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Luxembourg, the new frontier of Private Equity fundraising

Luxembourg, the new frontier of Private Equity fundraising

Luxembourg has long been the “go to” place for Private Equity (PE) and Venture Capital (VC) Fund managers to setup shop in the EU.
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The Alternative Investment Fund (AIF) made in Luxembourg brand name is widely recognised as the most relevant international market standard by PE Fund Managers (GPs) and international investors alike. Furthermore the passporting feature of such structures allows managers to market their funds in all EU member states. As a result, there are more than 300 authorised Alternative Investment Fund Managers (AIFMs) in Luxembourg today and the Grand-Duchy has developed a peculiar set of skills – regulatory, operational and compliance expertise - relative to its function as EU gateway.

But what is next for Luxembourg’s alternative assets space? Luxembourg is shifting gear and is positioning itself to become a fundraising centre. Indeed the fundraising functions were exclusive to Europe’s big capitals, but the seismic change created by Brexit has opened-up opportunities for Luxembourg to become a platform for investors’ relations.

As pointed by Gilles Dusemon, Partner of Arendt & Medernach, “looking at the Investment management value chain, the AIF is established in Luxembourg, the AIFM is located in Luxembourg, the central administration, transfer agency and depositary functions are all established in Luxembourg. However, the very critical fundraising function was not necessarily established in Luxembourg. Using the past tense here because the situation is changing as a direct consequence to additional regulation and Brexit. A very important part of the European fundraising capabilities are indeed located in London. Due to Brexit, firms established there have been cut-off from their fundraising activities within the EU. Alternative solutions are thus needed”. An increasing amount of PE/VC GPs are therefore consolidating their distribution and marketing capabilities in the Grand-Duchy.

According to Martine Kerschenmeyer, Director at Advent International Fund Manager “Luxembourg is a big office for Advent in Europe with over 60 people in Finance, Operations as well as an Investment team already on the ground. Distribution was a natural addition especially in light of Brexit and the change in distribution rules to EEA investors. Our distribution team is global with offices in the US, UK and Europe, including Luxembourg”.

So what are the building blocks to create a fundraising hub? The first is a given for Luxembourg – regulatory, operational and compliance excellence, and as the investor relation process is highly regulated, Luxembourg benefits from such competitive advantage.

The second, according to Hélène Noublanche, Manager in the Investor Relations team at Coller Capital is “having the right team in place. A team that is, able to represent the Fund and to market it to the appropriate investors. It is essential to develop the expertise of the internal Investor Relations team. These persons should be part of an in-house global team, which co-operates on a daily basis with other key functions of a GP, i.e. compliance, legal, finance, marketing and of course with the investment team”. [feature video with Hélène Noublanche:

Gilles Dusemon has been advocating for the third element: a series of improvements, many of small efforts but critical to bring us up to date with managers and investors’ requirements. “Besides updating our toolbox, there are a few other regulatory tweaks that could substantially improve the operating conditions of Luxembourg AIFMs. The next frontier would thus be the digitalisation of the fundraising process”.

The discussion is long but exciting as the opportunities ahead are sizeable and can significantly change the local landscape. To dive further into this topic the LPEA is inviting all of the above experts and many other speakers to its Insights conference which will be held on October 13th. Come and join the discussion!

 Johann Herz,Head of Events & Communication, LPEA