By Michael Sanders – When Alceda Fund Management was established in 2007, Luxembourg was already a well-recognised fund domicile, so the choice was relatively straightforward. Now, with more than 3,800 investment funds and net assets of nearly EUR2.1bn, Luxembourg is Europe’s largest centre for investment funds and the second biggest fund domicile in the world, after the US, in terms of assets under management.
In our view, the development of the Ucits framework and, more importantly, the recent introduction of Ucits IV, which came into effect on July 1, will only serve to enhance Luxembourg’s leading position.
It’s not just my opinion; I have met fund managers from all over the globe, including the US, Russia, India, Asia and the Middle East, who are all keen to set up Ucits funds in Luxembourg.
This is because Luxembourg offers a wealth of benefits. The political environment is extremely stable, and due to its location in Europe, many of the staff are multilingual – a great asset for those looking to branch out across regions and into new territories.
Moreover, Luxembourg has one of the best infrastructure set-ups for the fund management industry, such as outsourcing service providers like our own that help to set up Ucits funds efficiently. There are also a plethora of management companies, custodians, administrators, auditors and law firms.
Many of the industry’s main players are based or have offices in Luxembourg. This wealth of experience, coupled with a business-oriented regulatory environment, leave it in a strong position.
Luxembourg is tax- and cost-efficient, making it a competitive domicile in the current climate. We also feel sure that the government in Luxembourg will do what it takes to ensure it remains the leader. You can see this from the amount of international promotion that is being done by the public authorities and the private sector in the grand duchy.
A further key advantage is that the regulator and the political authorities are fast-moving, which is illustrated by the fact that Luxembourg was the first country to integrate the Ucits IV directive into the local legislative framework, in December 2010. This positive and dedicated approach from the regulator gives managers confidence in the jurisdiction.
The Ucits regime, and particularly Ucits IV, already allows funds operating in Luxembourg to reach out across the European Union (and beyond). The extension of the passporting system to fund management companies, as well as the admission of master-feeder structures to the regime, is likely to prompt firms to concentrate all their resources in a single location instead of having them spread around the continent.
Luxembourg is likely to be the obvious choice. We can foresee under Ucits IV that large master funds will be based in Luxembourg, with feeder funds established in national markets across the EU.
The worldwide reputation of Ucits funds as a seal of quality – evident in the enthusiasm for Ucits in Asian markets such as Singapore, Hong Kong and Taiwan, as well as Latin American countries and the Middle East – should ensure that Luxembourg will continue to prosper. As a market-leading independent structuring specialist, Luxembourg-based Alceda is ideally positioned to cater to this growing demand.
Michael Sanders is chief executive of Alceda Fund Management
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