Hedgeweek Interviews
AxeTrading integrates ICE’s pricing and analytics solutions for Quoting and Execution Management System
AxeTrading, a fixed income trading software company, has demonstrated the integration of ICE’s pricing, analytics and market data into the AxeTrader Quoting and Execution Management System (QEMS).
Users of the AxeTrader QEMS will be able to access ICE’s pricing and analytics tools, including end-of-day evaluated pricing, continuous fixed income evaluated pricing, best execution services and ICE Liquidity Indicators™.
As the electronification of fixed income markets continues to accelerate, traders and other investment professionals are demanding solutions that help them make more informed and efficient decisions. The AxeTrader QEMS provides dealer-grade pricing through a user configurable quoting engine, manages RFQs, executes orders and helps achieve best execution across multiple execution platforms and trading venues. The addition of ICE’s pricing and analytics tools deepens the resources available to AxeTrading customers.
ICE’s high-quality pricing and analytics data offers an expansive set of tools that can be used throughout the investment process and help to support customers in their assessment of regulatory compliance requirements. ICE calculates and publishes independent evaluations for 2.8 million fixed income securities and provides continuous evaluated pricing throughout the trading day through its Continuous Evaluated Pricing service. ICE Liquidity Indicators can help in quantifying security and portfolio liquidity across fixed income and equity asset classes, while ICE’s Best Execution Service can help customers manage and measure bond trade execution quality and support them with their assessment of regulatory compliance. ICE’s fixed income and data offering is part of Intercontinental Exchange (NYSE: ICE), a leading global provider of data, technology, and market infrastructure.
Stephen Baker, Global Head of Sales of Fixed Income and Data Services at ICE, says: “Our pricing, analytics and market data supports mission-critical trading processes throughout the lifecycle of an investment and helps users make more informed decisions. AxeTrader’s flexible and innovative trading solutions continue to provide users with an optimised and intuitive workflow that allows them to take advantage of high-quality data, trade more efficiently, and help to meet various regulatory compliance requirements.”
Ralf Henke, CEO and Co-Founder of AxeTrading, says: “Working with ICE we will be able to expand our clients’ access to truly market leading trading workflows and analytics. AxeTrading is part of a new generation of technology providers whose ethos and business is built around openness, flexibility, and interoperability. Traders benefit from their choice of connectivity to the broadest ecosystem of best-in-class pricing and analytics data, taking them beyond the legacy technology providers with their limited ‘walled gardens’.”
“Data-driven, automated trading strategies are clearly demonstrated to improve trading efficiency and accuracy. In fixed income trading this is further strengthened by a buy-side firm’s ability to act as both price-maker and price-taker as the situation demands. Having quality, timely data embedded in the workflow is key to being able to do so,” says Mark Watters, CCO and Co-Founder of AxeTrading.
TNS offers trading firms seamless relocation to Bergamo IT3
Transaction Network Services (TNS) is expanding its Managed Hosting solution to enable firms wanting to co-locate and directly access the Euronext exchange matching engine to seamlessly move trading operations from Basildon to Bergamo.
Euronext is planning to migrate its primary datacentre and related colocation services to the Aruba Global Datacentre IT3 in Bergamo, Italy in Q2, 2022, with TNS securing infrastructure capacity in the new site. As with TNS’ other global colocation sites, TNS will leverage its Layer 1 switching solution to deliver ultra-low latency mutualised market access while also deploying the lowest latency network connectivity to bring Bergamo onto its global network.
“Relocating from Basildon to Bergamo with TNS will allow traders to focus on their core business, safe in the knowledge that they can experience uninterrupted, seamless trading from day one of the switch over,” says Jeff Mezger, TNS’ Vice President of Product Management. “We will provide a full suite of low latency services, including order routing, market data access, and the procuring, installing and management of trading infrastructure.
“Accessing IT3 through TNS is cost effective for traders, as it avoids having to research, acquire and maintain their own exchange connections, datacentre space and equipment,” adds Mezger. “We can deliver a lower total cost of ownership, with clients benefitting from TNS’ cost efficiencies, rack-optimised cabling and design. We offer differentiated services to help all traders effortlessly make the move, from small firms requiring a partial rack, to international banks requiring multiple contiguous cabinets.”
TNS’ Managed Hosting solution utilises the company’s ultra-low latency Layer 1 technology inside the datacentre. This enables firms to access execution speeds that are 10 times faster than traditional layer 3 architectures. TNS Layer 1 was the first of its kind and remains the most advanced solution in the market, eradicating the need for multiple switches by using a simple, single hop architecture to deliver connectivity in as little as 5 to 85 nanoseconds.
The TNS infrastructure brings together over 2,800 financial community endpoints to address the needs of financial market participants worldwide. TNS offers a range of connectivity, colocation, cloud, market data and VPN solutions within its Infrastructure as a Service (laaS) portfolio.
Traders using the company’s Managed Hosting solution benefit from TNS’ global point-of-presence footprint and extensive existing on-net connections, which includes uninterrupted access to more than 60 exchanges with local, physical support around the globe. Additionally, real-time monitoring is provided by TNS’ Network Operation Centres in the UK, US and Australia.
BTIG Fixed Income Credit adds to emerging markets team
BTIG has expanded its Fixed Income Credit division with several senior hires who specialise in emerging market debt sales and trading.
Blake Considine and Josh Markfield have joined BTIG as Managing Directors, while Tyler Danielsen joins the firm as a Director.
They each will be tasked with helping to enhance the team’s global reach, industry relationships and client resources across developed and emerging markets worldwide. In their new roles at the firm, they will report directly to Darren Haines and Michael Carley, Sr, Co-Heads of BTIG Fixed Income Credit.
“Our institutional and corporate client base worldwide is increasingly focused on expanding beyond the developed markets,” says Anton LeRoy, President of BTIG. “Pushing into emerging markets is another important development in our global credit platform and we are pleased to have Blake, Tyler and Josh join us as part of that effort.”
At BTIG, Considine will hold a sales trading role, focused on Asia-Pacific. He has nearly 15 years of industry experience. Prior to BTIG, he was a Managing Director at Seaport Global Securities. Previously, Considine was a Director within Structured Credit at Deutsche Bank and a Vice President within Institutional Flow and Structured Credit Sales at BNP Paribas.
Danielsen will also focus on sales trading within Asia-Pacific at BTIG. He held several emerging market sales and trading roles prior to joining BTIG. Danielsen was a Director within Credit Sales and Trading at Seaport Global Securities, where he spent nearly five years. Earlier in his career, he held similar roles at Tullett Prebon and Creditex Group – Intercontinental Exchange.
Markfield has 25 years of emerging market trading experience at both buy and sell-side firms. As a BTIG Fixed Income Credit Trader, he will focus on the Latin American market. Prior to BTIG, he was a Managing Director within Fixed Income Credit at Maxim Group and Seaport Global Securities. Previously, Markfield was a Managing Director and Co-Head of Emerging Markets at Cantor Fitzgerald. Earlier in his career, he was a Credit Trader at SAC Capital and a Director within Credit Trading at Calyon. Markfield also held trading roles at Gramercy Advisors and Oppenheimer.
“With their emerging market experience, we believe that Blake, Tyler and Josh will be immensely valuable to our clients,” says Haines. “Their knowledge, responsiveness and ability to produce meaningful market intelligence will help industry participants better evaluate their trading decisions and execute effectively.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsBlockFills launches SaaS crypto platform Phoenix
BlockFills, a global cryptocurrency and digital asset technology company, has launched Phoenix, a SaaS crypto interface designed for institutional clients to access the company’s proprietary cryptocurrency trading technology and liquidity.
Phoenix arms institutions with the technology they need to enter the digital asset and cryptocurrency space at an accelerated pace with unmatched security, functionality and reliability. Unlike retail exchanges, the new platform enables digital market participants to access BlockFills' deep, executable liquidity 24 hours a day, seven days a week.
“Phoenix is the future of institutional digital asset investing. It gives institutions access to the most advanced technology platform available, allowing them to make secure, efficient and accurate investments with confidence 24/7,” says Nick Hammer, co-founder and CEO of BlockFills. “Our team noticed a gap in the technology available – other crypto platforms frequently crash, provide subpar customer service, execute orders at different price points, or generally have poor tech design. Based on our decades of experience in institutional trading, we knew there could and should be a better option. So, we launched Phoenix.”
