Funds Europe – A legislative framework adopted by the EU last year aims to address problems that have been raised by the industry over the past three decades and which have not been solved by the Ucits and the Alternative Investment Fund Managers Directive (AIFMD) regimes. But do the new rules – which cover EuVECAs, EuSEFs and ELTIFs – go far enough?
Thommes – We have been engaged in that specific Capital Markets Union initiative from the outset, and also tried to contribute to get rid of some barriers for cross-border distribution of products. We have been very active at multiple levels. I think in the end we welcome some of the changes that have been introduced, like harmonised pre-marketing rules for AIFs across the EU, the fact that there isn’t harmonisation of the denotification procedure for both Ucits and AIFs, the removal of the requirement to have a local presence has been welcome. As always in such discussions, you would aim for more, but you have to strike a balance and you have to strike a compromise.
Overall, I think these are positive steps in the right direction, but it is clear that it’s important to monitor how effectively those rules will reduce cost and the administrative burden for cross-border distribution.
Grenner – Here in Luxembourg, we have the advantage of a large range of fund structures. You can happily choose among those to find the right one for your fund, such as an unregulated SCSP for a VC fund, for example. The majority of managers in venture capital are not necessarily looking at whether an external AIFM is appointed or not. The question for Luxembourg is, do we actually need that piece of legislation? Some countries in Europe may say yes, others no, but I am not 100% convinced that Luxembourg really requires this, at least not the EuVECA.
For the EuSEFs, I don’t know how many funds were launched in Luxembourg and elsewhere in the EU. I think it’s a good idea as such, but with more funds adhering to ESG principles in general, the question is, ‘Do we actually need something like this (EuSEFs) going forward?’
Brimeyer – We are servicing about 500 funds in Luxembourg and I believe zero EuVECA, zero EuSEF and zero ELTIF, which to me does not necessarily mean that these regimes are meaningless or that we don’t need them, but I think it clearly shows that Luxembourg has a broad toolbox which allows fund initiators to achieve their goals with the other tools that we have around, and these regimes don’t seem to bridge or to solve the problems that these particular types of funds might have. For me, honestly, those three topics are not really a topic today.
Mouftaou – It’s much more efficient and convenient to use what is existing in the jurisdiction of your choice than picking up another global European regime.
When you look at the possibilities offered by the three regimes you have listed, on paper, EuVECA should be a regime that attracts a lot of interest from the market: it offers a voluntary EU-wide marketing passport to qualifying fund managers, without the costs associated with AIFMD authorisation. Nevertheless, it is quite interesting to see that fund managers are just not choosing this fund type for their venture capital funds. It’s another demonstration that jurisdiction selection is probably the first step in the fund manager’s decision-making process, and after they look at the fund regimes.
Funds Europe – In the next 18 months, which issues will be top of the agenda for the Luxembourg funds industry?
Thommes – For Alfi as an association, it’s definitely to execute our ambition plan, which covers very broad topics.
Brimeyer – There are two big priorities. One is certainly digitalisation. The second is maybe surprising, but we have a big issue around talent and recruiting the right people to cope with the growth that we have as a financial services centre. Our success in the past has been driven by high-quality labour, but it’s increasingly difficult to source the amount of people we need to service all these structures.
Grenner – Information technology is an important topic, particularly on the alternative fund side, also because the alternative fund is growing at quite a high speed. It’s one of the major concerns of our clients – they expect technology to work efficiently so they can concentrate on other issues.
The major issue is indeed finding the right qualified staff. The fund structures here in Luxembourg on the alternative side are complex and very often you do not find the people here to service them. Not even within the EU do you find enough qualified staff. Because there is a large range of service providers, people also move from one to the next, which is understandable if demand for qualified staff is high. For the administrators, this is a considerable cost factor.
Mouftaou – Our priorities are digitalisation and to promote ESG, both internally and for our clients. Good, talented people want to work on tasks that add value to the company, to society, and digitalisation is offering that.
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