Where next for funds and investment structures - and what drives that choice?16 May 2018
Early in 2018, Ocorian conducted an online survey of specialists working within fund advisory and/or management. Respondents were drawn from across the Private Equity and Real Estate profession and primarily based with the UK (71%) or central and western Europe.
TOP 5 DESTINATIONS FOR FUNDS AND INVESTMENT STRUCTURES
- Luxembourg (26%)
- Jersey (19%)
- UK (16.7%)
- Guernsey (11.7%)
- Cayman Islands (8.6%)
More than a quarter (26%) of respondents to our survey, across both private equity and real estate, see Luxembourg as the most likely market for their next fund or investment structure, followed by Jersey (19%) and the UK (16.7%).
What makes Luxembourg so attractive?
“Luxembourg has done a great job of promoting itself as a destination for investment funds and, in particular, as an EU-based alternative to other common private fund jurisdictions,” explains Marc Schubert, Associate from Weil Gotshal and Manges (London) LLP. "By modelling the features of the SCSp on limited partnerships in other jurisdictions, Luxembourg has created a fund structure familiar to investors."
Philip Bolton, European Executive Director at Ocorian, agrees: "SCSps have been one of the most popular structures for Ocorian's clients in our Luxembourg office and we see this trend to continue in the coming years."
“Everybody knows and understands the Luxembourg market," adds Rob Williams, Tax Director - Real Estate and Construction at BDO LLP. "The size of the industry, its reliability … at present, Luxembourg remains the destination of choice.”
What drives jurisdictional choice?
Nearly a third of respondents (28.6%) concede that the choice of destination is primarily driven by investor preference. The next most significant driver is a flexible regulatory framework (18.5%) followed by tax planning opportunities (16.1%). Speed of set up was the least pressing concern (1.8%).
“Investors want confidence and stability, first and foremost,” continues Rob Williams from BDO LLP. “It’s the reason why they put their capital in London and also why they very often route their structures through Luxembourg.”
David Brown, Partner at Deloitte, adds: “Another factor is cost. Management fees continue to be under pressure – particularly in real estate and real assets where fees and the cost of doing business are higher than in other asset classes.”
DRIVERS FOR JURISDICTIONAL CHOICE
- Investor preference (28.6%)
- Flexible regulatory environment (18.5%)
- Tax planning opportunities (16.1%)
- Cost of set up (10.7%)
- Marketing distribution flexibility (8.3%)
- AIFMD (7.1%)
- Service provider asset class experience (5.4%)
- BEPS (3.6%)
- Speed of set up (1.8%)