Seizing opportunities amid uncertainty: insights from the Jersey Finance Private Wealth Conference

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This year’s Jersey Finance Private Wealth Conference in London was themed “Beyond the Permacrisis: Taking Advantage of Change and Opportunity.” The event offered thought-provoking sessions and engaging networking opportunities, with insights that are invaluable for navigating the current landscape. James Michel, Director in Private Wealth, summarises the key themes covered at the event.

Geopolitics and the new world order

Keynote speaker Tim Marshall set the tone with a captivating presentation on the “multipolar world” we now live in, emphasizing the role of geography in shaping global politics. He also touched on the modern “space race” and left the audience with a powerful reflection, quoting, “there is nothing new under the sun,” suggesting that history often repeats itself, but with greater understanding each time. During an interactive Q&A, Marshall shared his prediction that Argentina could emerge as a major player in the next 20 years, sparking conversations about future growth regions.

Strategic wealth management in a volatile world: key panel insights

The panel discussions centred around how private investors and families can successfully navigate a world marked by geopolitical volatility.

  • Strategic investing in turbulent times: The panellists emphasised the importance of thinking strategically about investing amidst geopolitical risk. Collaboration among advisers is critical to understanding and navigating economic cycles, which, as mentioned, can last up to 30 years.
  • Global families and wealth management: As clients become increasingly multi-jurisdictional, wealth advisers must adapt to the complexities of managing assets and family affairs across borders. The rise in global mobility has resulted in families maintaining multiple residences, businesses, and investments in different jurisdictions, each with its own legal, regulatory, and tax implications. This shift demands greater flexibility in wealth structuring, as traditional approaches often fall short in accommodating the modern, borderless lifestyle of high-net-worth individuals.

    Advisers must craft bespoke solutions that not only address the diverse requirements of these global families but also account for evolving regulations and geopolitical uncertainties. This includes managing cross-border tax compliance, mitigating risks associated with different legal systems, and ensuring a seamless transfer of wealth across generations. Additionally, there is an increasing focus on the professionalisation of wealth management, as family offices look for more sophisticated governance models, operational efficiency, and a broader suite of services to support their global aspirations.

    With a growing demand for holistic, internationally adaptable strategies, wealth advisers must collaborate more closely with global legal, tax, and financial experts to ensure that structures are robust, future-proof, and responsive to the dynamic needs of modern global families.

  • Philanthropy at the forefront: Philanthropy is increasingly important to high-net-worth families, particularly in regions like the GCC, where philanthropic donations are estimated at $210 billion annually. This shift represents a significant change from tax being the primary driver of wealth management conversations in the past.
  • Embracing change and technology: Technology was a major theme, with AI and fintech emerging as transformative forces within the wealth sector. While there is still misinformation surrounding AI, it was acknowledged that AI is here to stay and offers significant efficiencies. However, governance and regulation will be essential in mitigating its risks. Although there was some debate that AI could erode jobs, most panellists agreed it is more about reshaping how we work and integrating AI tools into our day-to-day processes, not replacing human talent.

Looking ahead: opportunities for family offices

The conference concluded with a dynamic Q&A session discussing how jurisdictions can attract family offices—entities set up by high-net-worth families to manage their wealth. A key theme was the “ease of doing business,” encompassing streamlined regulatory frameworks, tax incentives, and administrative efficiency. Family offices seek jurisdictions that offer straightforward processes, allowing them to focus on strategic planning rather than compliance burdens.

The panelists also emphasised the importance of stability and predictability in governance, with family offices favouring locations known for political and economic security. Furthermore, jurisdictions must embrace innovation and provide access to advanced fintech and bespoke services that cater to the unique needs of family offices, including impact investing and philanthropy advisory.

Overall, the Jersey Finance Private Wealth Conference offered valuable insights into the challenges and opportunities presented by today’s global landscape. From navigating geopolitical risks to embracing the AI revolution, the event highlighted the importance of strategic thinking and adaptation for the future of wealth management.

At Belasko, our private wealth services are designed to protect, grow, and transition wealth while navigating complex legal and regulatory environments. We offer tailored solutions across four key pillars: philanthropy, next generation, entrepreneurship, and sustainable investing. If you’re interested in exploring our private wealth services in Jersey, please reach out to James Michel ([email protected]).

Private markets in transition: Fundraising, ESG, and tech trends from ALFI 2024

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The ALFI Private Assets Conference in Luxembourg brought together industry experts to discuss the latest trends and challenges in private assets. Greg McKenzie, Country Head of Luxembourg, and John Russell, Director, share some of their key takeaways from the event.

  1. Market trends:

The fundraising environment remains challenging, with asset managers tightening strategies as they navigate market uncertainty. Whether launching their seventh or first fund, asset managers are dealing with a more concentrated market and a global decline in IPO activity.

