Lessons learnt from Jersey's Innovation Fund as Guernsey launches Investment Fund

Monday 19 February 2018

Following the launch of the Guernsey Investment Fund, one of the island's most senior politicians has assured the public and investors that lessons have been learnt from elsewhere.

Deputy Lyndon Trott told Express that “we have looked across the globe to work out what will be the best practice for our model" and that those behind the Investment Fund are “determined to get this right" and said they have been "looking closely at similar models in other jurisdictions where the successes haven’t been as obvious."

The Investment Fund was announced on Friday when it was described as "a fund offering investment opportunities to island innovators and entrepreneurial companies will be an 'economic enabler' for Guernsey."

Immediately, comparisons were drawn with Jersey's Innovation Fund.

Jersey's Fund was set up with a £5million investment pot in 2013. Six companies received funding –some of which enjoyed significant success, with one, BabyHub, gaining national awards. But it later emerged that one, software firm Logfiller, would never be able to pay its £500,000 States loan back.

Pictured: BabyHub which received funding from the Jersey Innovation Fund

The Jersey Fund's collapse prompted three reviews into its operations, public questions over whether the government should have ever become involved in private enterprise, and even a criminal investigation, which remains ongoing.

According to the most recent figures, the States of Jersey are still waiting for £1.4million of their money to be repaid.

Unlike Jersey, the Guernsey Investment Fund will be an equity rather than a loan model, meaning that the investment will equal a stake in the business. Politicians and civil servants will also be kept out of decision-making.

The Guernsey Investment Fund will invest in projects and businesses which have a Bailiwick of Guernsey focus, or which may benefit directly or indirectly the development of the island. Its aim is to deliver long-term capital growth to its shareholders, which includes the States of Guernsey which has committed to investing up to £25m. The Policy & Resources Committee, which has delegated authority over the States of Guernsey’s Investment Reserve, agreed to invest its £25m on the basis that Ravenscroft would secure additional funding from the private sector. Millions of additional investment has now been raised. 

The Deputy Chief Minister said that money will be invested wisely with big returns for Guernsey if the investments turn a profit:

“We have looked across the globe to work out what will be the best practice for our model, and remembering that Guernsey has an International recognised expertise in this area, we have found a very robust system.

"No public servant - whether that be politician or civil servant - will play any role at all in making decisions, that will all be down to the board and the investment managers.

"We are not setting up a bank, there will be no loans. All of the funds investments will be equity participation - rather than lending we will be taking a slice of the business. Importantly, if things go wrong with an investment the downsides are no worse than if we were giving loans, but the upside is massive in comparison.”

Pictured: Deputy Lyndon Trott

Deputy Trott said due diligence has been done and the board will be "very careful in making our investments."

"The professional investment managers are obviously skilled in assessing the risks and investigating the background of any pitch - it is their day jobs after all - but that won’t be sufficient either, they will then have to persuade the independent board that the idea is worth investing in as well. From a Guernsey community perspective, this will be real people making real decisions in real time, and that is how you would expect things to be done in the private sector elsewhere, so that is how we will be doing it.”

News of the Investment Fund has been well received so far with John Clacy, the Vice Chairman of the Guernsey branch of the IoD, commenting:

"The IoD is greatly encouraged to see the launch of the Guernsey Investment Fund. We hope that this is the start of a programme of investment by the States of Guernsey to help stimulate economic growth and innovation. 

"As highlighted in our recent survey and at our 2017 convention, the need for infrastructure spend and reinvestment into the local economy is clear and immediate."

Deputy Trott agreed there is "sufficient demand for this product" and added that he can say "with certainty that the States’ door will remain open if the case could be made. Do I think the States will stop at this £25m.? No. Who knows, but in a decade or so I can see the Guernsey Investment Fund having a seed investment in a business in the same levels of success as Facebook, Amazon or Apple - all of those had to get funding at the start, and the Guernsey Investment Fund will be a better source of capital for innovative businesses than anywhere else.”

The P&R Vice President described the launch of the Investment Fund as a “seminal event” for Guernsey saying there are “huge benefits on the horizon for the Bailiwick of Guernsey’s Economy."

The President of the Committee for Economic Development, Deputy Charles Parkinson, said:

"A well-managed investment fund has significant potential to help grow the economy. Our need to diversify is well-understood, and the Guernsey Investment Fund can be a key enabler to meet that objective. We cannot stand still; we must innovate and we must support those with the ideas – but not the necessary funds – that can benefit the Bailiwick for years to come."

Pictured: Deputy Charles Parkinson