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Third-party AIFM providers are ‘driving exponential growth’ in alternatives

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Third-party AIFM providers are ‘driving exponential growth’ in alternatives

Growing expertise in Alternative Investment Fund Managers (AIFMs) is helping to drive exponential growth in Europe’s alternative investment funds market, says Ocorian, the global diversified financial services group.

Data shows the compound annual growth rate of assets under management with third-party Irish AIFMs is forecast to increase by 14.2% a year until 2025 while total net assets** in Luxembourg funds is around €5.3 trillion.

Ocorian says key drivers for this growth are both jurisdictions’ ease of doing business, range of fund structuring offerings, and their sophisticated fund services sector. The new Irish ILP structure is now also offering investment managers and investors a flexible partnership alternative to the hugely popular Luxembourg SCSp. These developments and continued strong growth have made the EU AIF market increasingly competitive and with that regulatory scrutiny over fund governance has intensified. This is where third-party AIFMs can provide real benefits to investment managers who want to raise capital in Europe.

Increased regulation has placed a significant administrative burden on AIFs and many alternative investment managers have appointed third-party management companies (ManCos) as a result.  

Stephen Hickey, Head of AIFM, Ocorian said: “Luxembourg, and more recently Ireland, are viewed as the locations of choice for AIFs wishing to distribute across Europe. Both jurisdictions have experienced exponential growth in demand for AIFs in recent years and the hope is that the new Irish ILP structure will provide a real alternative AIF vehicle to the Luxembourg SCSp and provide investment managers and investors a degree of flexibility. 

As the alternative assets industry continues to evolve; sophisticated, specialised, and experienced AIFMs are ideally placed to provide the operational efficiencies and governance managers need to remain competitive. AIFMs who are specialised in alternative asset classes in the private markets can align with investment managers and help those managers successfully raise capital through pre-marketing and the use of the European distribution passport.”

One of the key benefits of appointing a third-party AIFM for investment managers is optimising capital raising by using the AIFM’s European marketing passport and optimising fund manager time by allowing them to concentrate on managing the alternative investment fund’s (AIF’s) assets.

They also minimise operating costs for investment managers and fund promoters and provide access to expertise on governance and compliance, as well as risk and accounting specialists and experts in sectors such as private equity and real estate. Using third-party AIFMs also has the added benefit of increasing speed to market and provides investment managers with access to knowledge on fund structuring, regulatory wrappers, marketing requirements, tax transparency, legal regimes and service provider synchronisation.

They can help mitigate risk and reduce liability exposure across a wide range of risk areas including investment risk, market risk and operational risks. The fund initiator is also not subject to AIFMD remuneration rules and can continue to incentivise deal teams.

Ocorian fund services

Ocorian was recently granted three new licences by the Central Bank of Ireland, making it one of just a few non-bank providers based in Ireland able to offer a full range of services for a wider range of clients. It has licences covering Alternative Investment Fund Management (AIFM) services, fund administration services, and real asset depositary services.

As a private capital specialist and global leader in providing AIFM, fund accounting & administration, and depositary services, Ocorian can provide asset managers with a quick, cost-effective, and compliant way to realise their fund projects. Ocorian takes care of the regulatory and operational burden of establishing and administering our clients’ alternative investment funds (AIF) throughout their lifecycles.

Ocorian’s third party ManCo/alternative investment fund management (AIFM) services based in Luxembourg and Dublin provide a quick, cost-effective, and compliant way to realise fund projects, including cross-border distribution. Its expertise spans all alternative investment asset classes including private equity, venture capital, infrastructure, real estate, debt, as well as funds of funds.

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