Europe remains cautious, particularly due to the potential impact of the upcoming U.S. elections. Despite these challenges, the CSSF continues to support a pro-business and pragmatic approach, modernising regulations to adapt to market needs. Luxembourg’s clear regulatory framework, combined with its strong interconnected funds ecosystem, continues to cement its position as a favoured jurisdiction, with practical tax structures like no VAT on management fees.

  1. NAV financing:

NAV (Net Asset Value) financing is gaining traction in the private equity space, providing flexibility for managers with the capacity to underwrite credit and assess underlying performance. NAV financing enables quicker access to liquidity at the fund level and is a useful tool for deleveraging portfolio companies and freeing up liquidity for operational and capital expenditures.

  1. Fundraising insights:

The fundraising landscape is undergoing several shifts:

  • Secondaries and private debt are becoming more prominent, fuelled by rising interest rates and changing investor preferences.
  • A shift toward retail investors is evident, albeit still quite slow, with products like ELTIFs and UCI Part IIs becoming more popular, though UCI Part II is restricted to semi-professional investors. Family offices are also very active in this space.
  • Listings are increasingly important, enabling asset managers to target a broader investor base. This supports the movement toward “deretailisation,” focusing on high-net-worth individuals and institutional capital over retail investors.

Preqin’s “Alternative 2029” report predicts a slowdown in the growth of alternative assets under management (AUM) until 2029, but private equity, infrastructure, and private debt are expected to grow significantly. European private capital fundraising is also expected to rise by 2026.

  1. ESG and greenwashing:

The discussion around ESG evolved from greenwashing (overstating sustainability claims) to greenhushing (downplaying ESG initiatives to avoid scrutiny). This shift reflects a growing focus on delivering real accountability rather than ticking boxes.  According to a 2022 report by PwC, nearly 90% of investors believe that corporate sustainability reports contain greenwashing.

Greenwashing concerns have been a focus of regulatory action, with firms like Deutsche Bank’s DWS agreeing to pay the SEC $19million to settle charges of greenwashing. As a result, sustainable assessments need to be embedded from the outset, capturing the right data to meet material risk requirements.

The biggest challenge lies in collecting and integrating reliable, complete data to support ESG initiatives. Private markets have a key advantage over public markets in this area, as private investors can directly influence data requirements by sitting on boards and defining the parameters for sustainability reporting.

  1. The role of technology and data in private assets:

Technology is playing an ever-larger role in asset management. The rise of Artificial Intelligence (AI) in analysing data, alongside the global push for regulatory convergence, is expected to shape future developments. There is growing pressure on fund administrators to meet investor demands for transparency and scalability, with fund of funds investors particularly focused on look-through reporting.

  1. Digital assets and Luxembourg’s regulatory flexibility:

Luxembourg’s regulator has demonstrated flexibility and bravery in supporting digital assets, providing clear regulatory frameworks that allow this asset class to flourish. This proactiveness aligns with Luxembourg’s interconnected funds ecosystem, ensuring that digital assets can integrate into traditional financial structures with ease.

  1. Future outlook:

As the private markets sector continues to evolve, we can expect significant advancements in AI-driven data analysis and regulatory alignment on a global scale. Product innovations are likely to follow in the coming years, with enhanced tools for capturing and managing sustainable investments.

This year’s conference underscored the importance of adaptability, particularly in navigating a challenging fundraising landscape, leveraging technology for growth, and integrating ESG considerations into long-term strategies. Asset managers will need to embrace innovation and remain proactive in meeting evolving investor demands.

Belasko in Luxembourg provides tailored, personalised fund services and our team has extensive experience in servicing global private capital firms. We excel in managing complex AIFs and holding structures, offering comprehensive end-to-end fund administration and corporate services.

With a deep understanding of the Luxembourg regulatory landscape, we offer a reliable and proactive service, underpinned by leading technology, to help clients navigate the complexities of private capital investments with confidence.

Get in touch with Greg McKenzie ([email protected]) or John Russell ([email protected]) to discuss how we can support setting up your next fund in Luxembourg.

     

Transferring a trust to a new trustee: A strategic option for HNWIs

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An essential wealth transfer tool for any high net worth family is ensuring the effective management of a family trust, preserving your legacy, and ensuring that future generations benefit from your foresight. However, there may come a time when the trustee originally appointed is no longer the best fit for your evolving wealth management needs. Transferring a trust to a new trustee can be an efficient and strategic move to ensure that your assets are managed in line with your objectives.

In this article, Andy Bailey, Head of Private Wealth, explores why and how to transfer a trust to a new trustee, the benefits it offers, and what high net worth individuals (HNWIs) should consider throughout the process.

