ROUNDTABLE: BANKING, FUNDS & ASSET MANAGEMENT
Q2: HOW WOULD YOU CHARACTERISE THE HEALTH OF THE ASSET MANAGEMENT SECTOR IN BERMUDA?
“The other industry that is showing an uptick is private equity.”
Scott Burns: Bermuda is very well positioned right now and is capitalising on some great initiatives that were started a few years ago. There is a great positive trend on alternative investments especially insurance-linked securities (ILS) and private equity. The ILS asset class performed really well through the COVID-19 pandemic, demonstrating that even under extreme risk scenarios ILS investors can be relied upon to support protection buyers’ need for capital.
Bermuda continues to be at the forefront of risk innovation and a market leader in ILS and alternative capital. In fact Bermuda is ideally placed to come to the fore in a new era for the reinsurance industry when the pandemic is over and that is being validated by a number of startups that are currently being formed because they have identified some great opportunities ahead.
The other industry that is showing an uptick is private equity. I estimate over 80 percent of our clients will fast-track fundraising or the launch of new funds to take advantage of what they see as a good buying opportunity over the next year and a half. Funds that are fully invested right now are less healthy, but funds that were either in the harvesting phase or were about to launch have actually sped up those timelines.
We’ve seen a lot more macro activity from different industries and we’ve also seen a general increase of interest in Bermuda. I think that’s driven by two things. Quite a few local people have done a really good job for the last two years, getting Bermuda out there.
When I’m having conversations with clients who have historically used a different jurisdiction, Bermuda is now seen as one of the better fund options because the regulatory news has been good.
Consequently, more asset managers (especially private equity and hedge) are now looking at Bermuda as a jurisdiction of choice, which was not the case two or three years ago. I think they’re more interested in setting up structures here and I dedicate that shift to the superb job the government, BMA, Bermuda Business Development Agency (BDA) and business leaders have done to demonstrate to the world Bermuda’s commitment to compliance leadership, data protection and strong governance.
We are also dealing with more institutional investors in our funds, especially on the private equity and ILS side. Institutional investors conduct a thorough due diligence process and the credibility of the jurisdiction is one of the key parameters that drive their decision process. Bermuda’s strength in both regulatory and legal framework along with the ease of doing business in the Island is creating a positive trend that will benefit the asset management industry in the long run.
“We are also dealing with more institutional investors.”
“We did very well in the Caribbean Financial Action Taskforce Evaluation.”
Laura Knox Clingerman
Laura Knox Clingerman: It seems as if Bermuda as a jurisdiction did quite a bit of the heavy lifting in terms of compliance and regulatory procedures, several years ago. We’ve already established the beneficial ownership system, working with corporate services clients. Our clients are accustomed to the kind of AML requests that the Corporate Service Provider Act 2016 has required.
Because we’ve put in a lot of work over the last few years, we did very well in the Caribbean Financial Action Taskforce Evaluation—in contrast to other jurisdictions that had to pass through some fairly significant pieces of legislation which have resulted in higher costs. In short, I think we are well positioned, taking into account the strengths that we’ve already established.
Of course, much of our success is due to the global economy and we’ve had some great returns over the last three or four months, although the next couple of months might not be so pretty, if you believe the W-recovery predictions. Overall, we’re happy with where we are and if we have a bit of luck and keep working together, 2021 could turn out to be a pretty good year.
Todd Kearns: I’ve been in asset management for 20 years. It’s not the heyday of the early 2000s when a brand new offering document arrives on your desk every week, but over the last few months we’ve seen a uplift in the number of new companies and new funds setting up in Bermuda. I agree that selling Bermuda to the US and the UK is starting to pay dividends.
However, in terms of private equity funds and raising capital, I am seeing clients that are unable to or are experiencing difficulty in raising capital in the current markets, given COVID-19 constraints.
Millar: From an Argus Wealth perspective, growth has continued on an upward trend over the past few years driven by a combination of new business and strong market performance. This year there have been many “main street” challenges, but for many investors and market participants, it has almost been a non-event.
If you closed your eyes on January 1 and woke up today on September 2, and looked at the major US stock market returns you wouldn’t think that you were in a global pandemic requiring an economic response far greater than was rolled out in the 2008/9 financial crisis. The speed of the recovery from the March lows has been both amazing and mind-boggling at the same time.
