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Supplements » Luxembourg Report 2021

Specialist fund admin roundtable: Technology and the human touch


Funds Europe – And if things do go wrong it becomes a case of damage mitigation. How can one rectify the situation hypothetically?

Heinen – In times of GDPR, there can be huge challenges, like assessing criticalities and informing data subjects and so on. Today, you have to do the right thing. You cannot deprioritise it because you are busy. It is too critical.

It’s right that we have these regulations, and it is in everyone’s interests, including our clients, to do the right thing. It’s not a case of receiving information about best practice and deprioritising it because you’re too busy. You can’t afford to as a business, as this is critical.

Funds Europe – There have been many appointments in recent years to specialist fund administrators of people who previously worked at large custodians predominantly focused on the Ucits funds sector. Is this a coincidence? If not, what is behind it?

Smith – There are two elements to this. Firstly, why would specialist fund administrators want people from big custodians? Second, why would anybody from a big custodian want to go to a specialist fund administrator?

I think when people are looking for talent they go to the usual places, so they go and pick people from their competitors. Then if they don’t find who they’re looking for there, they start looking somewhere else, where the people have similar skills.

When specialist fund administrators are expanding, they need managers who are familiar with the challenges. They could hire people from a global organisation with similar expansion challenges but it’s easier if you hire people who have some level of experience in specialised fund administration as the custodians do.

As for why people who were working for custodians go to join specialist fund administrators − it’s the challenge of taking a skill that you have and seeing if it’s transportable to another industry, and seeing if the ‘time-honoured ways’ of doing things that are ingrained in you can be successfully exported to another line of business. You have to be careful, because you assume that they can be, and maybe most of them can, but 20% of them can’t.

Brimeyer – If you look at where the growth has been over the last few years, it has mainly been in private markets, so it’s no surprise that you have talented people coming out of the Ucits environment looking for the next challenge − they go where the growth is and where the opportunities are. This is a natural trend. On the other hand, I think our industry, the alternative asset space, is on a rapidly maturing track, and I think Ucits went along this track ten or 15 years ago, so it’s about bringing its skills into our world and using them effectively.

Godfrey – I saw Ucits go through rapid change, driven mostly by investors and regulators. There is going to be more demand on us to provide real-time and meaningful information to the investment community. We might not see the regulation come as swiftly and in such a condensed period as we did on the Ucits side, but this is our opportunity to get on the front foot.

There’s $3.5 trillion in global liquid assets under management (AuM) and $7.1 trillion in private capital AuM. We know where the growth is, so it’s a very exciting place to be. What I found out very early on is that this industry is where the ‘real’ action happens; we’re so close to the deals.

Pesch – I am very proud to be surrounded by such bullish ambassadors and specialised providers of the private markets and PE/VC industries. You absolutely said it, the growth is there. When you look at, for example, the special limited partnerships (SCSp) in Luxembourg, more than 4,300 active structures in only seven years and more than 1,160 RAIFs in four years, so it’s absolutely where the trend is moving. Also, in my past when I was still working in the fund administration business, eight projects out of ten were already in the ‘alternative’ space, so the traction is there.

From a more opportunistic perspective and in the context of the AIFMD implementation (2013), while Ucits depositary banks/custodians were beefing up their alternative operations, PSFs (non-banks) were also able to deliver depositary services to PE/VC funds (excluding financial instruments). This unique opportunity represented a completely new business model which had to be ‘fed’, inspired by experts from the field, who certainly had to adapt to the specificities of the PE/VC asset classes, but it really made sense to take the experience where it was.

Mas – Depositary is a part of the alternatives space, so that’s where you can find a lot of common skills with the large custodians. I think that’s where the growth is at the moment, and I also think the alternatives class in itself is very interesting.

Heinen – It also goes the other way around. We have seen our staff catch the interest of the large custodians, because the large custodians are trying to expand into the alternative space, as that is where the growth is. But as their skills are only on the Ucits side, they have a lack of understanding of how the alternatives world really works. We are a perfect breeding ground for talent, as our staff are in the ‘trenches’; they come across different deals and asset classes and are quite close to the action.

Fessey – There’s a whole range of reasons why private assets have grown very significantly over the last 20 years, and asset managers, custodian banks and non-bank administrators are responding to that trend. That creates need and opportunity in services, and we see people moving from one sector to another to fulfil that need.