Funds Focus: A Turning Point for Private Asset Management

The established norms in the global alternative and private investment sector are being challenged like never before and on multiple fronts, according to speakers at Jersey Finance’s latest Funds Focus event.

A panel of industry experts discussed how a number of largely unrelated factors are coming together to create a period of intense change – change that is manifested through investor diversification, product diversification and structural diversification.

Providing the backdrop for the event was a recently published white paper from Jersey Finance, in partnership with IFI Global, which explored some of the key factors that are set to transform the private investment sector over the coming years – and that can present both managers and investors with new opportunities.

Addressing the 200-strong audience of fund managers, service providers and investors, the panel at the event highlighted how, after 15 years of growth, many asset managers in the alternative investment sector are currently facing more challenging conditions than they are accustomed to.

This environment, the panel said, was prompting many managers to diversify away from their traditional institutional investor base and look to new audiences – including family offices and the broader high-net worth market, who remain under-allocated to the sector.

Recognising that accessing alternatives can be opaque, cumbersome and costly, the panel discussed how changes in the sector are addressing these issues, providing solutions and creating some new opportunities for investors.

“One of the big changes in the sector is the acceleration we are seeing in the creation of new products and the adoption of new structures, which is enabling managers to cast their net wider,” said Elliot Refson, Head of Funds at Jersey Finance and one of the panelists at the event.

The panel pointed to the fact that, in addition to standard pooled funds, many managers are now offering investors managed accounts, co-investments, funds of one and various other hybrid fund structures.

“Just how much structures have changed over the last five years is illustrated by what has occurred in Jersey,” added Elliot. “Jersey is one of the leading domiciles for alternative investment structures and has continued to grow as a jurisdiction for these entities over this period of time. Their recent growth, however, has come primarily from non-traditional entities, rather than from standard funds.

“This looks to be a long-term change in investment structuring in which managers have a different range of options available for investors, depending upon what they are looking for. The days of relying upon traditional collective investment funds, for many private sector managers, may be over.”

Technology

Exploring the impact of technology on the sector, meanwhile, the panel also explored how the rise of blockchain technology and tokenisation is further transforming the market, providing a way into alternatives and private markets for high-net worth investors.

The application of tokenization in particular was a technology-driven trend that the panel were convinced would revolutionise access to alternatives – giving investors improved liquidity, transparency and control over their allocations, but without extra fees.

Regulatory uncertainty may still be a perceived obstacle, but the panel felt that tokenisation’s impact on private markets and the avenues it could open up for investors could be transformative, with the tokenised market set to reach around $2 trillion by 2030, according to McKinsey.

Overall, speakers at Funds Focus were clear – the major changes shaping the private markets will undoubtedly help managers bring new products to new markets like never before, whilst investors will – thanks to a combination of a structuring and technology revolution – have access to a far wider choice of strategies and structures.

“The key for jurisdictions is to be able to support these trends, understand them and enable managers and investors to achieve the positive opportunities they offer,” said Elliot.

Highlighting Jersey’s position in the changing environment, Elliot pointed in particular to the certainty the jurisdiction offers managers, balanced against the need for progression and innovation:

“In Jersey, we are well placed to support this transition to a new era in cross-border funds,” he added. “On the one hand, we offer unrivalled economic, regulatory and fiscal certainty that you just don’t find elsewhere. On the other hand, we are an agile jurisdiction, with a renowned regulatory framework, a broad range of vehicles and a future-focused outlook, and we are already supporting innovative digital asset and tokenised strategies. Fundamentally, Jersey is committed to this transformational journey for the industry. It’s an exciting place to be in.”

Jersey Finance’s next Funds Focus event will be held in London on 4 June.