Funds Europe talks to senior executives about Brexit, funds industry developments and changes to the law. Plus, essential figures about their businesses.
AIDAN CONNOLLY, CHIEF EXECUTIVE OFFICER, ALTER DOMUS
What impact do you anticipate Brexit will have on your business?
The shock of the Brexit vote has somewhat abated, though perhaps not the frustration with the political ineptitude that got us there. While politicians have plumbed new depths of incompetence, we at Alter Domus have been positioning ourselves for when Brexit finally arrives. Like everyone, we hope we’ve got it right.
What figure, statistic or industry development have you found particularly interesting over the past year and why?
Increasing regulatory pressure has become a significant determinant over the past 12 months, both in the wake of GDPR and with the need for ever-more transparency in financial undertakings. We welcome the opportunity to demonstrate that our practices are transparent, sound and compliant, but the additional effort this requires costs money. It threatens to make fund structure support into a much more costly undertaking – the very opposite of what it should be.
Alter Domus
15 Boulevard F.W. Raiffeisen
Luxembourg 2411
+352 4818 281
[email protected]
www.alterdomus.com
Country of origin: Luxembourg
When founded: 2003
Number of employees: 2000
Total assets under administration: $505 billion
Total assets under administration in Europe: $136.5 billion
Senior executives: Aidan Connolly (Luxembourg), CEO; George Rologis (Nicosia), CEO; Dimitri Davreux (Chicago), chief human resources officer
Prevalent legal structures: Sif; Raif; SCSP; SCA
Main external regulatory reporting provider: N/A
DAVID RHYDDERCH, GLOBAL HEAD OF REGULATED PRODUCT, APEX GROUP LTD
What will be the major regulatory or legislative developments of 2019 that will impact the domicile you work in and what effect will those changes have on your business?
The increased adoption of outsourcing is continuing apace and will set a general theme for years to come. Broadly, as we move from a period of new regulation to one of implementation and ongoing supervision, we see specific sub topics and risks becoming the focus of regulatory and legislative development. Specifically, operational resilience and exposure to IT and cyber risk – outsource service providers will need to demonstrate they both understand their risk exposure and have capability to deal with potential disruption. In addition, technology advancements and the subsequent regulations to protect personal data such as GDPR are also impacting businesses. Robust procedures are paramount, and although technology in the service space is increasingly automated, that expert compliance resource is required for escalation and expertise.
What impact do you anticipate Brexit will have on your business?
Given our global reach and significant presence in Ireland, Luxembourg and the Channel Islands, we see limited direct impact for our business. However, there are broader implications around compliance with specific European legislation (GDPR) and the ability to share data between service locations.
What figure, statistic or industry development have you found particularly interesting over the past year and why?
There are two key areas that spring to mind. First, the growth of private credit and disintermediation of traditional bank lending models is growing at a pace not seen since the earlier years of the hedge fund industry. Assets under management are predicted to grow to more than $1 trillion by 2020. Secondly, the importance of environmental, social and governance (ESG) in investing – ESG investments now account for over $20 trillion, around a quarter of all professionally managed assets, and is really driving change in the space as investors make decisions based on ESG ratings and transparency in this area
Over 30% of all funds launching in Europe are launching through European ManCos. The growth in this sector has continued to impress and the capabilities of these SuperManCos is shaping the industry and accelerating greater distribution models.
Apex Group Ltd
+1 441 292 2739
[email protected]
www.apexfundservices.com
Country of origin: Bermuda
When founded: 2003
Number of employees: 3,000
Total assets under administration: $532.35 billion
Total assets under administration in Europe: $267.47 billion
Senior executives: David Rhydderch (London), global head of regulated product; James Burke (Dublin), head of Apex Europe; Sonja-Maria Hilkhuijsen (Luxembourg), global head of compliance and data protection
Prevalent legal structures: N/A
Main external regulatory reporting provider: N/A
JUSTIN PARTINGTON, GROUP HEAD OF FUNDS, IQ-EQ
What will be the major regulatory or legislative developments of 2019 that will impact the domicile you work in and what effect will those changes have on your business?
The substance requirements and governance enhancements including Luxembourg circulars 18/697 and 18/698 along with the new Cayman anti-money laundering rules and economic substance rules in the Channel Islands are all major developments.
