Alternative fund service providers employ a “little less than 4,000” people in Luxembourg and collectively the “industry contributes more than €1bn” in taxes to the grand duchy’s public coffers each year, according to , who is group executive chairman at IQ-EQ, a provider of corporate, funds and family office services.

The was founded as the Luxembourg International Management Service Association in 2004 to give the sector a voice. It switched its name two years ago, “to reflect really what the organisation was about,” explained Dundon, global relationship leader at Alter Domus, a provider of fund administration and fund management services focussed on the alternatives sector.

Need for specialist organisation

Dundon said the L3A is slightly different from larger trade associations, such as the Association of the Luxembourg Fund Industry and the Luxembourg Private Equity and Venture Capital Association, because those “organisations are principally aimed at the investment manager, rather than the service provider.”

“So a large part of what we’re trying to do as an organisation is ensuring that we’re all talking together, ensuring that we put together business models that are efficient, and that can respond to [the recent high] level of growth, but also to lots of regulatory challenges out there. You know, quite rightly, we’re in the spotlight, in terms of politicians or regulators. They want to ensure that the industry is properly controlled,” Dundon stated during the interview. “As service providers, we want to ensure that we’re [complying with regulations] in a very, very accurate and efficient way. And there’s all kinds of logic and benefits to discussing that collectively, as service providers, rather than all trying to go off and do our own thing.”

Tackling practical challenges

For instance, the L3A has projects on more efficiently complying with anti-money laundering and know-your-customer rules. “Another example would be bank accounts; it’s increasingly difficult to open bank accounts,” Dundon said. The group has been “working together to find easier ways for the banks to work with us on that, which will ultimately help our end clients.”

Krancenblum observed that banks make more money with client lending or managing liquid assets. They are less keen on taking on alternative funds because, “especially in private equity or real estate investments, you only have a few flows of money--when you make the investment, during the investment [there are] very few, and after, when you dispose of the investment. Which means that it’s a lot of work, also a lot of responsibility in terms of know-your-customer and AML, and some banks which used to do that activity and provide those service do not do it anymore.”

The L3A has been drafting “a charter between the different members of the ecosystem--the banks, the notaries, the lawyers, the alternative asset administrators--in order to facilitate everything and to make sure that there is still going to be banks providing the service,” stated Krancenblum. He said that fund administration outfits are aware that “we have a very important responsibility for the financial market in Luxembourg, and we invest a lot in all the tools for compliance.”

More broadly, the L3A runs several working groups, on topics from talent to tax, and advocates for the sector with government and regulatory bodies, on current and proposed rules.

Freshly appointed president

Krancenblum reported that Dundon was elected to replace him as president unanimously at the organisation’s annual general meeting last month. “I must tell you Alan was on the board of directors before I arrived 10 years ago,” Krancenblum recounted during the interview. “And the thing is, he has been one of the persons instrumental to everything that we have done so far, so he was definitely the right person to become the new chairman.” (Dundon said the comments made him blush.)

“The alternatives industry here [in Luxembourg] is one that is growing exponentially, in the last five years in particular,” when double-digit growth has been logged, Dundon noted, “and the continued forecast is for growth in this industry.” That means growth for the L3A, as well.

Expansion plans

Traditionally, association members had been independent service providers. That has been expanding in recent years to include banks. Today the L3A has 20 or so members, reflecting about 60% of the sector’s total marketshare. “There will be a real push in the next 12 to 18 months to increase that membership base, to broaden it out,” Dundon said. “We’ve got some aggressive targets there.”

Dundon stated: “One of my priorities is to increase not only the membership base, but also get more messages out into the industry around the sort of work that we’re doing. Our focus is all around making sure that the alternatives administration industry in Luxembourg is efficient, fit for purpose, is able to react and respond [to] the increasing growth that we’re going to see in the business. We’re going to have to be a lot more vocal out in the market.”

This interview is part of the Delano finance newsletter. For the latest Luxembourg financial sector news, analysis and events, subscribe .