With the new platform, investors have access to the following capabilities:
• Desktop, Mac-native, web and mobile-friendly platform versions, so investors can trade on any device, anywhere, 24x7
• Virtually limitless choices of studies, drawing tools, and a completely customisable user-interface
• Volume-weighted average price (VWAP), volume profile, order flow, real-time market cap, correlation matrices, heatmaps and more
• On-chart trading and advanced trading capabilities such as server-side OCO (order-cancel-order) commands
• Real-time on-chain network data such as difficulty and hash rate, analytics, and detailed data export capabilities
• Deep liquidity supported by battle-tested infrastructure
All the bespoke technical services that BlockFills is known for industry-wide
Phoenix is the latest addition to BlockFills’ growing SaaS ecosystem, which has set a new benchmark for quality of execution–both for liquidity providers and professional consumers. The company, founded in 2018, introduced its software division in the first quarter of 2021 with two breakthrough solutions, called “Vision” and “Zephyr,” allowing institutional trading businesses to enter the digital asset market efficiently and reliably.
While many traditional institutions and enterprises are preparing to build capabilities to trade and invest in crypto, the Chicago-based startup is on a mission to be the go-to digital asset firm for institutional clients looking to adopt cryptocurrency or implement digital asset management as part of its service offerings.
“Already, hedge funds, asset managers, proprietary trading groups, investors, brokers and corporations have realised the power of Phoenix, and for any institutions looking to make cryptocurrency investments or manage digital assets for the first time, Phoenix is ready to help,” adds Hammer.
Phoenix is currently available to new and existing BlockFills customers.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsInvestors show growing confidence in digital assets with USD90m inflows
Digital asset investment products saw inflows of USD90 million last week, marking the seventh consecutive week of inflows totalling USD411 million, according to the latest CoinShares Digital Asset Fund Flows Weekly report.
Bitcoin saw inflows of USD69 million last week. We believe this decisive turnaround in sentiment is due to growing confidence in the asset class amongst investors.
Ether saw another week of inflows totalling USD20 million although it has conceded market share to Bitcoin in recent weeks, having fallen from a peak of 28 per cent to 25 per cent.
Despite improving inflows across investment products, volumes remain low at USD2.4 billion last week, compared to USD8.4 billion in May 2021.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsEEX registers first trades on new nationwide German gas market THE
The European Energy Exchange (EEX) has introduced its gas contracts on Trading Hub Europe (THE), the new nationwide German gas market area. A total of 5.5 TWh were traded the first day in both Spot and Futures markets.
The two gas market areas GASPOOL (GPL) and NetConnect Germany (NCG) merged into the new all-German market area Trading Hub Europe (THE) on 1 October 2021. EEX now offers both Financial Gas Futures (EGSI Futures) and Physical Gas Futures for the new THE market area. On the THE spot market, trading participants will additionally be able to trade 13 new zonal gas quality-specific products. These zonal products serve the need for balancing energy trading and congestion management in the new German market area.
EEX NCG VTP products have been renamed THE, in which trading now continues on the spot and futures market for the new Trading Hub Europe. In the meantime, all trades previously concluded at GASPOOL and NCG and to be delivered after the merger date are automatically executed in the THE market area.
Steffen Köhler, Chief Operating Officer at EEX, explains: “We have been supporting the German gas zone merger since the very beginning in partnership with our customers. With more than 170 trading participants, EEX is the biggest trading platform for German gas. The new Trading Hub Europe represents a strategic milestone not only for us but also for the entire European gas trading community as it will result in further liquidity, increased competitiveness and stronger price reference.”
“THE does not only have the potential to become one of the most attractive and liquid gas trading hubs in Europe, but also to drive the largest gas consumption and biggest gas storage reserves in the continent, benefitting from multiple interconnection points to important neighbouring markets. We are glad that the EEX team has intensively supported this merger and contributed to the close collaboration between stakeholders,” says Torsten Frank, managing director at Trading Hub Europe.
Carefully crafted investment strategies, paired with a behavioural approach to manager appraisals, generate successful formula for Stamford Associates' allocator clients
Stamford Associates, a relatively small and selective London-based investment advisor, has occupied an influential niche in the UK’s investment space for over 30 years. This influence is not necessarily a result of its ability to predict investment trends, nor a taste for the esoteric.
Instead, with over GBP80 billion under advisement at the end of March 2021, the firm’s client roster of pensions, wealth managers and charities, relish Stamford’s ability to eschew background noise and its more strategy fashion-conscious peers, by approaching due diligence with a granular analytical focus, and practising a psychological assessment approach when considering new managers and monitoring incumbents.
Nathan Gelber, Founder and Chief Investment Officer, told Hedgeweek that he believes, “Stamford Associates’ combination of investment diagnostics, financial analysis, investment and behavioral analysis distinguishes the firm from its peer group.”
This holistic, careful demeanour is perhaps particularly characterised in its relationship with the hedge fund sector, where the business currently works with only four managers, all specialising in long/short equity. Stamford Associates has been considering investing in credit long/short strategies, but after following this particular market segment for 10 years or so, is still at the “keeping an eye on it” stage.
The firm, which allocates anywhere between 5-20 per cent of their clients’ assets to hedge funds, explains it selects managers in a forensic and unique way.
Gelber noted: “One primary consideration relates to our qualitative bias with regards to manager assessments and selection. To that end, we employ three fully qualified psychologists, who are full-time members of staff at Stamford Associates, to help us understand the quality of a manager’s decision-making skills.”
The psychologists examine what kind of decisions a manager makes, how they make them, and how sustainable and repeatable these decisions are. Stamford’s long-standing, tried and tested framework means it looks for 14 key characteristics, including attention to detail, curiosity and certain biases, when assessing whether a manager’s behavioral characteristics will lead to successful outcomes.
Stamford Associates has been working with psychologists for over 20 years, who look to pick managers who can turn out to be “future winners” rather than solely relying on “past winners”.
Gelber added: “Our long-term record suggests that we select successful managers 86 per cent of the time.”
In addition to this form of assessment, Stamford Associates developed a series of proprietary financial diagnostics which help to understand a manager’s investment footprint as reflected by their historic portfolios. These diagnostics and assessments “lead to a better understanding of the potential repeatability of favourable results over time in the future.”
Stamford Associates measures its added value “on the basis of picking managers who succeed in the future, and the 86 per cent success rate is a reflection of this.” Gelber stated that, on average, “80 per cent of global equity managers underperform their indices after fees,” so the firm has great difficulty finding managers who meet their challenging criteria, and is often “fishing in a very sparse pool.”
The company also insists on full transparency from its funds. Its managers must be open to answering all questions, “irrespective of how sensitive they might be.”
Gelber stated: “Given that the hedge fund and private equity spaces are not accustomed to full transparency, this further limits the ‘manager universe’ for our clients,” as Stamford Associates refuses to work with managers who do not commit to full disclosure and transparency.
Gelber told Hedgeweek, “Stamford Associates had some time ago an investment programme which employed 15 hedge fund managers at its peak. However, this was overly-diversified and wasn’t a good experience for the company.”
Regarding investment strategies, the company exclusively focuses on long/short equity, on account of it having identified “exceptionally talented managers, who focus on stock picking rather than macro strategies, and who have exceptional skills, especially on the short side.” These managers attempt to generate alpha for their clients, rather than being exposed to beta.
On macro-orientated strategies, Gelber commented: “We haven’t been persuaded to engage our clients’ assets in that space because of the difficulties involved in making economic predictions and ensuring that clients will benefit. Many of these strategies are not entirely transparent, and involve leverage, which we don’t like to get involved in.”
The current interest in a credit strategy has been considered carefully. Gelber mentioned that the firm “is not yet persuaded” by this strategy, despite researching it for the past 10 years.
He noted: “Whilst in theory fixed income long/short strategies could offer attractive diversification characteristics in an institutional portfolio, the universe of specialist managers who meet our selection criteria remains narrow. Many of the strategies we looked at apply leverage in an attempt to amplify returns. Furthermore, given the low rate environment, the risk-return profile does not appear conducive to embrace such strategies for the time being.”
When asked about client concerns over fees, Gelber said that any reservations need to be carefully managed, and that performance fees aren’t paid out when a client hasn’t benefitted. Their insistence on full transparency from their managers also avoids many client concerns.