Following the global scrutiny around corporate tax arrangements and tax avoidance, companies including funds with a presence in those jurisdictions need to be able to demonstrate that those companies are managed and directed by an appropriate number of skilled employees with a physical presence and sufficient documentation and governance to evidence that the companies are being run from those locations.
IQ-EQ has expanded its service offering around AML and substance to help clients cope with the new requirements. We have also added further to our leadership teams and already strong governance model.
What impact do you anticipate Brexit will have on your business?
Brexit, in whatever form that may take, has accelerated the trend towards EU domiciles including Luxembourg and Ireland for private markets funds. A number of clients have set up their own substance offices in those locations, which are often centred on an AIFM for passporting into the EU. Interestingly, in our recent Private Equity Outlook survey, 72% of respondents indicated that they are not considering redomiciling their fund as a direct impact due to Brexit. And so, while the AIFMD is causing some fund managers to consider an EU-domiciled fund, Brexit is having less impact on the fund domicile and more impact on fund distribution rights due to the potential loss of an EU passport for the UK.
What figure, statistic or industry development have you found particularly interesting over the past year and why?
In the same Private Equity Outlook survey, the respondents noted an adoption rate of the Institutional Limited Partners Association reporting standards at 60%. This is a much higher figure than has been reported in recent years and demonstrates that this standardised data format has now reached the tipping point of widespread industry adoption. An agreed data standard would be highly beneficial for the industry to standardise data models, and automate the interaction between data systems between fund administrators, fund managers and investors either in traditional back-office systems or new distributed ledgers.
IQ-EQ
412F, route d’Esch
L-2086 Luxembourg
+352 466 1111
www.iqeq.com
Country of origin: Luxembourg
When founded: 1998
Number of employees: 2,450
Total assets under administration: $400 billion
Total assets under administration in Europe: n/d
Senior executives: Serge Krancenblum (Luxembourg), group executive chairman; Mark Pesco (Jersey), group chief executive officer; Justin Partington (Luxembourg), group head of funds
JONATHAN JENNINGS, GROUP HEAD OF INSTITUTIONAL CLIENT SERVICES, JTC
What will be the major regulatory or legislative developments of 2019 that will impact the domicile you work in and what effect will those changes have on your business?
In terms of the Channel Islands, recently introduced economic substance legislation is significant. Both Guernsey and Jersey have an assumption towards substance where fund management is concerned anyway, but the new rules will mean managers will need to look carefully at their structures and we anticipate an uptick in workflow supporting managers as a result.
What impact do you anticipate Brexit will have on your business?
Our multijurisdictional reach means we are well placed to help managers navigate Brexit, regardless of the outcome. Private placement through Jersey and Guernsey is working well for managers that opt to be outside of the EU, whilst through our Luxembourg office, we have a fully-fledged one-stop shop for managers wanting to structure their funds in an EU environment. Having a ManCo capability in both Luxemburg and Guernsey gives managers real optionality too.
What figure, statistic or industry development have you found particularly interesting over the past year and why?
The real estate market is interesting. Rules proposed last year around capital gains tax for overseas investors threatened to impact the appeal of UK commercial real estate, but the outcome has been pragmatic and we’ve actually seen strong ongoing appeal for UK investment, including some big-ticket funds. We’re also anticipating sustained interest in pan-European real asset investment in the coming 12 months, with investors allocating more to the asset class in the long term.
JTC
JTC House, 28 Esplanade City
St Helier JE4 8PB
Jersey
+44 1534 700 000
[email protected]
www.jtcgroup.com
Country of origin: Jersey
When founded: 1987
Number of employees: 700
Total assets under administration: $70 billion
Total assets under administration in Europe: $65 billion
Senior executives: Jonathan Jennings (London), group head of institutional client services; Mark Grenyer (Jersey), head of funds, Jersey; Jorge Fernandes (Luxembourg), managing director
KAVITHA RAMACHANDRAN, SENIOR MANAGER, BUSINESS DEVELOPMENT AND CLIENT MANAGEMENT, MAITLAND
What will be the major regulatory or legislative developments of 2018/19 that will impact the domicile you work in and what effect will those changes have on your business?