Why transfer a trust to a new trustee?

Trusteeship is an integral part of managing complex wealth, and while trustees are bound by a fiduciary duty to act in the best interests of the beneficiaries, circumstances often change. Whether due to shifting financial goals, personal relationships, or the evolving complexity of wealth management, HNWIs may find it beneficial to appoint a new trustee. Here are some common reasons:

  • Sophistication and expertise in asset management

HNWIs often have diverse portfolios that include not only liquid assets like stocks and bonds but also real estate, private equity, art collections, or even family businesses. The expertise required to manage these assets effectively can be highly specialised. If the current trustee lacks the necessary skills or experience, especially in global investments or niche assets, it may be time to seek out a trustee with more appropriate expertise.

  • Better personal service and engagement

Trustees are not just financial managers; they play a significant role in stewarding wealth for future generations. For HNWIs, having a trustee who understands their unique financial goals and family dynamics is critical. If the current trustee lacks responsiveness moving to a trustee who provides a more personalised, high-touch service can lead to greater satisfaction and trust in the management of the assets.

  • Jurisdictional and regulatory advantages

With the global mobility of HNWIs, you or your beneficiaries may have moved to a new country with different tax laws and regulatory frameworks. Transferring your trust to a trustee who understands jurisdictional obligations when it comes to tax and regulation and can help simplify compliance with local laws can be hugely advantageous.

  • Changing family or business circumstances

As families grow and their financial needs evolve, trustees must adapt to new circumstances. If your family has expanded or there are new business ventures to consider, the existing trustee may no longer be the best fit. A trustee with experience in intergenerational wealth transfer or managing family-owned businesses might offer better solutions for your family’s evolving financial landscape.

  • Market consolidation and continuity concerns

The trust market is seeing significant consolidation, with many trustees being acquired by larger firms, leading to disruptions in service quality and a loss of personal relationships. For HNWIs seeking stability and consistent service, moving to a trustee that is independently/family-owned can provide long-term continuity and a more personalised relationship management approach. These trustees often have a vested interest in maintaining strong, lasting client relationships.

The process of transferring a trust is easier than expected

For HNWIs, the prospect of transferring a trust may seem like a complex endeavour, but the process can be straightforward, especially with the right advisors. Here’s how it generally works:

  1. Review the trust deed and legal requirements: Consult the trust deed to understand the terms governing trustee replacement. Most trust deeds include provisions that outline the process for appointing a new trustee. Some may require the consent of beneficiaries or a protector, while others may provide broad discretion to the settlor.
  2. Consult advisors and stakeholders: Before making any decisions, it is essential to consult with your legal, tax, and financial advisors. They will help assess any potential legal or tax implications of moving the trust to a new trustee, particularly if the transfer involves cross-border assets or multi-jurisdictional considerations.
  3. Appointing the new trustee: Choosing a new trustee is arguably the most important step. For HNWIs, the decision should be based on a trustee’s ability to manage complex asset structures, their understanding of global markets, and their approach to family governance and succession planning. Boutique trust companies are often preferred by wealthy individuals because they offer a higher level of service and a bespoke approach.
  4. Prepare the legal documentation: Once the new trustee has been selected, a Deed of Retirement and Appointment will need to be drafted to formalise the transition. This document specifies the outgoing trustee’s resignation and the appointment of the new trustee. Your legal advisors will ensure that all documentation is in order and compliant with the trust deed and local laws.
  5. Transferring assets: Transferring the trust’s assets to the new trustee may require coordination with financial institutions, asset managers, or other parties to ensure a seamless transfer. Additional steps may be required if assets are in different jurisdictions to comply with local laws or regulations.

Key considerations for High Net Worth Individuals

As with any significant financial decision, there are several important factors to keep in mind when considering a transfer of trusteeship:

  • Legal and tax implications: A transfer can trigger tax liabilities, especially in cross-border cases, so consult tax professionals to plan accordingly.
  • Trustee reputation: Ensure the new trustee has the expertise and reliability to manage large estates as well as a consistent and responsive approach to relationship management.
  • Long-term flexibility and stability: You want a trustee who can evolve with your financial and family circumstances over time. Choose a trustee who can adapt to changing circumstances and family dynamics and have a solid ownership structure behind them.
  • Costs of the transfer: Weigh legal fees and transfer costs against the long-term benefits of appointing a more capable trustee. At Belasko, we can make the transition seamless, fill any gaps you’re experiencing with your existing trustee, at a competitive cost.

A strategic move for wealth preservation

For high-net-worth individuals, transferring a trust to a new trustee can be a strategic decision that enhances the management and protection of wealth. Whether you are seeking better expertise, more personalised service, or a trustee with jurisdictional reach, the process of transferring trusteeship is easier than many might think.