Gelber told Hedgeweek, “transparency, granular analysis, alignment of interest between clients and portfolio managers, and the psychological assessment of key investment decision makers, are the cornerstones of Stamford Associates’ investment process – and these are simply non-negotiable.”
Regarding the future, Gelber said: “We have a clearly defined investment philosophy which we stick to, and which we consistently apply. We’re optimistic for the future.”
Like this article? Sign up to our free newsletter Author Profile Fiona McNally Employee title Reporter Linkedin Related Topics Funds Investments Long-short investing UK Companies Investing in Hedge FundsBitfinex Derivatives launches Aave, Fantom, Elrond, Polygon perpetual swaps
Bitfinex Derivatives a derivatives platform accessible through Bitfinex, a state-of-the-art digital token trading platform, has launched perpetual contracts for Aave (AAVEF0:USTF0), Fantom (FTMF0:USTF0), Elrond (EGLDF0:USTF0) and Polygon (MATICF0:USTF0).
AAVEF0:USTF0, FTMF0:USTF0, EGLDF0:USTF0 and MATICF0:USTF0 will go live on 30/09/21 at 12:00 PM CET. The contracts offer users up to 100x leverage and will be settled in Tether tokens (USDt).
“We’re delighted to announce the addition of Aave, Fantom, Elrond and Polygon to the growing portfolio of perpetual swaps available to trade on the exchange,” says Paolo Ardoino, CTO at Bitfinex Derivatives. “We anticipate great interest in these products, particularly among funds and professional investors for hedging purposes and to manage risk.”
Bitfinex Derivatives platform and products are only available in eligible jurisdictions, and are exclusive to verified users.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsAIMA sentiment index: Hedge funds remain upbeat heading into final quarter
Hedge funds’ confidence continues to rise, with managers across the UK, Europe and Asia all bullish on their business prospects heading into the final quarter of the year, a key industry sentiment index shows.
The latest Hedge Fund Confidence Index (HFCI) – published jointly by the Alternative Investment Management Association, Simmons & Simmons and Seward & Kissel – found almost all hedge funds surveyed expressed confidence in the economic prospects for their businesses over the next 12 months.
Sentiment among larger firms, as well as UK and EMEA-based managers, showed the biggest rise during Q3.
The quarterly AIMA Hedge Fund Confidence Index (HFCI) quizzes around 300 hedge fund firms – collectively managing some USD1.6 trillion in assets - on their capital-raising, revenue-generation and cost-managing prospects, along with the overall performance outlook of their funds, for the coming year. They then score their confidence levels on a scale of +50 (the highest level of economic confidence) to -50 (the lowest), with 0 indicating a neutral level of confidence.
The latest quarterly report for the period between July and September shows hedge funds registered an average confidence measure of 20.4 during Q3, up from 19.51 the previous quarter, and 18.4 in Q1 this year.
Overall, hedge funds on average have generated double-digit returns so far in 2021, the report noted, with industry sentiment buoyed by sustained positive net inflows during the first half of this year.
Almost (99 per cent) of all hedge funds that participated in the index are confident in the economic prospects of their business over the coming 12 months, the study noted.
The findings show larger managers in particular are the most bullish for the year ahead: hedge funds managing more than USD1billion in assets reported a confidence score of 21.6 overall, while those with assets under USD1 billion gave a score of 18.6.
Geographically, meanwhile, managers in the UK, EMEA and Asia-Pacific regions are all growing in confidence, posting higher confidence levels in Q3 compared to Q2.
UK hedge fund managers’ confidence rose from an average of 17 in Q2 2021 to 21.3 in Q3. Similarly, EMEA hedge funds (which includes UK managers) rose from 17.7 to 20.8 over the same period, while APAC managers’ confidence grew from 18.2 to 19.5.
“The marked increase in confidence over the last year amongst UK hedge fund managers is great to see – and is reflected in the work we have been doing for our UK headquartered clients,” said Devarshi Saksena, partner Simmons & Simmons. “Our established clients have been very active creating new products across the full range of strategies and the new start-up manager market continues to see strong levels of activity and growth.”
On the flipside, North America-based hedge funds’ confidence slipped 2 points from 22.5 in Q2 to 20.4 in Q3. AIMA suggested the sentiment dip is a temporary setback, stemming from the spread of the Covid-19 Delta variant, with travel expected to recover strongly over the next quarter.
“There have been new challenges that have arisen from Covid-19 variants and the political climate in the US and thus it’s slightly unsurprising that North America based managers are less optimistic about the next twelve months than they were last quarter; however, North America managers are overall still optimistic,” added Steve Nadel, partner at Seward & Kissel.
Tom Kehoe, global head of research and communications at AIMA, said: “Prospects for the hedge fund industry are as strong as they have been in many years, underpinned by solid industry performance and renewed investor interest. Despite several industry headwinds including Covid-19 variants, increased regulatory scrutiny as well as operational challenges for the industry to consider, hedge funds globally remain cautiously optimistic regarding the economic prospects of their business over the coming 12 months.”
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Coronavirus Business & Services Investments Investing in Hedge Funds Funds of Hedge FundsSignal Stream to pioneer trading signals best practice
Trading signals provider Signal Centre has launched Signal Stream a new platform to better support traders through the ‘noise paralysis’ of inaccurate and confused signal reporting.
As an FCA approved and regulated firm, Signal Centre, which applies technical analysis to a range of indices, currencies and commodities to empower brokers to access high quality, rich data signal insights, overhauled its platform to maximise the trader’s user experience and also their engagement.
Signal Centre believes it is demonstrating best practice within the industry. In the most recent feedback from Signal Centre clients over 80 per cent of traders preferred to engage and utilise Signal Centre’s new dashboard as opposed to another non-FCA regulated competitor. By offering traders a customised and personalised experience they are better positioned to interact and understand the complete picture of signal trading opportunities. From dynamic emails, instant messaging, fast APIs to dedicated MT4/5 plugins and widgets for web, Signal Centre has revolutionised the way in which traders access market insights.
Steve O’Hare MSTA, Director, Signal Centre, says: “We’ve worked intensively alongside some of the best AI and fintech data academics to develop a trading tools platform that cuts through the noise of often misleading trading information straight to the heart of signal reporting. The pandemic and the explosion of cryptocurrencies has had an unprecedented impact on the uptick of new and often inexperienced clients playing the market. As an FCA authorised and regulated company it’s our responsibility to ensure we are continuously evolving our service to provide market clarity while applying surgical precision to our technical analysis.”
Signal Centre’s Signal Stream is a tool that unlocks trading tips at all levels from novice to advanced traders through a tiled visual experience giving traders an interactive and intuitive approach. The updated platform includes significant sophisticated AI back-end updates which incorporate the very latest advancements in fintech innovation. All clients are now able to access industry leading sentiment analysis tools, alpha generating alternative data integrations and economic calendars to give greater clarity on the signals and strategy that shape trading ideas.
Expert technical analysis, trading strategy, alternative data sets and investment decision tools are combined all in one view and include new radial gauges to explore sentiment scores and financial events forecasting to better understand market insights based on current and world affairs. Signal Stream is also integrated with the MT4/5 platforms allowing traders to capitalise on its advanced trading and charting features with integrated stock prices especially around futures and options.
The fintech overhaul of the trading tool platform comes hot on the heels of the acquisition of Signal Centre by AI research and fintech data pioneers Acuity Trading who opened a specialist AI data analytics research and development hub in Barcelona last month.
Andrew Lane, CEO Acuity Trading, says: “Signal Centre is one of a small number of providers of trading signals that is authorised and regulated by the FCA. With this accolade comes responsibility; it’s imperative that we continue to pioneer best practice in the fintech sector and develop technologies that both enhance the trading experience but also provide clarity and a traceable narrative behind each signal. The Acuity trading team takes great pride in collaborating with Signal Centre to develop market leading fintech products and this is the very beginning of a journey that will see the online trading experience of investors revolutionised in the months ahead.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Trading & Execution Technology & software solutionsIntegral Reports ADV of USD44.9bn in September 2021
Integral, a technology company in the foreign exchange market, has reported average daily volumes (ADV) across Integral platforms of USD44.9 billion in September 2021.
