The growth of the hedge fund sector in Luxembourg since the entry into force of the AIFM directive has been a source of inspiration. The latest to enter the market is the American company CSC, whose Luxembourg subsidiary CSC Luxembourg Services obtained the necessary authorisations from the Luxembourg financial regulator CSSF in July as a fund administrator and custodian in the field of alternative funds.
CSC is an American company that has been active for 120 years and is family owned. In recent years, the group has decided to expand its activities beyond the US to Asia and Europe. Its European activities were launched in 2017 in Luxembourg, Ireland and the UK in the field of capital markets and more specifically in securitisation. Fund administration and depositary activities in the hedge fund sector were also developed from Ireland, the Netherlands and the grand duchy. Yves Cheret, managing director and head of funds services Luxembourg, and Pierre Mifsud, managing director depositary services Luxembourg, joined the group in April and are responsible for developing these activities, which are housed in a company called CSC Luxembourg Services, which reports to the group’s Global Financial Markets branch.
A long-term vision
CSC Luxembourg Services targets international hedge fund asset managers who choose to administer their structures in Luxembourg and supports their parent company's US clients who want to launch parallel structures and existing products on the European market. "To market their product in the European market, European promoters need to have a structure domiciled in Europe. Most of the time, they choose the Luxembourg jurisdiction. Promoters can thus take advantage of the European passport, which allows them to market their product easily throughout the European Union, while investors appreciate the security provided by the AIFM directive, which requires the appointment of an approved administrator and a custodian whose obligations include monitoring what happens to the fund as it goes along," state Cheret and Mifsud.
In a highly competitive sector, they highlight several advantages.
Firstly, a vision of development and long-term client relations that is made possible by belonging to a family group with a stable shareholding--three families are the firm’s shareholders--that has existed for 120 years. "We can offer our clients a guarantee of stability, substance and a proven model, as well as an approach that is more focused on developing a long-term relationship than on short-term maximisation of results. We don't operate on a quarter by quarter basis,” they said.
Irish centre of excellence
Another advantage highlighted was the presence of a "centre of excellence" in Ireland, which has been operational for 18 months. CSC Luxembourg Services operates on a delegation model. Part of the work, and specifically "the lower value-added tasks, including all the preparatory work, are carried out in Ireland, while the management, supervisory activities and responsibility remain in Luxembourg. The model also applies to the group's Dutch operations and any other countries where the group may expand. Cheret and Mifsud claims the level of competence at the Irish centre of excellence means it is able to respond to all customer requests. "This strategy makes it possible to create specialised teams of 20 to 25 people who will always be more efficient than teams dispersed in each country.”
It is also a way of responding to the challenge posed by the Luxembourg labour market, which cannot keep up with the growth of the investment fund sector and meet these needs. Outsourcing not only makes economic sense to us, but also operational sense. Cheret and Mifsud stated: "Technical knowledge and flexibility are ensured at the centre of excellence, and in the different countries we will recruit staff according to the evolution of the client base."
The CSC group employs around 3,000 people mainly in the US, with 300 in Europe, 30 in Luxembourg and 6 at CSC Luxembourg Services.
Originally published in French by Paperjam and translated for Delano