As an independently owned business, our private wealth team are reliable, experienced and provide continuity and longevity in building relationships. Our bespoke private wealth solutions draw on the many years’ experience of managing the needs of HNWIs. We collaborate with your advisors, act as professional trustees, and ensure effective management and administration of the trust. We can ensure a seamless and smooth transition of your trust, at a minimal cost, which will also be a valuable step toward safeguarding your legacy for generations to come.

If you’d like to discuss transferring your trust, get in touch with Andy Bailey ([email protected]).

Partners for Growth: Key Takeaways from the BVCA Summit 2024

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Last week, Belasko were proud sponsors of the BVCA Annual Summit, the flagship event for the private capital industry, attracting over 1,000 attendees from across the ecosystem.

This year’s theme, “Partners for Growth,” emphasised the evolving role of private capital in driving innovation, partnerships, and investment in people as the industry moves into its next phase. Ross Youngs, our Chief Commercial Officer, shares the key highlights from this year’s summit.

  1. Recovery expectations and market outlook: There is an important yet subtle shift recognising the worst is behind us.  Panellists cited that the market may not fully recover until 2026 or 2027 however we expect the IPO market to reopen in 2025 and interest rates to continue to decline supporting growth. They also highlighted that whilst the M&A market is subdued, there are deal flow opportunities coming from the mid-market (£50-500million) as well as from family-owned businesses.
  2. Optimism in venture capital: With asset prices low and competition reduced, Managers view this as a prime opportunity to act. As highlighted by Isomer Capital, now is the time to strike, capitalising on lower valuations to fuel growth.
  3. Artificial intelligence (AI) and technology – long-term investment and integration: AI continues to dominate discussions, with the consensus that AI’s investment cycle will span the next 20 years. Investors are increasingly focused on software that connects industries, utilising AI to drive efficiency across verticals and horizontals. However, as AI advances, so does the need for stronger cybersecurity management to protect against sophisticated threats.
  4. Government support and the UK’s venture capital position: Government support for the private capital sector was a key theme, with Tulip Siddiq, Treasury Minister, pledging a stable, low-tax environment to foster investment. Reducing the funding gap for Series B and C is an important priority to enable British business to flourish.  Initiatives include encouraging pension funds to invest in the space and reforming planning to support these industries.
  5. Private credit and stable investment options: Demand for private credit remains strong, offering stability for fundraising and yielding steady returns. Investors continue to seek more evergreen solutions that provide cash yield stability, while the rise of software as a service (SaaS) also presents attractive opportunities.
  6. Liquidity tools on the rise: Liquidity options have expanded significantly in recent years, with access to over 25 different platforms now available, compared to just one a short time ago. This rise in liquidity solutions is helping businesses navigate the challenging market conditions, particularly as more opportunities emerge in the secondaries market.

The 2024 BVCA Summit offered a comprehensive look at the evolving landscape of private capital, providing delegates with valuable insights into the future of the industry. From AI integration to government backing and the continued rise of the secondary market, the next decade promises significant transformation, and the private capital market is well-positioned to drive this growth forward.

If you’d like to discuss how Belasko can support your business with achieving your growth goals and capitalising on new opportunities, get in touch with Ross Youngs ([email protected]) to arrange a meeting.

Embracing Finovation: Key Takeaways

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Last week, Andy Bailey, our head of private wealth, attended the ‘Finovation: The Guernsey Edge’ conference, hosted by the Guernsey Financial Services Commission and Guernsey Finance. The conference focused on how Guernsey’s financial sector can leverage its agility, strong legal framework, and forward-thinking regulation to embrace emerging technologies and drive growth.

Below Andy highlights his key takeaways from the event.

  • Harnessing technology for growth: Guernsey’s financial services sector is positioned to benefit from technological advancements, including AI and quantum computing. These technologies offer potential improvements in efficiency, risk modelling, and fraud detection, and are seen as critical for maintaining Guernsey’s status as a leading international finance centre.
  • Mitigating cyber risks: Speakers stressed the importance of addressing cyber risks in the financial sector. They highlighted the need for robust cyber risk management and regulatory compliance to protect against breaches and ensure financial crime controls are effective.
  • Regulatory innovations and openness: The Guernsey Financial Services Commission (GFSC) gave a sneak peak in to their soon-to-be-introduced new authorisations portal. This portal will digitalise and streamline processes whilst offering more visibility which will fundamentally make Guernsey an even more attractive place, with a much easier process, for those wanting to do business in the island.
  • FinTech vs. traditional banking: While FinTech solutions are reshaping the banking landscape, there were discussions around the potential risks for individuals and organisations. Concerns include the reliability and security of digital-only platforms compared to traditional banks who offer stability and reassurance, as well as regulatory clarity and the longevity of FinTech providers. The private wealth sector particularly are still a way off utilising FinTech banking solutions as they need to carefully weigh the benefits of innovation against safely securing their wealth without any risks.
  • Openness to innovation in Guernsey: Panellists Alexis Augier, CEO at Vega, and Matt Ong, Founder and CEO at Ctrl Alt, praised Guernsey’s openness to cutting-edge financial innovations, including fund administration and structures like Private Investment Funds and Protected Cell Companies. They recognised that with tokenisation comes a lot of scepticism and unclarity but, with the GFSC’s clear guidance on tokenisation, businesses can benefit from better speed to market and cost-effectiveness when looking to innovate.