This represents an increase of +1.6 per cent compared to August 2021 and an increase of +9.5 per cent compared to the same period in 2020.
Reported ADV represents volumes traded across the group’s entire liquidity network, including TrueFXTM and Integral OCXTM, in aggregate.
Integral’s global trading network has been designed to meet the execution needs of the widest variety of FX market participants, including banks, brokers, asset managers, and hedge funds. Our clients leverage the deep and diverse FX liquidity available through our platforms and have the choice to trade any execution style required, all within an integrated environment.
Like this article? Sign up to our free newsletter Author Profile Related Topics Funds Technology & software solutionsQuantHouse makes changes in senior leadership team
QuantHouse, a provider of end-to-end systematic trading solutions including market data feeds and infrastructure services, and part of Iress (IRE.ASX), has announced senior leadership changes as the next step in its full integration into Iress.
As part of this transition, Pierre Feligioni, CEO and Co-Founder, is departing QuantHouse to pursue new ventures. QuantHouse wishes him the best in his future endeavours and thanks him for his leadership. Arthur Tricoire becomes General Manager, Commercial, and Sebastien Tiphine moves to Head of Products.
These changes position the firm to continue to execute on behalf of over 500 global clients through closer alignment with Iress. The experienced leadership team will be instrumental in developing opportunities within the wider Iress ecosystem, as the firm continues its strategy to accelerate growth.
QuantHouse and Iress have a deep history of assisting hedge funds, market makers, investment banks, brokers and other trading venues to achieve optimal trading performance, and gain access to rich datasets, together with ultra-low latency built on a global infrastructure.
Arthur Tricoire, as General Manager, Commercial, says: “Given the increased adoption of API data platforms in open application ecosystems and booming processing availability, we are thrilled to blend our expertise within a dedicated team at Iress. This will allow us to support the evolving requirements of data driven trading systems, helping our clients perform at their best.”
Sebastien Tiphine, as Head of Products, adds: “We are committed to enhance the value we offer to clients, taking full advantage of a combined technology platform. This deeper relationship with Iress will provide tangible benefits for our clients.”
Other key management roles include Denery Fenouil, Head of Engineering, Anna Pesman, Head of Client Services, and Salloum Abousaleh, Managing Director - Americas.
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsNew reforms set to boost Luxembourg’s appeal for private equity funds
By Robin Pagnamenta – One of Luxembourg’s big advantages has always been its small size, which has allowed successive governments to introduce new rules with a speed and nimbleness that bigger nations would struggle to replicate.
Time and again, the Grand Duchy has used speedy and favourable regulation to bolster its financial sector.
It is a consistent, first mover-based approach which has helped to cement its place as one of Europe’s leading financial services hubs, especially for the domiciling of funds by private equity firms and asset managers.
A new draft securitisation law working its way through Luxembourg’s parliament - which will reform existing rules created in 2005 - is the latest example of this trend, according to Sandra Bur, head of capital markets Luxembourg at Ocorian, a provider of fund administration, capital markets and fiduciary services.
Although the bill has not yet entered the statute books, Bur believes it will represent a major boost to the Grand Duchy’s appeal for private equity firms eager to make use of tax efficient securitisation structures domiciled in the country.
“It will position Luxembourg, even more favourably as the location of choice for European securitisation deals,” she says.
Securitisation structure
Around the world, private equity firms are well known for their extensive use of partnerships to structure their investments, she explains.
Until now, existing laws in Luxembourg have restricted the use of these structures using the specific company type required for a partnership - the model favoured by the private equity industry.
The new bill changes that, however, by opening up new opportunities for securitisation transactions to take place through partnerships in ways that were not previously possible.
“The world of securitisation that was previously unavailable to most key structures and transactions would now very much be an option for them,” she says, describing the reformed law as “the cherry on the cake” of existing rules that have helped grab Luxembourg an 8.8 per cent slice of the global fund domicile market.
So what does this mean for private equity players?
”It enables a diverse set of investors to participate over time and across a broad selection of risk return profiles,” Bur says.
“It will also add new capital to the industry and provide liquidity to note holders in case they want to sell [their] notes, as these are freely tradable, as opposed to the burden and complex process of selling a limited partnership interest.”
With offices in 16 jurisdictions, Ocorian’s Luxembourg office is largely focused on providing fund administration and corporate services to underlying Special Purpose Vehicles.
Currently, a securitisation vehicle domiciled in Luxembourg must either be established as a public or private limited liability company. New legal structures offer flexibility.
But the draft bill will introduce four additional legal forms that can be used for establishing securitisation companies, offering a new degree of flexibility.
These include Special Limited Partnerships, Simple Limited Partnerships, General Corporate Partnerships and Simplified Joint Stock Companies.
“This expands Luxembourg’s product offering, and allows more flexibility and efficiency in the structuring of transactions in particular through the SNC [general corporate partnership] and the SCSp [special limited partnership] which are transparent for Luxembourg tax purposes,” Bur says.
“This would mean for the first time that a securitisation vehicle could be a tax transparent vehicle without needing to be set up as a fund. This will be welcome given the introduction of the Anti-Tax Avoidance Directive (ATAD) and its impact on Luxembourgish securitisation vehicles. Indeed, it will be a great relief to many to have this option to circumvent the difficulties posed by the ATAD legislation.”
She continues: “By allowing securitisation companies to take the form of tax transparent structures, we give clients the flexibility to structure a securitisation vehicle through Luxembourg in a tax transparent way.”
European CLOs
The new rules also have sweeping implications for the European Collateralised Loan Obligation (CLO) market, which is gaining in popularity as investors hunt for yield in an era of historically low interest rates, Bur explains.
The draft bill proposes a new article that specifically permits active management of securitisation vehicles for risks linked to bonds, loans or other debt instruments as long as these are issued under private placement.
Active management
Under Luxembourg’s existing law, active management of CLO funds has not been possible, placing the Grand Duchy at a big competitive disadvantage compared to rival jurisdictions such as Ireland, which has consequently emerged as Europe’s key hub for domiciling CLO funds.
Bur says: ”Permitting the active management of securitisation vehicles in Luxembourg would significantly strengthen the country’s securitisation proposition and likely attract CDO/CLOs back to Luxembourg as opposed to Ireland which is currently the jurisdiction of choice for CLOs, with assets in Irish-domiciled CLOs rising to EUR170 billion by April 2021.”
In practice, this will mean that if the draft law is adopted, securitisation vehicles will no longer be confined to a ‘buy and hold’ CLO strategy. Instead, they will finally be able to make active investing decisions on the assets within the CLO, enabling the portfolio to adapt to market developments.
Taken together, the reforms represent a powerful boost for the industry as it pushes to bolster its reputation as a leading global fund hub, Bur says.
“The changes proposed to Luxembourg’s securitisation regime by the Bill of Law have been welcomed by the Luxembourg financial services industry,” she adds.
“In my humble opinion, if these new flexibilities and frameworks are well-advertised by the key players of the market, this should place Luxembourg in an even more excellent place for securitisation transaction in Europe.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Funds Legal & RegulationPrivate Equity and Venture Capital talents wanted – The need for highly professional training solutions
The private equity and venture capital industries have shown tremendous growth and have attracted lots of attention and new investors over the last years due to their inherent qualities (strong performance and returns, long term approach, focus on value creation, financing of the real economy and innovation).
Thriving sectors embed lots of upsides and allow practitioners and future practitioners to be exposed to a high pace (certainly correlated with hard work and robust initial skills), quite agile and forward-thinking industries (e.g. at the forefront of technology and other investment trends), intellectually enriching activities and experiences, varied tasks and interactions with different actors (including investors, shareholders, service providers, public authorities and specialised associations), which all make perfect sense and have a real purpose. In such a positive cycle, boosting your competences, enhancing your skills and knowledge is a must and will hugely increase the value of your profile and potentially open new opportunities in the future (hint: take your time to build your foundation and expertise), which will facilitate a successful career in PE and VC. Interesting packages, bonuses and performance-linked fees are another nice ingredient and clearly represent an additional factor of motivation, another persuasive argument to join our entrepreneurial industries as soon as possible.
