The choice of domiciliation can make or break a fund’s success and, amidst a shift in attitudes and practical conditions in the business environment, there are still enormous opportunities for driving capital in Africa.
Those were amongst the key findings of a new report by African Business magazine entitled ‘South African Fund Managers: Trends in Fund Domiciliation and Capital Raising’, commissioned by Jersey Finance. The report was launched through a joint Jersey Finance and African Business magazine webinar (5 November), where a panel of industry experts unpacked recent trends in the context of the COVID-19 global pandemic, the rise of ESG, and increased risk in developed markets.
To produce the comprehensive report, African Business magazine surveyed more than sixty C-suite or partner-level executives, investors (LPs) and Fund Managers (GPs) operating in jurisdictions worldwide with a connection to South African managers. The objective was to explore the emerging global trends in fund domiciliation and capital raising, particularly as a route for private equity impact investing into the wider African continent.
In particular, the research found that in a rapidly evolving global market, the choice of fund domiciliation has become an increasingly salient issue for investors and fund managers, with choice of jurisdiction ultimately being led by LPs and the quality of a jurisdiction’s legal and regulatory framework being the most important factors in their minds.
It also found that the opportunities for capital raising in Africa are substantial, highlighting how the past two years have seen unprecedented foreign direct investment commitments to Africa as the region becomes more economically and politically strategic.
To assist in facilitating this growth, the research suggests that IFCs must extend their financial expertise into these investments, alongside private and institutional investors, in a cost and tax-efficient setting – with support from Development Finance Institutions (DFIs).
Dr Desné Masie, author of the report, Chief Strategist at IC Intelligence, and Editorial Director at African Business magazine, said: “The shifting geopolitics introduced by Brexit, Trumpism and now also, COVID-19 is reconfiguring Africa’s place in the world and driving its rapid ascendency. One important consequence is that Brexit and Trumpism have brought home some inconvenient truths that political risk is not idiosyncratic to Africa and so-called ‘emerging markets’ but rather, that they are features of markets everywhere.”
Commenting on the launch of the report and pointing to the fact that Jersey has been building a strong relationship with African markets for more than two decades, Allan Wood (main picture), Global Head of Business Development at Jersey Finance, said: “This research follows on from our 2015 report, ‘Jersey’s Value to Africa’, where the opportunities to facilitate capital flows into the continent were explored at a macro level. Exploring the current trends in fund domiciliation and capital raising, this research highlights the fact that IFCs which can demonstrate high standards of corporate governance and provide guaranteed and seamless market access, such as Jersey, will play an increasingly vital role in sourcing overseas capital securely and efficiently to help support economic growth and job creation in Africa. Fund managers, particularly in South Africa, are increasingly turning to specialist IFCs that have considerable experience in navigating global regulation and compliance requirements. In fact, South African managers now account for the eighth largest pool of capital globally in respect of Jersey-based fund promoters.”
While the choice of jurisdiction remains with LPs and portfolios are not limited to Africa, the research concluded that managers and investors remained optimistic about opportunities in Africa: “For agile professionals and investors, there are many opportunities for those who can offer a credible value proposition balancing regulation, governance, cost and innovation. For IFCs, those who can facilitate capital flows while meeting all these requirements, there is an opportunity to do really well while doing an abundance of good.”
Elliot Refson, Head of Funds at Jersey Finance, added: “We are in no doubt that there is a huge opportunity for Jersey in South Africa. Investors want a jurisdiction with political and fiscal stability, with a no change outlook from a regulatory, legal or economic perspective and Jersey ticks these boxes.”