The ‘Finovation: The Guernsey Edge’ conference provided invaluable insights into the future of Guernsey’s financial services sector, highlighting the island’s strong position to benefit from emerging technologies. From AI and quantum computing to innovative regulatory practices, Guernsey is well-equipped to navigate the challenges and opportunities presented by the rapidly evolving financial landscape.

With the GFSC’s openness to innovation and proactive stance on regulation, the island remains a competitive and attractive hub for businesses looking to capitalise on technological advancements. Guernsey’s agility and commitment to embracing innovation are critical to maintaining its status as a leading international finance centre.

If you’d like to discuss innovative solutions within private wealth, get in touch with Andy Bailey ([email protected]).

Navigating New Waters: Impacts of UK Government’s Non-Dom Tax Reform

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As the UK navigates changes in the non-dom tax regime, the new Labour government under the Treasury’s leadership is set to introduce several strategic updates. These updates are part of a broader effort to align the UK’s tax system more closely with international standards and maintaining stability.

The government will finalise policies in the upcoming Budget (30th Oct) but here we highlight some of the key proposed updates to the UK taxation for non-dom individuals that should be considered carefully[1].

Foreign Income and Gains (FIG)

  • Current system: Non-domiciled individuals in the UK are currently taxed on a remittance basis, meaning you are only UK taxed on income and gains remitted to the UK.
  • Proposed new system (from 6 April 2025): A shift to an internationally competitive residence-based system will be introduced meaning all worldwide income and gains will be subject to UK tax. However, a four-year relief period will be granted to new arrivals to ease the transition.

This change provides non-doms with a limited-time opportunity to remit foreign income and gains to the UK at a more favourable rate (12%), encouraging the reinvestment of global wealth into the domestic economy.

Inheritance Tax (IHT) rules based on residence

  • Current system: IHT is determined by domicile status, with UK-domiciled individuals liable for IHT on worldwide assets and non-dom individuals liable for IHT on UK assets only.
  • Proposed new system (from 6 April 2025): IHT liability will be based on residence rather than domicile. A new provision extends the scope of IHT to non-doms who have moved abroad, applying a 10-year window of liability. This measure ensures continued fiscal responsibility for those with substantial ties to the UK, even after they have relocated.

Trusts and Non-UK Assets

  • Current system: Under current rules, UK non-doms can establish excluded property trusts to shelter non-UK situs assets from UK IHT. These trusts have provided a means of protecting assets from IHT, thus serving as an essential tool for estate planning and asset protection.
  • Proposed new system: The Treasury has indicated potential grandfathering provisions for existing excluded property trusts. This potenitially means that trusts established before a specific date could retain their excluded property status, thereby exempting non-UK situs assets from IHT[2].

Settlor-Interested Trusts

  • Current system: These trusts often offer tax advantages to non-domiciled individuals.
  • Proposed new system: The preferential tax treatment for settlor-interested trusts will be gradually phased out, potentially leading to further tax obligations for settlors.

Strategic considerations for HNWIs and UHNWIs

With these updates, it’s crucial for non-domiciled HNWIs and UHNWIs to engage proactively with their advisors to navigate the evolving tax landscape and future proof wealth planning.

While the new government maintains continuity in many aspects of the non-dom tax regime, the introduction of specific measures marks a decisive shift towards a more inclusive and accountable tax system. Non-doms, particularly HNWIs and UHNWIs, must remain vigilant and informed to effectively manage their tax obligations and financial planning strategies.

Belasko’s proactive scenario-based analysis

At Belasko, we’re already proactively supporting our clients with scenario-based analysis to ensure they’re prepared and ready for any potential taxation impacts that will be put in place after the 30th October.

The scenario planning includes the mapping and analysis of a client’s investment universe, stress testing them against the potential changes that could be implemented by the UK government. This provides our clients with intuitive, cost-benefit analytics upon which families and their advisers can make informed decisions.

We’re experienced when it comes to optimising wealth across jurisdictions and generations and are ahead of the curve when it comes to navigating potential new tax and regulatory barriers.

