A total of 400 Specialised Investment Funds, the alternative investment vehicle launched by Luxembourg last February to boost its role as a domicile beyond traditional long-only funds, hav
A total of 400 Specialised Investment Funds, the alternative investment vehicle launched by Luxembourg last February to boost its role as a domicile beyond traditional long-only funds, have been approved during the first 12 months of the new regime, according to Claude Kremer, head of funds at law firm Arendt & Medernach and the new president of the Luxembourg Fund Industry Association, Alfi.
SIFs have been used in particular for private equity structures, as well as hedge funds, real estate funds and funds of alternative funds. Luxembourg fund industry participants say the growth in alternative investment products has helped to offset a slowdown in traditional funds as a result of stock market turbulence over the past six months.
The number of Luxembourg-domiciled funds rose from 2,868 at the end of December to 2,932 a month later, according to Kremer, with SIFs accounting for 50 of the 64 net additions to the country’s fund roster.
The Alfi president, speaking during the association’s annual spring funds conference in Luxembourg, told journalists that the aggregate net assets of Luxembourg domiciled funds had fallen from EUR2,059trn at the end of December to 1,951.1trn in January as stock markets slumped at the beginning of the year.
However, he noted that more than EUR100bn of the decline was down to the fall in global markets. Although net flows into Luxembourg funds turned negative in January for the first timer in years, the decline was well under than 10 per cent of the total at EUR7bn. By comparison, Kremer said, outflows from US funds in January totalled USD250m. Luxembourg s the world’s second largest funds domicile after the US.
The Alfi president said the launch of the SIF structure last February was the prime contributing factor to the increase in Luxembourg-domiciled funds of 800 in the course of 2007 – more than in the previous three years combined. No fewer than 95 SIFs were launch in November, Kremer said.
The SIFs legislation has broken new ground for a regulated European jurisdiction by allowing funds to be launched before they receive authorisation from the regulator, which must be sought within a month of launch. However, fund service providers say very few promoters seek to launch a fund before it has received regulatory approval.
Details of assets under management in Specialised Investment Funds are not yet available from Luxembourg’s financial regulator, the Financial Sector Supervisory Commission, but according to Kremer an Alfi survey identified EUR186bn in hedge fund assets at the end of June last year, comprising EUR109bn in funds of funds and EUR77bn in single-manager hedge funds.
Kremer says the new regime in Luxembourg is attractive to managers seeking institutional investors and argues that the country is not worried about losing business from promoters who do not seek regulation for their funds. Investors in Luxembourg funds perceiver strong regulation as an element of added value, he said.