GDPR and the CSSF circular 18/698 on the authorisation and organisation of management companies.
What impact do you anticipate Brexit will have on your business?
It has had a very positive impact on our business and we have assisted and onboarded UK managers by being appointed as their third-party AIFM to enable them to continue to manage and distribute an EU range of funds. In the UK, we continue to see an increase in the demand for UK-domiciled funds which continue to service the domestic market.
What figure, statistic or industry development have you found particularly interesting over the past year and why?
The continuous increase in demand in ESG investing and products.
Maitland
58, rue Charles Martel
L-2134 Luxembourg
[email protected]
www.maitlandgroup.com
Country of origin: Luxembourg
When founded: 1976
Number of employees: 1,100
Total assets under administration: $220 billion
Total assets under administration in Europe: $38 billion
Senior executives: Steve Georgala (London), CEO; David Kubilus (London), head of business development, ManCo and PERE; Kavitha Ramachandran (Luxembourg), senior manager, business development and client management
Prevalent legal structures: UK Ucits; Luxembourg Sif ; UK Aifs; Guernsey Aifs
Main external regulatory reporting provider: Kneip
CLAUDE-JOSEPH PECH, HEAD OF BD & CRM, PICTET ASSET SERVICES, BANQUE PICTET & CIE SA
What will be the major regulatory or legislative developments of 2018/19 that will impact the domicile you work in and what effect will those changes have on your business?
We see ongoing changes focused on transparency and fairness to the end investors of investment funds. Cost, performance, suitability, distribution are and will be subject to stricter regulatory scrutiny. So, I do not see one in particular that will impact Luxembourg-domiciled funds specifically.
What impact do you anticipate Brexit will have on your business?
There is still a lot of uncertainty around the Brexit implications. Despite a transitional period, many UK-based firms who have a core business in Europe prepare for the loss of passporting rights and have plans to establish a presence in the EU, and may also think of establishing Luxembourg or Irish funds from cross-border distribution as the UK Ucits (Oeics) may no longer be adequate.
Pictet Asset Services offers ManCo/AIFM services to third-party funds, in addition to custody and fund administration, and is very well placed in assisting UK-based investment managers to have the right set-up post-Brexit in order to distribute their products in Europe or any other countries where the Ucits label is recognised.
CLAUDE-JOSEPH PECH, HEAD OF BD & CRM, PICTET ASSET SERVICES, BANQUE PICTET & CIE SA
Despite the success of ETFs, pressure on asset management in general, I am impressed by the continuous growth of assets held in Luxembourg funds, still the second-largest fund centre after the US. AuM [assets under management] are at more than $4 trillion today (less than $1 trillion in 2000 when I joined the industry). So fund administration is still a dynamic industry and not subject to the commoditisation we have seen in the custody arena.
Banque Pictet & Cie SA
Route des Acacias 60
Geneva 73
1211
Switzerland
+41 58 3232323
group.pictet
Country of origin: Switzerland
When founded: 1805
Number of employees: 4,300+
Total assets under administration: $249.77 billion
Total assets under administration in Europe: $235.6 billion
Senior executives: Marc Briol (Geneva), CEO, Pictet Asset Services; Claude-Joseph Pech (Luxembourg), head of BD & CRM – Pictet Asset Services; Michèle Berger (Luxembourg), CEO – FundPartner Solutions (Europe) SA
Prevalent legal structures: Luxembourg Ucits; Luxembourg Sif; Sicav – Sif; Raif
Main external regulatory reporting provider: n/d
US BANK GLOBAL FUND SERVICE
US Bank Global Fund Service
24/26 City Quay
Dublin D02 NY19
Ireland
+353 1523 8000
www.usbfs.com/usbfs/alternative-investmentsolutions/european-fund-administration.aspx
Country of origin: Ireland
When founded: 2006
Number of employees: 140
Total assets under administration: $1.1 trillion
Total assets under administration in Europe: $33 billion
Senior executives: Linda Gorman (Dublin), CEO; Ken Somerville (Dublin), COO; Charles Gillanders (Dublin), head of product development
Prevalent legal structures: Cayman Master Feeder; Irish QIAIF (Icav); Ucits; Delaware LLC
Main external regulatory reporting provider: AQMetrics
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