Times have never been better in the global private equity fund industry, with assets now above pre-crisis levels. Unlike in 2007, Luxembourg is equipped to attract investors, and numerous structural factors are also pushing business towards the grand duchy.
Denise Voss, chair of the Association of the Luxembourg Fund Industry, speaks during the first day of the trade group’s Private Equity and Real Estate Conference, 21 November 2017The first day of the Association of the Luxembourg Fund Industry’s Private Equity and Real Estate Conference, 21 November 2017Eileen Burbridge of Passion Capital delivers the keynote speech during the first day of the Association of the Luxembourg Fund Industry’s Private Equity and Real Estate Conference, 21 November 2017Nick Tabone of Deloitte speaks the morning of the first day of Alfi’s Private Equity and Real Estate Conference, 21 November 2017Attendees listen to an opening speech the morning of the first day of Alfi’s Private Equity and Real Estate Conference, 21 November 2017Gilles Dusemon of Arendt & Medernach (centre) moderates the “Innovation in the same kind? What’s really happening in the private equity space” panel, with Alain Rodermann of Expon Capital (left) and Oliver Heiland of Allianz Global Investors, during the Association of the Luxembourg Fund Industry’s Private Equity and Real Estate Conference, 21 November 2017Attendees listen to the “Innovation in the same kind? What’s really happening in the private equity space” panel at Alfi’s Private Equity and Real Estate Conference, 21 November 2017Gilles Dusemon of Arendt & Medernach (centre) speaks during the “Innovation in the same kind? What’s really happening in the private equity space” panel, held with Alain Rodermann of Expon Capital (left) and Oliver Heiland of Allianz Global Investors, at Alfi’s Private Equity and Real Estate Conference, 21 November 2017Denise Voss and Alain Kinsch are seen during the Association of the Luxembourg Fund Industry’s Private Equity and Real Estate Conference, 21 November 2017Sven Rein and Lucienne Andring attending Alfi’s Private Equity and Real Estate Conference, 21 November 2017Marc Kriegsmann and Helmut HohmannYves Knel, Alison Laird and Gillian DalgleishMaelle Lenaers and Mevlüde-Aysun TokbagSteven Scally and Abdel HmittiSeverine Herbiet and Ismerie ArnouldPyrka Katarzyna and Sern ThamSophie Leissing and Gaffyn PriceJean-Francois Gillet (on right)Christina Mccarthy, Rocio Garcia-Santiuste, Ramzi Sahli and Eleni KokkinouLuciana Restivo (centre) of Maison Moderne (the company that publishes Delano) is seen at the Delano stand during the Association of the Luxembourg Fund Industry’s Private Equity and Real Estate Conference, 21 November 2017Luciana Restivo (left) is seen at the Delano stand during Alfi’s Private Equity and Real Estate Conference, 21 November 2017Luciana Restivo (left) is seen at the Delano stand during Alfi’s Private Equity and Real Estate Conference, 21 November 2017Gerry Brady and Dermot MulvinSteve Bernat of the Carne Group (on right) moderates the “Getting fund governance right – the Manager & Investor Perspective” panel on the first day of Alfi’s Private Equity and Real Estate Conference, 21 November 2017Frédérique Lifrange of Elvinger Hoss Prussen speaks during the “Getting fund governance right – the Manager & Investor Perspective” panel at Alfi’s Private Equity and Real Estate Conference, 21 November 2017Jérôme Wittamer of Expon Capital and of the Luxembourg Private Equity & Venture Capital Association speaks during the “Getting fund governance right – the Manager & Investor Perspective” panel at Alfi’s Private Equity and Real Estate Conference, 21 November 2017Jan Vanhoutte of Vistra Fund Management speaks during the “Getting fund governance right – the Manager & Investor Perspective” panel at Alfi’s Private Equity and Real Estate Conference, 21 November 2017The “Getting fund governance right – the Manager & Investor Perspective” panel at Alfi’s Private Equity and Real Estate Conference, 21 November 2017The “Getting fund governance right – the Manager & Investor Perspective” panel at Alfi’s Private Equity and Real Estate Conference, 21 November 2017The first day of the Association of the Luxembourg Fund Industry’s Private Equity and Real Estate Conference, 21 November 2017Tomasz Szubartowski, Alex Wedlich and Oliver Schütz attending Alfi’s Private Equity and Real Estate Conference, 21 November 2017Brian McMahon, Nigel Williams and Vincent LebrunThe first day of the Association of the Luxembourg Fund Industry’s Private Equity and Real Estate Conference, 21 November 2017Richard Browne, Paul Cornet and Timothy van DijkAmaury Zinga-Botao (on left) during the first day of Alfi’s Private Equity and Real Estate Conference, 21 November 2017
Photo: LaLa La Photo
There were just 30 private equity funds in 2004 when Luxembourg introduced the Sicar vehicle designed for this industry. Precise numbers are hard to calculate, but there are now thought to be in excess of 2,000 of these funds in this country, with the industry estimating more than €400bn assets under management locally. This is equivalent to more than 10% of the total assets for all Luxembourg funds.
At the first day of the Association of the Luxembourg Fund Industry’s Private Equity and Real Estate Conference , Tuesday 21 November, there were numerous references to the country’s “toolbox” and “ecosystem” meeting the needs of the global industry. As well, the talk was of the need to reduce uncertainty by establishing in a country known for its legal and political stability.
“Private equity has become a style of investing,” noted Eileen Burbridge, partner with Passion Capital, a VC firm based in London. In a low interest world, investors that have normally taken traditional approaches are increasingly turning to funds that support startup and growth businesses. “Unless there is World War III, private equity assets under management could triple to $15trn over next decade if current trends continue,” she added.
Burbridge argued that there was still untapped potential in the technology sector, saying investors and the wider business community have failed to appreciate how the economy is set for fundamental, tech-driven change.
The grand duchy is benefiting largely due to the EU insisting this industry be regulated, the Luxembourg government being keen to tweak the law to help the sector, and a regulator willing to work with business.
For example, in mid-2016, the reserved alternative investment fund was introduced to streamline the regulatory environment, and less than 18 months later this vehicle accounts for a quarter off all alternative investment funds in Luxembourg, according to Alfi’s Luxembourg Private Equity & Venture Capital Investment Fund Survey. The creation in 2013 of a common law style limited partnership regime has also been an important factor for attracting funds from the English-speaking world.
Several panelists also quoted the legal and political predictability of the country, encouraging “on-shorification” to Luxembourg, as a way of reducing representational and operational risk. Similarly, there is consensus that the UK leaving the EU is driving funds to consider a move to Luxembourg.
Although total investment in increasing, the number of funds is declining as investors seek to reduce costs. “Thus we will continue to see greater competition, and the need to be more distinctive and specialised,” Burbridge told the Alfi conference.
Along with this is a drive to create parallel US and EU fund structures: keeping a single fund while tapping into a wider investor base. Here too Luxembourg’s experience and flexibility is helping in the tricky task of creating convergence between diverse international teams.
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