In a perfect world, the downsides of thriving sectors would not really exist or be very limited. Realistically, however, an obvious threat or obstacle our favourite industries could endure in the future is exactly the lack of available, well trained, experienced and less experienced talents ready to either take a chance or make a move towards Luxembourg and its well-equipped ecosystem that offers a proven expertise (best-in-class players including General Partners, Limited Partners, family offices, services providers and pools of experts); a tremendous toolbox facilitating the launch of flexible vehicles/structures; the flair of an internationally recognised financial hub with its praised stability; and a resilient capacity to react to external events and special situations. Constant growth therefore rhymes with continuously attracting new talents, not just once a year when the best Master programs are delivering a new batch of hungry, ambitious youngsters who are looking for a first job, but also already experienced professionals interested to evolve in another firm or segment of the market, or simply to develop new experiences. We should also not forget other existing professionals who have not yet been properly exposed to PE and VC and who, thanks to either their educational background, their existing work experiences in other fields (traditional finance, engineering, industry, technology), could also make it once well trained and equipped for the battle.
These exact conclusions led the LPEA to focus its attention on existing PE/VC courses, specialised trainings (modules) and ad-hoc on-demand sessions. With our national PE/VC association hat, we decided to chip in and propose our own LPEA Training Academy in 2020, composed of different foundation, advanced and expert courses prepared by our local practitioners and dedicated to the next generation of experts (PE, VC, risk management, valuations, ESG, private debt, legal structuring, tax, and fund of funds). This endeavour became a successful and separate project, which will be proposed and updated on a yearly basis with hot topics and new speakers.
In parallel, the LPEA has also put in place some partnerships with external, specialised training entities and interested universities eager to propose, for example, dedicated PE certificates (SHU) and even potentially complete Master programs in the near future (tbc). This is a good step in the right direction from a local perspective and it has also encouraged us to create links with foreign universities, especially around our bi-annual job fair which was created this year for the first time. In the future, we will also try to get in touch with other worldwide Tier 1 providers (education and training) and monitor new and interesting technology platforms that could simplify even further organisation, spreading of meaningful content, knowledge and training.
One last trend worth highlighting is that our industries also continue to evolve, try to enhance their agility, efficiency (AI, machine learning, blockchain) and are intrinsically obliged to look for new profiles which are not yet central or internally required. This very promising trend will surely open the door to new kinds of professionals, who will inject this expected added value. Luxembourg, for example, a highly recognised back office of investment funds and SPVs in the 1990s and 2000s, added next to those essential tasks a complete range of middle office services (risk management, valuations, compliance) due to an increased need for substance, the implementation of new regulations, directives and the launch of new business models (third party AIFM, non-bank depositaries).
This evolution is far from over since an increasing number of General Partners have set up their upgraded operations in Luxembourg with new team members who are either analysing, handling deals themselves or very close to the deal teams and key decision takers. Within our ranks, this ranges from historical local VCs to internationally recognised PE houses with their own Luxembourg AIFM, outsourced/insourced models and empowered teams able to cope with most of the tasks. Additional angles and positions should be further explored in Luxembourg and could comprise investor relations, fundraising functions, flow analytics and more deal people or investors, like the many family offices who have opted for Luxembourg over the last years.
In any case, we believe that the provision of recognised, recurring and specialised training will facilitate the further development and evolution of our PE and VC industries and increase the overall attractiveness of the ecosystem. The entire sector needs to prepare and be ready for the upcoming challenges and opportunities of the future and developing talents will clearly be one of the solutions.
Like this article? Sign up to our free newsletter Author Profile Related Topics FundsLuxembourg fund managers and current geopolitical landscape
2020 was a challenging year for the Luxembourg funds market. Despite a strong start in January and February, the Covid-19 pandemic caused a slowdown to fund set-up and net asset developments due to valuation issues and travel restrictions. However, it should be noted that the Luxembourg investment fund industry remained robust given the market regained growth starting mid-2020 and continuing into the third quarter of 2021.
This positive development was driven predominantly by increasing net assets and incoming new commitments to the fund vehicles. Net assets under management in Luxembourg investment funds reached EUR5.22 billion at 31 March 2021 and increased to EUR5.49 billion as of 30 June 2021. Moreover, since the Brexit referendum, Luxembourg has attracted increasing interest from UK based fund managers or other fund managers or originators having planned and implemented the centralisation of their cross-border activities via Luxembourg in the post-Brexit era. Several dozen market participants, such as M&G, have also been relocating to Luxembourg over the last three years.
In terms of the origins of Luxembourg fund initiators, it is worth noting that the first place is well occupied by the US initiators, followed by UK, Swiss and German initiators.
1. Sustainable Finance
One of the new key trends driving growth and development in the Luxembourg fund industry is sustainable finance. Due to the Luxembourg Green Stock Exchange that doubled its green, social, suitability and ESG (environmental, social and governance) securities over the last years and the Luxembourg Finance Labelling Agency (LuxFLAG) that grew considerably over the previous years and continues to label sustainable products across several jurisdictions, Luxembourg retains its status as the place of interest for various fund initiators as well as investors across the globe.
Along with those market players, the Luxembourg government plays an important role in developing a sustainable finance area. Implementation of the EU Sustainable Finance Disclosure Regulation 2019/2088 (SFDR), applicable from 10 March 2021, creates some challenges for financial market participants from a short-term perspective. However, it will definitely create some opportunities from a long-term perspective, especially for those who are up to speed with the measures. Those fund managers potentially will benefit from the opportunities in terms of performance, growth of assets under management and reputation that sustainable finance products could bring. It is worth noting that sustainable funds represented a growing segment of investment solutions over the last years in Europe. The net assets in sustainable funds have doubled since 2018 and reflect around 11 per cent of total net assets domiciled in Europe at the end of 2020. More than half of the cash flows went into the sustainable investment fund market in 2020 and that trend might only grow in the near future.
Another growing trend appears with view to the increasing set-up of non-regulated funds instead of regulated vehicles. In particular, the reserved alternative investment funds (RAIFs) which are not subject to direct supervision of the Luxembourg regulatory authority, the Commission de Surveillance du Secteur Financier (CSSF), have proven to be the preferred fund vehicle of promoters and initiators looking after alternative assets classes.
Fintech and investment into venture capital is another key trend that drives the growth of Luxembourg economy and will continue to develop over the years bringing new business opportunities to the country.
2. Fund structuring vehicles
Luxembourg, as a financial centre, continues to create a favourable environment allowing the development of new products and services, giving investors flexibility in terms of fund structuring.
The Luxembourg law dated 10 August 1915 on commercial companies (Corporate Law), to the extent it is applicable, and various fund product laws, such as the law dated 13 February 2007 relating to specialised investment funds (SIFs), the law dated 15 June 2004 relating to invest-ment companies in risk capital (SICARs), the law dated 17 December 2020 relating to undertakings for collective investment (UCIs), the RAIFs and other alternative investment funds (AIFs) offer to potential investors and fund initiators, a varied choice in terms of fund structuring vehicles. The most common structures being used are as follows: (i) investment companies with variable capital (SICAVs), taking the form of a corporate vehicle or (ii) contractual form funds (FCPs). Both SICAVs and FCPs allow a number of flexibilities with regard to the structuring aspects and can take the form of SIFs, UCITS and RAIFs.
SICAVs could be set up in various corporate forms, such as a public limited company (SA), a limited liability company (SARL) and different types of partnerships, such as a partnership limited by shares (SCA), a special limited partnership (SCSp) or a simple limited partnership (SCS). The corporate choice of a vehicle quite often depends on various factors, such as the investor’s geographical location, tax considerations and/or control over the vehicle or other aspects. One of the major advantages of a SICAV is a floating share capital, meaning that its share capital is al-ways equal to the value of its net assets thereby dispensing with costly notarial recordings of share capital variations.
On the other hand, FCP is a contractual form vehicle without legal personality and not subject to the Corporate Law provisions which allows those entities certain flexibilities.
Both FCPs and SICAVs could fund-raise by means of equity or debt instruments and allow creation of so-called umbrella funds with multiple compartments that could have different investment strategies and invest in different asset classes. The constitutive documents can be drafted only in the English language and it is not required to translate those into French or German.
3. Key objectives over the coming years to ensure Luxembourg remains a competitive global jurisdiction
Up until now, Luxembourg has taken a leading position as a financial centre within the EU and has shown strong expertise and high resilience during the pandemic crisis. To continue to remain a competitive global centre, the key objectives should be to (i) offer flexible products and high-quality services at reasonable costs, (ii) maintain a high level of professionalism, and (iii) continue to serve as a global hub for cross-border activities focusing on digitalisation, sustainable finance and other sectors.
