Funds regime, allowing eligible funds merely to notify the regulator of their establishment rather than undergo a full authorisation process. The speed and simplicity of this process provides Jersey with an advantage over competing European and offshore jurisdictions and consolidates its position as a domicile of choice particularly for specialist property funds.
Bill Gibbon is a group partner in the commercial practice at Voisin and Tom Amy is head of the funds and SPV group at Volaw Trust Company