Our private client directors all have 20+ years of extensive experience, leading a frontline administration and accounting service delivery team. We hold strong relationships with leading legal and tax advisors and deliver tailored solutions, while being truly dedicated to delivering client service excellence.

If you’d like to discuss how we can help you navigate new waters as a result of the new UK government, get in touch with Andy Bailey ([email protected]).

[1] https://www.gov.uk/government/publications/2024-non-uk-domiciled-individuals-policy-summary/changes-to-the-taxation-of-non-uk-domiciled-individuals#:~:text=The%20government%20envisages%20that%20the,scope%20for%2010%20years%20after

[2] https://www.gov.uk/government/publications/2024-non-uk-domiciled-individuals-policy-summary/changes-to-the-taxation-of-non-uk-domiciled-individuals#:~:text=The%20government%20envisages%20that%20the,scope%20for%2010%20years%20after

Sustainable Finance: How ESG is Shaping the Future of Investment

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ESG has fast become one of the better-known acronyms in financial services, continuing to dominate news headlines. As a result of this, buyers of goods and services are now differentiating where they allocate capital and prioritising businesses pushing to make a difference. This has shifted ESG and sustainable finance from just buzzwords to critical components of the financial landscape.

Despite a cooling in ESG fundraising to $91 billion globally in 2023, there has been a notable resurgence in 2024, with $55 billion raised by April alone[1]. This rebound highlights the sustained interest and commitment to ESG principles among investors and fund managers. And, according to PwC, analysts expect ESG AUM to reach c20% of Global AUM or $33.9trn by 2026 ($18.4trn 2021).

Interestingly, while the performance difference between ESG funds (13.5% IRR) and non-ESG funds (15% IRR) is not significant, ESG funds tend to exhibit lower variance. This lower risk profile can be appealing to investors seeking stability. Moreover, six out of ten investors have either rejected an attractive investment opportunity or would do so based on ESG concerns, underscoring the growing importance of these factors in investment decisions[2].

Ross Youngs, Chief Commercial Officer at Belasko, identifies how ESG is shaping the future of investment, the impact on our clients and the business’ proactive approach to lead the way.  

How are our clients impacted? 

Our fund clients experience varying degrees of impact from ESG, largely influenced by their size and marketing strategies. Many clients share our proactive stance and have generally adopted two distinct approaches based on the level of regulation required:

  1. The Sustainable Finance Disclosure Regulation (SFDR): A key regulatory framework in the EU that governs the transparency and reporting of sustainability-related information by financial market participants.
  2. The Principles for Responsible Investing (PRI): Where SFDR has not been relevant, our clients have chosen voluntary compliance with the PRI which provides a set of ESG principles designed to foster a positive, sustainable impact within the global financial system.

Unpacking the SFDR 

There are three levels of regulation applicable to funds marketed in Europe under the SFDR:

  • Article 9: These funds are dedicated to achieving specific sustainable objectives. They have strict requirements on how they achieve their goals. There has been a great deal of focus on this category of fund with rigorous evidential reporting. Due to these high standards, about 40% of Article 9 funds, representing $175 billion, have reclassified to Article 8.
  • Article 8: These funds promote positive environmental, social, and governance characteristics without necessarily having them as their primary objectives.
  • Article 6: This category includes funds that do not integrate sustainability considerations into their investment strategies.

These three levels of regulation serve as stepping stones depending on where the business or fund is on its ESG journey.

How has ESG impacted Belasko?  

At Belasko, we recognise the significant benefits of incorporating ESG into our business strategy. Although we’re not legally required to report on sustainability, we’ve taken a proactive approach in doing so by partnering with Terra Instinct to develop a Responsible Business Policy. This initiative includes forming a group-wide committee, defining relevant sustainable metrics relevant to our business, setting targets, and publishing an annual report on our ESG journey for clients and investors.

We anticipate that mandatory ESG reporting will become a reality for businesses like ours in the coming years. To stay ahead, we’re committed to being leaders in this space, continuously taking proactive steps to lead the way.

How can we help you?  

No matter the complexity of compliance with the PRI or SFDR, there are common challenges that we can support you with.

  1. Defining a policy of responsible investment: The policy must consider the fund’s impact on ESG factors and establishing data points to measure and track positive impact according to the goals set.
  2. Data collection: While it may seem straightforward, data collection is not standardised across markets and countries so the sophistication and resource availability of portfolio companies to stream up the data sets can vary considerably.
  3. Regulation and investor demand: With both evolving rapidly, our clients often lack the internal ESG resources to stay compliant therefore relying on Belasko to keep them informed.

