Thomas Fahl, managing director at Ocorian Fund Management in Luxembourg, talks about launching a fund in lockdown, the responsiveness of Luxembourg’s authorities, the benefits of using a management company and the prospects for 2021.
Despite the world shifting more in the last year than it did in the 15 before that, Thomas Fahl, managing director at Ocorian Fund Management in Luxembourg, admits that business has largely continued as usual. “The nature of what we do is such that it meant we spent a lot of time on the phone with clients, but it is something that we’ve quickly added video to.”
Even when the world was locking down gradually, it took a while for the new reality to emerge. “There were a lot of products, including a new fund, that we were in the process of setting up,” Fahl says, “and there was a slight shock in terms of figuring out how we would do this under lockdown circumstances, but we were able to continue, and we did. We were closing deals between March and May. Then came the lull, and people began to realise that the Covid-19 situation was here to stay.”
Pandemic or no pandemic, Luxembourg, remains a good place for funds to domicile. A few years ago, Fahl says, the question was whether to domicile there or in the Netherlands. It is a question that he says is no longer even asked.
A better one, he admits, is what the turning point was. He hesitates, thinks, then says: “This is clearly linked to the fact that our legislator and the regulator are listening to the industry. When the need for an Anglo-Saxon style fund model was flagged, the Luxembourg limited partnership was quickly introduced. That, in combination with the regulatory framework of the reserved alternative investment fund (RAIF) made the Luxembourg fund offering much more attractive. The RAIF is an extremely popular legal framework because you skip the regulation part of the fund. That element comes in through the fact that the vehicle needs a regulated manager and depositary.”
There is a critical mass of people and expertise in Luxembourg, and a good chunk of the industry is taken up by firms such as Ocorian. Fahl obviously leans towards the benefits of using a management company.
“What funds need to consider,” he says, “is how much business they’re looking to do here and what their asset base is. They also need to think about what’s needed to move people over. To set up the infrastructure on your own and to get all the necessary licences is a process that takes six to 12 months. And while you’re doing that, you need people on the payroll, even if there’s not much for them to do while they wait.”
As much as anyone can, Fahl is looking to what this year may bring. “It’s going to be interesting,” he says. Ocorian, which merged last year with Estera, has made no secret of the fact that the fund business will be a big driver of its growth, and it is investing heavily in people, systems, and IT.
Fahl believes that things will get better in the wider market. “For our sector and business, there’s a bit of light at the end of the tunnel with what we see in the stock markets. I also expect that we’ll continue to have new players discovering Luxembourg, whether that’s fund managers setting up or teams that spin out of existing ones. As a company, our existing clients continue to be a source of organic growth.”
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