Nick Tabone & Arnaud Bon (Deloitte): 3…2…1 Funds Blast Off from Luxembourg Launchpad
Deloitte Luxembourg’s Nick Tabone, Private Equity leader and Vice President of the LPEA, and Arnaud Bon, Alternatives leader for Advisory and Consulting, say that favorable regulatory and market conditions are making the Duchy a fund launch pad. But they warn over regulation and skills shortages could limit growth.
How is the private equity landscape evolving in Luxembourg?
Growing numbers of managers now are choosing Luxembourg as their base to launch funds. A significant increase in Luxembourg-based funds launched is partly attributable to the availability of the SCSp structure. The Duchy also remains attractive for parallel funds such as those launched in the Cayman Islands but available as Luxembourg-based funds for European investors. The growth has made the fund industry an important contributor to the Luxembourg economy and resulted in a significant increase in the workforce at asset managers, asset servicers, and service providers. This reflects a shift from pure back office work a decade ago towards middle office and, more rarely but still relevant, front office.
“While the private capital fund industry is booming, we see the UCITS market plateauing”
What risks and opportunities do you see for Luxembourg in this important segment of our economy?
Regulation of the industry is positive. However, the risk of overregulation is making Luxembourg less competitive. In addition, the growth of Luxembourg’s popularity for launching funds is making it difficult to attract the right professional skill sets. While the private capital fund industry is booming, we see the UCITS market plateauing. The difference is huge: in a UCITS fund, the capital is fully deployed while private capital funds usually deploy capital for three to five years. The alternative asset market is not being given the right attention as they measure the asset class based on assets under management rather than capital committed to their funds.
How does Deloitte support private equity investors and suppliers?
Deloitte Luxembourg is a unique center of global competence for fund product and growth strategy. We support the innovation that asset managers seek to apply in structuring their funds. In these ways, we facilitate the transformation of management firms including technology-led advances. We are increasingly requested to support non-PE players entering the market. These include traditional managers diversifying into the alternative space or wealth managers looking at the best set-up to provide their clients with access to the alternative asset classes. Our operating model made us leaders in the UCITS fund environment. We are now using this experience in the private markets fund space - be it for reporting, AML, operation, or risk and regulatory monitoring purposes. We help with the integration phase when asset managers buy out each other.