Luxembourg Eyes AIFMD as an Opportunity to Create Global Fund Brand

With the Alternative Investment Fund Managers Directive (AIFMD) now in effect, Luxembourg sees an opportunity to increase its importance as a fund center.

At Thursday’s Association of the Luxembourg Fund Industry (ALFI) Roadshow in New York, Marc Saluzzi, chairman of ALFI, noted that Luxembourg hopes to attract more non-EU funds, particularly from the U.S. and Asia. ALFI will also take the roadshow to South America next month to promote Luxembourg’s ability to act as an AIF hub.

“We believe that properly implemented, [AIFMD] has the potential to create a new global fund brand equivalent to UCITS,” said Saluzzi.

ALFI has worked toward expanding its international reach, such as signing a Memorandum of Understanding (MoU) with the Asset Management Association of China (AMAC) to deepen the collaboration between the two associations.

“In the future, as Chinese asset managers may wish to extend their activity outside of China, Luxembourg will constitute an ideal gateway into and beyond Europe,” said Saluzzi at the time of the MoU.

In addition to China, ALFI is also specifically targeting Australia, Mexico and Brazil as growth opportunities.

Luxembourg’s Minister of Finance Pierre Gramegna also spoke at the New York event and noted that Luxembourg’s reach has extended beyond its borders, with Luxembourg UCITS comprising over 60% of the investment funds listed and sold in Hong Kong. “So it shows you this model has worked extremely well, and we hope that we can replicate this for the alternative investment funds,” he said.

Gramegna noted that Luxembourg’s goal is to reach around 250 AIFM authorizations by the end of the year and 500 registrations, which would probably put Luxembourg in the top two for these categories in Europe.

Luxembourg has also increased its presence as an offshore renminbi hub, and Gramegna noted that American companies can use Luxembourg as a stepping stone to the Chinese market, for example.

“Don’t look at Luxembourg only as a country,” he said. “Look at it as a door opener at the heart of the European single market, and that will be profitable for you and for us.”

Along with Luxembourg’s apparent optimism for AIFMD, panelists at the roadshow also indicated that certain aspects of the provision may have turned out better than expected, even if there are still some challenges. For example, Dan Lambeth, head of Regulatory Affairs, J.P. Morgan Asset Management, London, noted that with depositories under AIFMD, “there were question marks over how much it would cost, [but] I think some of the nightmare scenarios have not transpired.”

Charles Muller, partner, KPMG, Luxembourg, also told Global Custodian that the cost of the depository has not had much of an affect, with fees at around three to five basis points from what he’s heard from the market.

“It’s not the big deterrent as people thought it would be at the beginning,” he said.

Aside from AIFMD, Luxembourg has also been active regarding the Financial Transaction Tax (FTT), though in the sense of opposing the measure.

Gramegna said that the country has taken this stance, because it wants Europe as a whole to be attractive for investors.

“[S]uch a transaction fee would probably deter lots of investors to use financial centers at the heart of the European Union single market,” he said. “So although 11 countries have decided to eventually introduce such a tax, we have asked that those countries who have stayed outside should not be punished by it…those who take an initiative should not impose extraterritorial effect on others. So this discussion is underway, and you can be sure that will we make sure that Europe will not be at a disadvantage, or certainly those countries who don’t want that tax will be put indirectly in a disadvantaged situation.”