We have developed an end-to-end solution in partnership with Terra Instinct to power auditable data collection. Terra Instinct are specialists when it comes to defining policy and collecting and validating data, as well as providing reasonable industry estimates where data is not available. The expertise of advisory specialists is crucial in ensuring data quality, which, in turn, ensures accurate and reliable reporting for investors.

Moving forward

It’s evident that ESG is here to stay, with a growing market expectation for sustainability considerations in both our personal and business lives. Adopting positive-impact principles is essential for future success.

If you’re looking to prepare for the future of ESG, get in touch with Ross Youngs at [email protected].

[1] Preqin, “ESG in Alternatives 2024” [Source: https://www.preqin.com/insights/research/reports/esg-in-alternatives-2024?chapter=sample]

[2] Preqin, “ESG in Alternatives 2024” [Source: https://www.preqin.com/insights/research/reports/esg-in-alternatives-2024?chapter=sample]

Outsourced Models are Changing: Executive Summary

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Nick McHardy, our Head of Funds, recently shared his insights on enhancing performance by developing and improving operating models in our ‘Outsourced Models are Changing’ series. As a refresh, you can read back over those articles here:

  1. A response to marketing conditions
  2. Four value drivers that underpin an operating model review
  3. Considerations when changing your operating model
  4. Same scope of services, different outcome

Across the four articles, we covered the evolving nature of outsourced models in the private capital fund industry, emphasising the current need for fund managers and general partners (GPs) to reassess their outsourcing arrangements due to market conditions, technological advancements, and changing investor expectations.

Historically, significant adjustments to outsourcing models have coincided with market downturns, such as the post-Global Financial Crisis era. Today, challenging fundraising conditions and the emergence of alternative service providers with advanced technology and tailored services are prompting another wave of operating model reviews.

Key value drivers for reviewing and potentially changing operating models include cost reduction, operational effectiveness, risk management, and enhancing the investor experience. Fund managers have two main routes: insourcing activities previously outsourced or increasing their existing level of outsourcing.

Critical considerations in this process include regulatory permissions, expertise and resourcing, opportunity costs, systems and data strategy, risk management, relationship dynamics with service providers, contractual obligations, and the timeframe for onboarding additional services.

As we conclude the series, it’s clear that even without changing the scope of outsourced services, fund managers can achieve improved outcomes through tender processes, feedback mechanisms, and technology solutions. Ultimately, adapting outsourced models can enhance performance, reduce costs, and improve service quality, making it potentially beneficial to switch to a new fund administrator in order to achieve long-term growth.

Belasko offer tailored, full scope fund administration, focused on delivering the highest quality solutions across the entire fund lifecycle and across multiple asset classes. We’ve worked closely with our clients on developing and improving their operating models to enhance their performance. If you’d like to discuss further, get in touch with Nick McHardy, Group Head of Funds at [email protected].

Is now the time to consider upgrading from your existing fund administrator?

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In today’s evolving financial landscape, private capital fund managers and general partners (GPs) face increasing pressures to enhance performance, reduce costs, and manage risks effectively.

Outsourced models have long been a cornerstone of the private capital fund industry, offering solutions to these challenges. However, market dynamics, technological advancements, and changing investor expectations are driving a need to re-evaluate existing outsourcing arrangements.

Download our new whitepaper which addresses the pressing question: Is now the time to upgrade from your existing fund administrator?

Here, we delve into:

  • Responding to marketing conditions
  • The four value drivers that underpin an operating model review
  • Considerations when changing your outsourced model
  • Key benefits of changing your fund administrator – it’s easier than you think!

You’ll also discover why clients of ours, including Syntaxis, Riverside Capital, RTP, RCapital and Apera, have all made the seamless transition to Belasko – and why they’ve never looked back…

If you’d like to discuss how we can simplify administration solutions for your business, get in touch.

The MVP In Venture Capital

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Belasko’s Chief Commercial Officer, Ross Youngs, recently worked with the British Private Equity and Venture Capital and Association (BVCA) to support their Accelerate conference aimed at providing advice and guidance to the UK’s venture capital community, those raising funds to deploy across Seed and Series A as well as innovative start-up companies seeking funding. Both communities have something in common – they’re searching for the minimum viable product. Ben Cocoracchio, a fund formation partner at Addleshaw Goddard, was also in attendance and we’ve teamed up to share our views on the key considerations for determining the minimum viable product for an emerging venture capital manager.

Introduction

If you’d have asked what MVP was a few years ago, the answer would have been Most Valuable Player with Kobe, MJ and Lebron first springing to mind.  However, having worked with our venture capital client community, it has become clear that finding the ‘minimum viable product’ serves as a critical success factor for first time fund managers and portfolio companies.

But, as an emerging venture capital manager, what key factors should you look out for to determine the minimum viable product (MVP)?