Creating an additional framework for sustainable finance products will help the Luxembourg fund industry to flourish on a greater scale. It is expected that the green finance sector will contribute to a strengthening of Luxembourg’s position as a key, global hub for impact investment and sustainable finance.
Like this article? Sign up to our free newsletter Author Profile Related Topics Funds Legal & Regulation ServicesPolitical stability makes Luxembourg a compelling choice
By Robin Pagnamenta – Visitors to Luxembourg are often surprised and pleased to discover that public transport is free. Step onto a tram in Luxembourg city, and there is no conductor to pay, and no machine to stamp tickets.
In a drive to tackle traffic congestion and emissions, last year the Grand Duchy introduced a new policy where no charge exists for using the trains, trams and buses that criss-cross the small country sandwiched between Germany, France and Belgium.
The policy is an attractive perk for its 602,000 residents, 175,000 cross-border workers and 1.2 million annual tourists.
It’s also emblematic of something else: Luxembourg’s runaway economic success and almost unrivalled political stability – which has become a magnet for its booming financial services industry – and generated a tax windfall to boot.
Over the past few decades, Luxembourg has cemented its position as one of the world’s leading international fund domiciles, usually hosting the structures that are used by private equity firms, hedge funds and asset managers based in other centres like the US or UK.
It’s a policy that has been so successful, for so long, that it has fuelled a powerful economic boom that has showered benefits across the entire country – including the nation’s cheerful commuters, says George Ralph of business IT consultancy RFA.
“Luxembourg has very successfully developed its funds industry, but has managed to do this to the benefit of the whole country,” he says. “As such, it has a triple-A rating and political stability.”
He continues: “This political stability is crucial, as it mitigates the risk of subsequent legislative changes that could adversely impact fund complexes over the longer term.”
Legendary reputation
This reputation serves as a powerful advantage over rival centres. Many financial firms have first-hand experience in other less predictable countries, where the tax treatment of SPV-type legal structures has suddenly changed, often with damaging results.
Ranked as the world’s richest country in terms of GDP per capita, Luxembourg seems uniquely shielded from such volatility. Its administrators and citizens alike seem aligned in their determination not to kill off the golden goose.
“Of course, there is also risk of more centralised-based changes from the OECD or EU, but Luxembourg has a very sound approach, so is less likely to be adversely impacted,” he says.
“For example, its basic corporation tax rate is already 15 per cent, which is the minimum that has been suggested by the OECD in its two-pillar plan to reform international taxation rules versus 12.5 per cent for Ireland.”
Attractive market
For technology vendors like RFA, who specialise in cloud, data and cybersecurity solutions, having a presence in Luxembourg is essential as many banks, advisory firms and other financial groups who rely on RFA to effectively service their business IT solutions.
Founded in 1989 RFA, which has over 800 clients globally divided between hedge funds and private equity, in 2018 launched a new private and public financial cloud in Luxembourg.
The move allowed RFA to offer a range of services to both its existing and new financial clients in Luxembourg, Madrid, Hamburg, Paris, and the wider region.
RFA now operates two secure, tier-one data centres in Luxembourg which meet the required standards for firms regulated by the Commission de Surveillance du Sector Financier (CSSF) and continue to offer Best in Class Azure and AWS solutions for those wanting to leverage public cloud.
The firm offers clients managed private cloud, infrastructure-as-a-service, and secure multi-cloud services, which offer the flexibility and scalability of public cloud services, whilst benefiting from the security and direct control of the private cloud.
It also operates its own dedicated Security Operations Centre (SOC) designed to monitor suspicious activity on all of its clients’ networks 24 hours a day, 365 days per year.
Usually, this kind of service is provided by an outsourced third-party provider but RFA offers its own in-house managed detection and response service for clients.
ESG is a growth area
As for the future, Luxembourg is eager to position itself at the forefront of two emerging trends, says Ralph.
The growing interest globally in funds which comply with environmental and social governance (ESG) objectives, represents a big opportunity for the Grand Duchy, which is pushing hard to become a centre for ESG fund domiciles and build expertise in the field.
“Luxembourg has always been at the forefront of ESG funds,” says Ralph.
“The EU’s Sustainable Finance regime is central to this, and will continue to be so – as it develops, it will create additional distribution opportunities for managers or Article 8 and 9 funds.”
Another profitable area is in financial technology, where again Luxembourg is pulling every lever it can to cultivate a new and thriving industry.
He says: “Luxembourg has a number of centralised initiatives to support the development of fintech, which include incubators and funding. It’s very keen to develop these areas, so this is an area of government focus.”
Ralph believes that Luxembourg is lagging slightly on another potential growth area: cryptocurrencies.
According to a recent PwC report, only 2 per cent of crypto funds are based in Luxembourg.
“We don’t see Luxembourg as a significant crypto domicile; the regulator and legislature aren’t really pushing this.”
The challenge with full-scope Alternative Investment Funds (AIFs) of more than EUR100 million is simply finding a depositary that is willing to accept strict liability for the safe keeping of crypto assets – a common challenge across EU jurisdictions.
Trademark flair
However, with its trademark flair for spotting a coming opportunity for its bustling financial sector, Luxembourg has also cottoned onto something else: the boom in non-bank lending activities, and the rise of private debt and real estate as emerging asset classes, says Ralph.
“The legal and regulatory landscape in Luxembourg is perfectly suited to the growth of these strategies, as it has every conceivable corporate and regulatory structure within its toolkit.”
The SCSp (Société en Commandite Spéciale), Luxembourg’s equivalent to a common law tax transparent partnership, has played a critical role in the success of this push, he adds.
While there will be a challenge from the Irish Investment Limited Partnership (ILP), it’s worth recognising how well-developed Luxembourg’s support and service infrastructure is for the SCSp.
Like this article? Sign up to our free newsletter Author Profile Related Topics Funds Legal & Regulation ServicesLuxembourg looks to the future offering fund managers quality supervision, convenience and expertise
By Robin Pagnamenta – If any jurisdiction can claim to be the home of the global fund industry, it is Luxembourg. The Grand Duchy is the second largest investment fund centre worldwide and the first in Europe, with an 8.8 per cent global market share in 2020 and is a prime location for alternative investment funds.
Yves Cheret, managing director of fund administration at CSC Global Markets – a privately-owned firm offering fund administration and depositary services to alternative investment firms in Luxembourg – comments: “I think that, over time, the investment fund business in Luxembourg will become known as the US is known.”
Luxembourg’s attraction for fund managers is based on its political and financial stability which fosters a culture of investor protection with strong support from the Commission du Surveillance du Secteur Financier (CSSF); a culture of innovation, with Luxembourg an early mover to support trends including environmental and social governance (ESG) demand; and a ‘legal toolbox’ for asset managers including the common limited partnership (SCS) and the special limited partnership (SCSp).
The jurisdiction’s particular strength is in alternative investment. Cheret says: “For the last 10 years, if someone wants to launch an alternative investment fund, Luxembourg has been their first port of call. It is its own complete ecosystem – the service providers, the law firms, everything they need is here.”
First mover advantage
Apart from the convenience factor of Luxembourg’s geographical position for European alternative investment managers, the latest boom in popularity dates back to the 2013 AIFM Directive governing the supervision of alternative investment funds in the EU. Luxembourg was one of the first countries to implement the directive, which required funds to register with local regulators to manage or distribute their funds, giving it a clear advantage over rival centres such as Dublin and the UK.
Cheret comments: “Luxembourg has always been used to handling cross-border transactions and that is exactly what we see with the AIFM. Alternative investment funds have investments and investors outside of Luxembourg, so the fund is sold and distributed cross-border.”
Luxembourg was also ideally placed to take advantage of opportunities offered by Brexit, Cheret adds. “Major UK private equity firms needed to use Luxembourg to ensure continuity for their business models post-Brexit, creating teams for the distribution business and to offer a point of contact for investors,” he says. While they continue to work closely with the installation management teams in the UK, official communication to investors is coming from Luxembourg, he adds.
Indeed, Luxembourg’s relative stability is a major factor in its popularity with alternative investment funds, with a settled political and economic landscape, a cross-border approach through the international profile of its workers, and proper supervision of the industry.
