The last week of June and the first week of July saw two interesting fund services focused conferences in Luxembourg: 0100 conference on Collecting Executive Insights from European Mid and Large Cap Private Equity and Knect365 UCITS & AIFM Luxembourg conference.
Anja Grenner, Director in Funds in our Luxembourg office, moderated a panel discussion about fundraising in the first and joined the panel on Launching in Luxembourg in the second conference. Here's a brief summary of the main discussions and findings from both panels.
0100 Collecting Executive Insights from European Mid and Large Cap Private Equity - panel discussion on fundraising
- Particularly smaller and medium sized US funds do not offer their funds to European investors anymore due to difficulties imposed on them by the Alternative Investment Fund Management Directive (AIFMD). This is particularly a problem for globally investing funds of funds.
- One of the largest challenges today are co-investment programs run by funds, letting their investors directly co-invest in the target companies and thereby negotiating better terms than via the investment through the fund.
- Similar challenges pose co-syndications, i.e. loan syndications, where not only the classic loan syndication agents (traditional banking institutions) intervene, but also private equity funds.
- The development of permanent data rooms, whereby funds provide investors permanent access to their data, was seen as a sign of the industry becoming more investor-driven.
- Lighter due diligence processes for repeat investors and specific terms for different classes of investors were seen as other signs of the increasing power of investors.
- At the same time these developments also show a growing concentration of fund managers on a select number of investors, instead of accepting any and all investors.
- Environmental, Social and Governance (ESG) factors were confirmed by all participants as now an established part of the selection process when investors choose their fund investments. ESG definition, reporting standards and harmonisation across the industry will likely become an important topic in the next year.
Panel participants included:
John Holloway, Director Institutional Asset Management @ European Investment Fund
Gilles Collombin, Partner, Head of Investor Relations @ Charterhouse Capital Partners
Oliver Kneschewitz, Principal @ Siemens AG Private Equity Asset Management
Moderator: Anja Grenner, Director Funds Alternative Investments @ Intertrust Luxembourg
Knect365 UCITS & AIFM Luxembourg: Navigating the European regulatory framework with successful investment, distribution and operational strategies – panel discussion on Launching in Luxembourg
- While the outlook on UCITS was deemed rather dull, it was clear the alternative asset industry, particularly in Luxembourg, is thriving.
- The micro-economic environment, i.e. low interest rates, and Brexit developments were deemed as main recent factors contributing to the particular success of Luxembourg in becoming the hub for alternative investment funds – and the reason for pension funds and other institutional investors to turn to alternative investments.
- These latest trends add to the arrival of Base Erosion and Profit Shifting (BEPS) and AIFMD, which had already lured European investors to fund jurisdictions within Europe.
- However, the developments also pose a new challenge for Fund managers: choosing the right service provider. Particularly in Luxembourg, the choice between more than 150 administrators, almost 70 depositaries and an ever-growing number of 3rd party Alternative Investment Fund Managers (AIFMs) is not an easy one. Thorough investigation and Due Diligence remains key – unless one wants to "kiss a lot of toads to find the prince".
Panel participants included:
Josée Lynda Denis - Independent Board Director – Strategic Advisor, Nord Est Asset Management SA
Anja Grenner - Director Funds, Intertrust Luxembourg
João Teixeira - CEO, Log Capital Management
Paul Carr - CEO & Conducting Officer, East Capital Asset Management S.A
Thierry Klaa - Conducting Officer, European Capital Partners
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.