One of the things that intrigues me is the changing face of technology, ensuring that it is fit for purpose in terms of the new type of investor that potentially we’ll need to service as we move forward. We need to make sure that we have the products and the technology to service all market segments—both institutional and retail investors.
Overall, I’d say that Bermuda has done a really good job. Certainly, on the regulatory front, I think it’s been A-class and that should bode well for the future.
“Sellling Bermuda to the US and the UK is starting to pay dividends.”
“Growth has continued on an upward trend over the past few years.”
Demerling: That sort of enthusiasm captures exactly where we are in this space, and I haven’t felt this good about asset management for years. We had a concerted effort back in 2013 to look at our offering, where we were in the marketplace, and where we wanted to be. We made legislative changes and we collaborated with government, industry, the regulator and the Bermuda Stock Exchange.
Bermuda sells itself so well and when people have experienced what we have to offer, they’re converted. It has been several years coming, but the pay-off is now here and we are seeing people jurisdiction-shopping again. They are looking to see where the opportunities are, or if the landscape has changed, and Bermuda is faring very, very well.
We have talked about being on the EU White List, and the fact that our legislation meets international standards has definitely given us opportunities. Fortunately, we have also picked up referrals from other jurisdictions that have had problems on that front—and that has provided us with even more opportunities. I think that we’re fit for purpose when it comes to the US, the EU and Asia.
We have been very commercial in the way we treat the asset management industry, and we’re continuing to stay with that theme—understanding the market, understanding the threats and making sure we remain competitive. It is a collaboration and has been a concerted effort for a while.
I do think we are getting more enquiries now than ever and people are quite surprised: “wow, you’re back on the map”, they say. Whether it’s Cayman or Bermuda, we are now considered in the mix—and that hasn’t been the case for a number of years. It’s a good story.
Lightbourne: It is great to hear the positivity and, speaking on behalf of the BDA, it is great to hear the fact that it is partly due to the way we have marketed ourselves. We have focused on telling a jurisdictional story and building on the back of the strong regulatory achievements that continue to set Bermuda apart.
Everything that was done to establish Bermuda as a carefully regulated blue-chip jurisdiction has worked out for us. Everybody else is coming up to our level and that speaks volumes for the industry and the people that work in the industry.
I have to say that the BDA has received a lot of interest in the funds space during this pandemic. That’s very important. We have also seen an uptick in interest in the concierge services we offer to prospective companies and clients. >>
“When people have experienced what we have to offer, they’re converted.”
“Everybody else is coming up to our level.”
<< People find out about Bermuda through a number of different avenues of immediate interest to them, including our technology legislation or Work From Bermuda one-year residential certificate, and then discover all the other things we offer that makes the Island so valuable.
It’s exciting. I can tell you that we continue to look ahead and there are more things happening in this space in Bermuda. I believe a lot more people will continue to find us to be the jurisdiction of choice.
Hughes: It’s great to see all the hard work that’s been put in over the last few years, which is beginning to pay dividends. For me, a key benefit is the Work From Bermuda certificate so that we can bring in more asset managers, more families and more businesses, because that’s fundamentally valuable to the economy.
Lightbourne: It’s important to understand that the BDA, as an independent public-private organisation, continues to host a lot of industry focus groups and working groups that relay their insights and information to the government. We need to be open, and welcome people in, and the Work From Bermuda Certificate is one stream and there are other initiatives currently being discussed for people who want to come and reside here.
O’Rourke: As you know, several of our banks have active asset management operations tied in with trust and a lot of that has diversified to other jurisdictions. But here, we are hoping that the investment we made to preserve our reputation and put Bermuda above its peers in terms of quality and integrity will pay dividends.
This covers all business sectors, including asset management, which benefits because of the implied trust involved in handling the management of money.
Neff: I would say from a corporate banking standpoint, we have seen an increase in activity and that is partly the result of getting out, marketing ourselves and proving that we’re an attractive jurisdiction.
I used to get a lot of feedback that Bermuda is too regulatory heavy, too complicated and too expensive, but all the work that we did to put the framework in place around regulations, all the investing in our infrastructure and regulatory framework, is now going to pay dividends.
Image courtesy of Shutterstock / Hanif Fauzi
“A key benefit is the Work From Bermuda certificate.”