Pierre Mifsud, managing director for depositary services at CSC Global Markets, comments: “I think that is the word which keeps recurring when we speak about Luxembourg: stability. These are long-term investments, and investors do not want us to change the system every three years. They know that if they come in today, the system is not going to change dramatically in the next 10 years.”
The importance of supervision
Luxembourg places great emphasis on the proper supervision of the industry, according to Mifsud, a reputation that regulators are keen to maintain and which places certain requirements on fund managers and service providers alike.
“Know Your Customer (KYC) is crucial”, he says. “As per the law, we are obliged to perform a full KYC analysis as part of central administration to ensure that funds coming from investors are clean.
“The Luxembourg regulator is very sensitive to this because of systemic risk. If you were injecting money from corruption, or worse, from terrorism, that would hugely impact Luxembourg’s reputation,” Mifsud adds.
He likens Luxembourg’s stringent KYC rules to the Covid vaccination passport scheme: “When you go somewhere, you want to know that you are in a safe environment.”
A bespoke service model
CSC Group is a family-owned US firm headquartered in Delaware, offering fund administration and depositary services to alternative investment funds in Luxembourg and across the world. It provides global solutions for managers engaging in private equity, real estate, venture capital, private debt, funds of funds, and other alternative investment strategies.
The company offers its clients a bespoke service model and prides itself on unrivalled service quality underpinned by the stability of experienced staff, together with a strong and common corporate culture throughout the different jurisdictions.
Whether an asset manager is launching a new fund, considering outsourcing or contemplating an alternative to their current third-party provider, CSC aims to be a global partner with a local perspective.
The team work closely with clients to provide an integrated offering across markets, fund structures, and asset types, with services including accounting, corporate secretarial, special purpose vehicle management, regulatory compliance and investor reporting.
Mifsud comments: “Our image is very competitive. We work for our clients at the end of the day.”
A unique approach
CSC also offers depositary services, including safekeeping of custody assets, ownership verification of non-custody assets, comprehensive registry of all non-custody assets, cash flow monitoring, and oversight of the fund and the AIFM.
With its increasing presence and the expansion of its activities in Europe, CSC continues to be a partner of choice for US clients who wish to invest via EU vehicles, and in particular for US asset managers who want to launch parallel structures for European investors or with an investment focus in Europe.
Mifsud concludes: “What makes CSC unique is that we have developed technology internally so it is part of the business, and we can continue to develop tools internally. We rely on powerful IT tools to gain efficiency and flexibility.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Funds Legal & Regulation ServicesGrowth opportunities for PE and VC funds in Luxembourg
By Jevgeniy Nesch and Virginie Leroy, AKD – Private equity and venture capital are amongst the key investment fund strategies showing the strongest growth in the last decades. Even if at the beginning of the Covid-19 pandemic, some PE and VC funds faced challenges such as a reduction in the activity of their portfolio companies, valuation difficulties, exchange rate volatility and liquidity, most of the fund managers were able to adapt and address those issues in an efficient, rational, cost-effective and prudent manner. In addition to the handling of the day-to-day challenges, PE and VC fund managers have also discovered new opportunities where they might help to navigate the businesses out of economic emergencies, while providing investors with attractive returns and necessary protection.
Luxembourg as the fulcrum for fund establishment, management, administration and distribution has a conducive environment in particular for PE and VC funds, offering a large range of flexible regulatory, corporate and tax structures together with the access to seasoned and experienced fund professionals. This advantageous and sustainable ecosystem in Luxembourg provides fertile ground for successful growth to all types of players in the PE and VC field.
Easy and fast market access
Luxembourg’s regulatory plug and play system allows PE and VC fund managers to build on their existing knowledge, expertise and capacities by providing multiple possibilities to enter the Luxembourg funds market.
Smaller PE and VC fund managers launching a Luxembourg fund often choose to benefit from the exemption under the Directive 2011/61/EU on alternative investment fund managers (AIFMD) allowing the management body of the fund, instead of appointing a fully authorised alternative investment fund manager (Authorised AIFM), to act as so-called sub-threshold alternative investment fund manager. Since the latter must be inter alia registered with the Luxembourg Commission de Surveillance du Secteur Financier (CSSF), those managers are also referred to as Registered AIFMs. In order to benefit from this exemption, Registered AIFMs’ assets under management, including any assets acquired through use of leverage, may not exceed a threshold of EUR100 million. Should the Registered AIFM manage only unleveraged funds that have no redemption rights exercisable during a period of five years from the initial investment in the fund, its assets under management may not exceed a threshold of EUR500 million.
EEA-based non-Luxembourg managers who do not benefit from the above mentioned AIFMD exemption or wish to opt-in under the AIFMD – e.g. to get access to the AIFMD marketing passport – must apply for authorisation as an Authorised AIFM in their home jurisdiction or in Luxembourg. An Authorised AIFM must comply with a number of legal, regulatory, substance, operational and infrastructure requirements as set forth in the respective national legislation implementing the AIFMD. In case the fund manager does not have yet the capacity for the full authorisation under AIFMD, the management body of the Luxembourg fund may delegate inter alia the portfolio and risk management function to a Luxembourg based third-party Authorised AIFM (Third-Party AIFMs). Subject to certain requirements, a Third-Party AIFM may further delegate portfolio management function to the manager/initiator of the fund. Instead of acting as delegated portfolio manager, the PE and VC fund manager may also act as investment advisor providing the Third-Party AIFM with investment advice based on its specific expertise and experience taking into account the investment strategy of the respective fund. Non-EEA based PE and VC fund managers (e.g. US, UK, etc.) acting as AIFMs also have good access to the Luxembourg funds market and, depending on their marketing plans in EEA, may fall out of scope of AIFMD for the time being.
Luxembourg PE and VC fund vehicles
Luxembourg limited partnership regime offers to the PE and VC fund managers, in particular since it was strengthened through addition of the special limited partnership (SCSp), the most flexible and widely used fund structure. The legal framework applicable to the Luxembourg common limited partnership (SCS) and SCSp allows the managers, to the greatest extent possible, to tailor the fund’s limited partnership agreement implementing their specific approach, including fund governance, operations as well as fee and distribution models. Specifically, the combination of the Luxembourg limited partnership regime used for the fund vehicle together with the role of the fund manager as Registered AIFM is often seen in the PE and VC funds sector.
Luxembourg PE and VC funds in the form of limited partnership (but also other corporate forms) can further opt-in to one of the well-known Luxembourg fund regimes, whether regulated and supervised by the CSSF (such as SIF or SICAR) or without being regulated and supervised (such as RAIF) and be henceforth subject to the relating fund product laws. These Luxembourg fund regimes, and in particular the SICAR together with the corresponding structure under the RAIF regime, were specifically designed and tailor-made for funds pursuing private equity and venture capital investment strategies.
Distribution of PE and VC funds
Luxembourg-based investment funds are successfully distributed in Europe and beyond its borders whether with the AIFMD marketing passport or through compliance with the national private placement rules applicable in the jurisdiction of targeted investors. As from 2 August 2021, certain new rules brought by the EU cross-border distribution of funds legislation (CBDF) apply to the distribution of funds. While the practicability of the new set of rules brought by this legislation may be assessed only at a later stage, CBDF seems to bring some clarity about certain distribution aspects. For instance, the EU-wide harmonised understanding of pre-marketing activity and the introduction of de-notification procedures should bring efficiency and hence growth opportunities for the fund managers distributing their Luxembourg PE and VC funds in accordance with the new CBDF rules.
PE and VC funds embracing ESG aspects
Funds pursuing PE or VC strategy worldwide increasingly implement ESG considerations. Since March 2021, fund managers must comply with EU Regulation 2019/2088 (SFDR) and inter alia ensure the provision of certain sustainability-related information to investors. In particular, PE and VC funds promoting environmental or social characteristics or having sustainable investments as their objective will benefit from respective qualifications under SFDR and the ESG related developments in the investment funds industry.
Like this article? Sign up to our free newsletter Author Profile Related Topics FundsInnovation key to success
Luxembourg is widely regarded as a prime location for investment in private assets such as private equity, private debt, real estate and infrastructure. Much of its success in this field can be attributed to innovative investment vehicles which are success stories in themselves, and a perfect match for the dynamism of private assets investment.
