A one-stop-shop solution for alternative investment funds
A one-stop-shop solution for alternative investment funds
Luxembourg has seen an exponential growth in demand for Alternative Investment Funds (AIFs) in recent years. Reliable structuring possibilities have been the corner stone of this growth and give Luxembourg domiciled AIFs strong foundations to further capitalise on this. The Alternative Investment Fund Management Directive (AIFMD) means that, more than just regulatory compliance, AIFs are increasingly seeking third party management companies (ManCos)/AIFMs to outsource administration obligations to, allowing them to concentrate on adding true value for their investors.
Against this background, Luxembourg-based Director, Shaun Lee talks to Thomas Fahl, Managing Director of Allegro S.à r.l., a Luxembourg based third party ManCo, AIFM and fund administrator, to discuss the integral role of ManCos and how our recent acquisition of Allegro S.à r.l. provides fund managers with a one-stop-shop solution to accessing EU investors.
Shaun Lee: Ocorian has a comprehensive fund servicing offering, can you tell us why the acquisition of Allegro is a significant move?
Thomas Fahl: Allegro and Ocorian are a really natural match. Our management company and AIFM services for institutional fund initiators and investors complement Ocorian's fund administration, depositary and corporate services – and vice versa. Together, we can provide our clients with a one-stop-shop in terms of services that are needed for an alternative investment fund structure: management and administration of the fund vehicle, underlying SPVs, GP and carried interest vehicles, providing local substance in terms of directorships, regulatory and tax reporting, plus AIF depositary services, so all in all very complimentary.
Where I see particular potential for collaboration is in private equity and real estate: this is where Ocorian has a tremendous track record, internal resources and client base to match. These are also areas of strength for Allegro, both for direct investments and fund of funds – so I expect very strong synergies in servicing alternative funds investing in these areas.
SL: We’ve had discussions about how the increased jurisdictional reach and cross-border capabilities will benefit both existing and prospective clients.
What we are seeing is that our clients operate in multiple jurisdictions, as fund initiators and their target investments are rarely located in Luxembourg. As such, having colleagues in the four corners of the globe brings us much closer to our clients and their needs, enabling us to offer a far broader range of fund services and potentially other fiduciary solutions.
TF: You’re right, in recent years, we have seen a clear trend in moving investment funds onshore. Frequently, the first step in this move is setting up a Luxembourg-based parallel investment structure to the more traditional offshore vehicle. Therefore, being able to cooperate with our Guernsey and Cayman Islands offices when it comes to combining both worlds and offering our clients a comprehensive service scope is a fantastic opportunity and a win-win situation for all our clients.
This cooperation is greatly helped by sophisticated fund technology, something Ocorian is harnessing with the financial backing of Inflexion Private Equity. This allows us to further streamline and optimise the workflows that are needed to make complex, cross-border services smooth and seamless for our clients.
SL: Covid-19 has taken much of the business world by surprise. Having said that, our crisis management plans and ways to ensure business continuity have proven their worth, as our day-to-day activity of servicing our clients has largely continued “as usual”, albeit under quite unusual conditions.
With an uncertain economic outlook for the short-to-medium term, how have fund operations been affected and has the volatility reinforced the key role of third-party management companies and AIFMs in fund management?
TF: When it comes to our funds, the actual impact is only starting to show now. Initially transaction activity continued almost as normal, especially where the acquisition process had been in fairly advanced stages already. We do expect a certain slow-down in new acquisitions going forward, at least until a level of 'new normal' is established.
We also expect that as part of the 'new normal', the industry will focus on flexibility, enabling technology and to have a sharp eye on costs. This is where third-party management companies and AIFMs will continue to play a key role, being able to provide the necessary regulatory licenses, operational platform and expertise for an efficient fund set-up.
SL: We have all seen increasing complexity of administration requirements and evolving demands from our regulators. How has that impacted you in Luxembourg?
TF: In Luxembourg, we have been operating in a relatively heavily regulated environment since Allegro's inception in 2008. For sure, the complexity of regulation and the demands put on management companies and AIFMs in terms of substance and manpower for regulatory compliance have increased drastically over the last years. However, this is also one of the areas where I expect our business to benefit immensely from being part of a large organisation such as Ocorian. We are now able to leverage on central solutions for new regulations which are often applicable across various jurisdictions, such as DAC-6 or AIFMD 2.0.
SL: We have seen an increase in interest in Luxembourg based third party management companies from UK fund groups in the wake of Brexit as they work to maintain access to European investors. Is this a trend that you have also seen?
TF: Absolutely. Despite the fact that Covid-19 seems to have replaced Brexit as the main topic on news channels, the underlying problem remains for UK fund groups: how to ensure access to the continent’s vast number of investors. Those managers who do not have their own presence within the EU - especially the smaller to mid-sized private equity and real estate houses - are likely to lack the resources necessary to establish such presence. In that case, it is much easier to engage with a local, third-party AIFM who already has the license and operational platform in place to efficiently market funds to EU institutions.
Bespoke fund solutions
With enhanced fund administration and fiduciary service capability, we enable fund managers to leverage our experience and cross-border functionality so they can focus on adding value for their investors. Together, Ocorian and Allegro offer a one-stop-shop for fund groups so they can maximise the benefit of centralising their administration to create economies of scale. From dedicated depositary teams to specialist green energy expertise, we'll work alongside you to maximise your fund's efficiency.
To discuss how we could support your fund's success, get in touch with our team via their profiles below or to learn more, click here.