Following the introduction of AIFMD, domiciliation of fund vehicles have increasingly moved from offshore to onshore, with Luxembourg, UK and Ireland being successful EU-based fund jurisdictions. The potential impact of Brexit, if any, will certainly be positive for Luxembourg as fund managers will look to identify alternative fund domiciles to UK. Both Ireland and Luxembourg are well positioned. What have been some of the major developments that have taken place over the past 2-3 years in the domiciles you work in?
Two main regulatory changes that have occurred are (i) the Alternative Investment Fund Managers Directive and (ii) the creation of Special Limited Partnerships (SLPs). Definitely Luxembourg can stand up as an example of being part of this success as we have noted the creation of more than 1,000 SLPs in Luxembourg. The biggest change we have noticed on the local market is the creation of unregulated (although qualified as Alternative Investment Funds) fund structures compared to the quasi-exclusive creation of regulated fund structures before 2012. Which figure, statistic or industry development have you found interesting over the past year and why?
The assets under administration worldwide of PE funds have gone from $800 billion to $4.5 trillion in ten years. It is one statistic, among many others that shows the incredible growth of alternative assets. PAUL LAWRENCE, HEAD OF EUROPEAN FUNDS, ELIAN Are domiciling patterns changing? If so, what is driving this?
It might be too early to tell if there is a definite shift in the domicile of funds away from traditionally strong jurisdictions. From a UK perspective, following Brexit, there is now a catalyst for future change as the UK moves towards being a ‘third country’ under AIFMD. Dublin and Luxembourg must believe they are poised to capitalise on these events but inertia counts for a lot with managers and swift access to the EU passport may be sufficient to maintain the status quo. What have been some of the major developments that have taken place over the past 2-3 years in the domiciles you work in?
Only two years after the introduction of increased regulation in the form of AIFMD, we are already starting to see developments aimed at relaxing some of that. Luxembourg is looking to introduce the Raif (Reserved Alternative Investment Fund) and Guernsey has the MLP (Manager Led Product) both of which are funds that do not require regulatory supervision, if managed by an authorised AIFM. Which figure, statistic or industry development have you found interesting over the past year and why?
Recently, we have seen the systems capability as a key consideration in terms of new business generation for a fund administrator. There are increased due diligence requests from managers and investors looking into a fund administrator’s back-office processes and systems. This is to gain comfort that they are partnering with a technology-focused fund administrator and will be able to continually offer them efficient and timely reporting. Due diligence questionnaires are no longer a box-ticking exercise, but a detailed inspection of an administrator’s capabilities. KAVITHA RAMACHANDRAN, SENIOR MANAGER, BUSINESS DEVELOPMENT AND CLIENT MANAGEMENT, MAITLAND Are domiciling patterns changing? If so, what is driving this?
We are seeing changes in domiciling patterns from offshore to onshore. With the introduction of AIFMD, institutional investors are looking for AIFMD-compliant fund structures and we are seeing a trend in managers moving their funds from traditional offshore jurisdictions like Cayman and BVI to Luxembourg and Ireland. Innovative products with shorter time to market being introduced by domiciles like Ireland and Luxembourg are enhancing their attractiveness. This is as we await Esma’s recommendations on third-country passports. What have been some of the major developments that have taken place over the past 2-3 years in the domiciles you work in?
Introduction of new legislation and innovative fund products like the Special Limited Partnership (SLP) and the upcoming Reserve Alternative Investment Fund (Raif) in Luxembourg as well as the Icav (Irish Collective Asset Management Vehicle) in Ireland. MIFID II continues to be the most challenging of upcoming regulation. Which figure, statistic or industry development have you found interesting over the past year and why?
The way in which the industry has risen to the introduction of regulation and created opportunities. AIFMD, Fatca, CRS are clear examples and this will only continue. JUSTIN PARTINGTON, GLOBAL HEAD OF FUNDS, SANNE Are domiciling patterns changing? If so, what is driving this?
Investment funds are increasingly using the new Luxembourg SCSp for closed-ended alternative assets. The Channel Islands continue to be perceived as among the highest-quality third-country fund domiciles. Some European managers with significant EU institutional capital are turning away from Cayman in favour of Channel Islands or EU structures. Which have been some of the major developments that have taken place over the past 2-3 years in the domiciles you work in?
Luxembourg and the Channel Islands are all keenly focused on delivering their Raif product offering, which is effectively a significantly less regulated fund that transfers regulation from the fund to the manager level and offers greater future flexibility. Which figure, statistic or industry development have you found interesting over the past year and why?
In Q4 2015, investors pulled more money out of hedge funds than they put in – for a net quarterly withdrawal, and that trend continued into 2016 due to sub-par returns and intensifying losses in the face of increased volatility. Finding a true hedge fund has become more difficult. PUNIT SATSANGI, MANAGING DIRECTOR AND HEAD OF SS&C GLOBEOP BUSINESS DEVELOPMENT EMEA Are domiciling patterns changing? If so, what is driving this?
We have experienced an increasing preference for regulated funds in Ireland and Luxembourg. For offshore hedge funds, the Cayman Islands remain the jurisdiction of choice. Keys drivers are: performance; protection; tax efficiency; regulatory environments; market expertise; flexible structures; minimum complexity; and historic relationships. What have been some of the major developments over the past 2-3 years in the domiciles you work in?
Ireland Icav structures made marketing Aif and Ucits to US investors easier. New Irish Ucits regulations brought additional clarity for managers. The new SCSp limited partnership regime and Raif structures in Luxembourg are sparking interest. In Cayman, new law and signing of 27 co-operation agreements paved the way for marketing into Europe. Which figure, statistic or industry development have you found interesting over the past year and why?
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