A real trump card in the Grand Duchy’s hand is its limited partnerships (LPs) that complement the broad range of legal solutions available for structuring alternative funds and private asset transactions. Among them, the Société en Commandite Spéciale (SCSp) stands out as a multi-purpose solution for private assets. When Luxembourg introduced the SCSp in 2013, in a forward-looking move at the time of transposing AIFMD into national law, it provided the investment fund industry with a modern entity type that, to this day, scores with its wider scope and greater flexibility than options available in other jurisdictions. Unlike the ‘vanilla’ société en commandite simple (SCS), an SCSp has no legal personality and can exist merely by agreement between its partners, allowing the maximum flexibility in structuring with an efficient time-to-market, making it ideal for various set-ups. Overall, the SCSp has proved a hit among those in search of a non-regulated, transparent vehicle solution. It is insightful to notice that over the past two years, the numbers of SCSp increased by 85 per cent, according to PwC’s analysis.
Management passport
Another ace up Luxembourg’s sleeve is the the Reserved Alternative Investment Fund (RAIF). As a subset of AIF, it shares the manager-regulation regime’s key features without being directly subject to product approval by the regulator CSSF. Instead, it relies on an authorised external alternative investment fund manager and benefits from the management passport and the marketing of its shares, units or partnership interests to professional investors across the EU. The RAIF is now considered as one of the key pillars of the Luxembourg toolbox, offering the possibility to set up quickly an investment vehicle investing in any asset class.
This passporting concept, which contributed to making UCITS a successful global brand for retail investments, allowed AIFMD to also create a single market for alternative investment funds. While the UCITS regime has retail investors at its heart, individuals have limited access to the private assets universe. But that may change for more sophisticated retail investors. A review of AIFMD and MiFID is under way. Facilitating investments by these investors in private asset classes is part of the discussion.
Strong and steady
As the low-interest environment persists and certain private asset classes – private debt funds in particular – have been outperforming others with double-digit growth rates, it is no surprise that investor interest in less liquid, higher-returning assets has been strong and steady, not only from the institutional side, but also from individuals with a long-term view of their asset allocation.
In this context, the ongoing reform of the ELTIF regime introduced in 2015 to “boost European long-term investments in the real economy” is promising and one can expect that ELTIF may become a successful third pillar alongside AIFs and UCITS to supplement the offering to European investors, increasing substantially access to a certain private asset class by retail investors.
Like this article? Sign up to our free newsletter Author Profile Related Topics FundsContinuous growth of new private debt and real estate funds in Luxembourg
The Grand Duchy is set to capture an important chunk of the growing global market for alternative investment funds.
Luxembourg’s role as an international financial centre goes back many decades. But its future as a services hub for asset managers looks brighter than ever.
For Marco Mondaini, Head of Depositary Services at Alter Domus in Luxembourg, there are powerful new segments of growth for the industry which appear highly favourable over the next few years.
Alongside its traditional strengths as a centre for domiciling mutual investment funds, he believes some of the biggest opportunities now lie in offering services for alternative investment products and in particular the upward trajectory of debt and real estate funds.
“Luxembourg’s reputation is already very well established in the mutual fund market. It has moved up the chain to become recognised as a centre of excellence for those funds to be distributed worldwide; Luxembourg-domiciled investment funds are distributed in more than 70 countries,” says Mondaini, a 30-year veteran of the Luxembourg fund management industry.
Before joining Alter Domus, Mondaini worked for CBP Quilvest reorganising their depositary services in Luxembourg. Prior to that, he served as Deputy General Manager of Bank of New York Mellon in Luxembourg for nine years, responsible for asset servicing and alternative investment services, business change management and corporate trust.
“The recognition Luxembourg receives helps support the distribution and provides confidence to investors globally around the use of Luxembourg products,” Mondaini says.
But over the last 10-15 years, the alternative investment space has developed rapidly, first with hedge funds and then private equity and other specialist funds, he adds.
Private debt market booms
Today, Luxembourg is rapidly earning a reputation for something else.
“Today, the debt fund sector is developing quite fast as traditional lending that goes through banks becomes more challenging,” Mondaini says.
“The cost of traditional lending for banks is increasing due to capital adequacy requirements which are driven in large part by regulations like Basel III, making it more difficult for banks to generate profits from lending. That’s why the banks are becoming more prudent and thus benefitting the private debt market.”
Just five years ago in 2016, the global private debt market was valued at about USD575 billion, according to figures from Preqin.
By the end of 2020, it had already reached USD848 billion with Preqin projecting it could be worth as much as USD1.46 trillion by the end of 2025.
For Luxembourg, that represents a growth opportunity for advisers and providers of domicile, management companies, depositary and fund administration services who specialise in assisting fund managers.
Mondaini estimates that 50-60 per cent of all private debt funds will be channelled through the Grand Duchy. Luxembourg fund vehicles cater to the broadest possible spectrum of investments, from senior to mezzanine loans, whole loans and syndicated loans, distressed debt, and convertible loans. The loans can finance any asset, from real estate and infrastructure to private equity, and the operational infrastructure in Luxembourg provides a robust framework for all of them.
“I think it’s a testament to Luxembourg’s ability to service those specialised funds and be able to structure them and offer expertise,” Mondaini comments. “Its stability and innovative mindset make it a key location for financial professionals. Luxembourg is one of only nine countries worldwide with a AAA rating. The country draws on its political, economic and regulatory stability to foster a strong culture of investor protection, which is an important element as well.”
Comprehensive suite of services
With more than 3,300 employees across 36 offices in 21 countries, Alter Domus is a leading provider of integrated solutions for the alternative investment industry globally, dedicated to serving private equity, real assets including real estate and infrastructure, and debt capital markets sectors. The firm has the ambition to deliver integrated and bespoke solutions at each level of the value chain, from investors down to asset level, spanning depositary, AIFM, central administration and corporate services.
Mondaini says the group has the expertise needed to provide financial professionals with a single point of entry and assist them in defining and setting up the most appropriate structure to fully achieve their objectives.
Real estate is a big growth area
Another significant growth area for Luxembourg’s financial industry is in real estate funds. The country’s international business environment has given rise to a number of structures designed to facilitate real estate acquisitions with cross-border components.
In a world of low interest rates, long-term investors such as insurers and pension funds are increasingly looking at alternative opportunities to secure higher yields.
“Real estate funds are an option that is better understood and more highly considered by those investors,” says Mondaini.
“If they must provide the returns that they need for their internal products, equity and fixed income don’t generate those returns anymore so they are diversifying their portfolio investments using alternatives. That pushes different segments including private equity and real estate funds,” he adds.
Many of these funds spread their portfolio across housing, logistics, infrastructure and office developments.
“Overall, the real estate sector is showing quite a resilient position,” Mondaini says.
Luxembourg’s cluster of experts in law, accountancy and other services are poised to benefit from the growth of real estate funds as many managers look to use the country as a services and distribution hub.
“Luxembourg is home to a wide range of service providers allowing fund promoters to get the best advice for their initiatives and choose the best fit to materialise their projects,” Mondaini comments.
He continues: “When you have your fund project clear in mind, within a short timeframe it’s easy to get into the market and get it designed and set up the right way to achieve your objectives.”
Robust supervision
Mondaini says that Luxembourg’s sophisticated regulatory framework and the well-established relationships between the supervisory authority and the financial sector also ensure the entire process of setting up a fund, while rigorous, is fast and straightforward.
“The regulator performs its duties of prudential supervision and supervision of the markets for the purpose of ensuring the safety and soundness of the financial sector, solely in the public interest,” he says.
“So, I think regulation is in a constant state of evolution, but it’s a healthy evolution in the sense that the regulator also understands the dynamic of changes necessary at national, European and international levels.”
He adds: “There is the right balance of exchange and communication between the associations representing the business and the regulators.”
Mondaini predicts that the regulatory framework will evolve, especially in the private debt market amid growing international scrutiny of the non-bank lending sector in particular.
“Developing alternative sources of financing to bank loans may be beneficial to the real economy but may also create new ‘shadow banking’ risks,” he says.
Either way, Mondaini feels confident that Luxembourg’s financial sector is in good health and stands to gain further from the steady growth of the alternative investment industry globally over the next few years.
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