Right-sizing your fund

A very common struggle for first-time venture capital funds (VCs) is deciding on an appropriate fund size. This is a delicate balancing act between choosing a fund size that can be realistically raised while also making sure the size is appropriate for the investment thesis.

“When right-sizing their fund, first-time VCs really need to think through the construction of their target portfolio, i.e., what cheque size they’re aiming for, how many investments will they make and how much capital they want to reserve for follow-ons” says Cocoracchio. “It’s also important to think about fundraising dynamics – can the VC raise a decent portion of the fund size at the first closing (which is crucial to build momentum)? Does the proposed fund size rule out certain investors (e.g., institutional investors find it hard to commit to smaller funds)?”.

When VCs are seeking to raise their first fund, there’s generally considered to be a minimum fund raise to power the investment platform for the duration of the investment or divestment programme.   It’s very challenging to make the economics work below a certain size of fund, particularly when it comes to covering staff overheads and operating costs over the life of the fund. But so-called “micro funds” are successfully being launched, it just takes a degree of nimbleness, creativity, and compromise.

Choosing the right jurisdiction

A reputable well-regulated jurisdiction is essential to provide comfort that an investor’s capital is adequately safeguarded by regulation, but choosing the right fund jurisdiction involves considering a multitude of different factors.

“In the emerging manager space, we typically see clients favouring the simplicity, investor familiarity and speed-to-market of Channel Islands and UK, with European domiciles being reserved for situations where particular investors demand a European structure or, if needed, to market in some of the trickier European jurisdictions”, says Cocoracchio.

At Belasko, we see a similar trend and the factors cited for this leading share are the familiarity for European and US investors, lower cost and being less administratively burdensome than popular European domiciles.

Standardising the term sheet

Raising capital is a time consuming and intensive process, often lasting between 12-24 months (or longer!). For emerging mangers in particular, any deviation from what investors perceive as “market standard terms” runs a very real risk of adding friction to the fundraising process.

In developing their MVP, emerging managers would do well not to stray too far off-piste with the terms of their fund and to really focus on what’s important to executing their fund strategy. For example, some fund terms are still fairly standard (e.g., most venture funds in the market have a life span of 10 years, an investment period of around five years and for the fundraising to be concluded within 12 months of first close).

Interestingly, new themes noted in Addleshaw Goddard’s Spotlight on Venture Capital Report highlight a range of approaches being taken by VCs when it comes to calculating management fees and carried interest. “These “premium fund terms” can have a material economic impact – but they’re of no use if they deter investors and prevent the fund from being launched”, says Cocoracchio.

Fund administration: finding the right fit

There are lot of options available to new managers to raise a fund such as:

  • Full tech automated solutions: Low-cost base but rigid self-service solution.
  • Boutique customisable administration: Experienced staff supported by technology.
  • Global administration brands: Multi country standardised service models often with centralised resources that use industry standard technology.

As a first-time fund manager, working with an experienced fund administrator can add real value to fundraising and day to day running. They can ensure the investor experience is seamless, provide guidance and support on the expected reporting and can provide the flexibility and agility to accommodate the ad-hoc nature and complexity of venture capital along with shorter deal cycles. By applying a goldilocks approach in the detailed due diligence performed when selecting your administrator will ensure you find just the right blend of cost and quality.

Building a strong team

Every fund launch requires a strong team. The venture capital market is a tight nit community and selecting an experienced team of service providers will add value the credibility to the fund offering and ensure that terms and structures are not over-complicated, and costs are carefully managed.

“When it comes to working with first-time managers, the key for us is to use our collective experience to provide the simplest solutions with the greatest impact – no over-engineering and no unnecessary (expensive) bells and whistles”, says Cocoracchio.

MVP: the foundation of venture success

The concept of seeking an MVP transcends beyond the start-up realm and becomes a vital baseline for emerging venture capital fund managers. It serves as a tangible checkpoint, ensuring that resources are effectively utilised, risks are mitigated, and paves the way for sustainable growth and for leveraging innovation from the venture capital ecosystem.

Belasko works with first time and experienced venture capital fund managers across the Channel Islands and Luxembourg. We provide tailored, full scope administration services, underpinned by expertise and technology solutions to provide the perfect MVP in venture capital. Get in touch with Ross Youngs ([email protected]) to learn more.

Addleshaw Goddard is an international law firm, whose private funds team advises a broad range of managers (from first time managers to established global institutions) on both onshore and offshore fund mandates, across all sectors including venture capital and private equity. Addleshaw Goddard’s Spotlight on Venture Capital Report and Funds Trends Report are available here.

Ross Youngs, Chief Commerical Officer, Belasko
Ben Coccorracchio, Partner, Addleshaw Goddard