TMF GROUP
Growth of parallel funds in the face of EU complexity Interview with Anja Grenner
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uxembourg remains a key hub of fund distribution. However, the complexity of the European regulation has seen a rise in managers setting up more parallel funds in other jurisdictions. This is done to accommodate non-EU investors, who may struggle with the demands of the EU fund regulations. “Something we’re seeing quite a lot of is managers setting up a fund in Cayman or Delaware for US investors, a Singapore or Hong Kong fund to cater for Asian investors and then a Luxembourg fund for the EU market,” observes Anja Grenner, Market Business Development Lead – Fund Services at TMF Group. It would be simpler and cheaper to have a one-size fits all solution, but this trend is largely driven by the regulation governing fund distribution in Europe. “Across the EU, the rules are undeniably more complex than for structures outside of the union. We see this from the investors’ perspective as well, as US or other non-EU investors in an EU fund sometimes struggle with the requirements to be met here in Europe,” Grenner remarks. She confirms a development seen for a number of years now where investors prefer a fund domiciled in their local time zone, a preference which is further underscoring the trend for managers to set up parallel funds. In TMF Group’s case, it can leverage its presence across the globe to meet this demand. Grenner notes the overall client relationship manager would usually be in the fund manager’s home jurisdiction, to maintain high levels of communication and rapport. However, she adds: “There are many synergies to be gained from working with one service provider with multiple locations. We can make sure managers who have parallel funds in the US, Europe and Asia don’t have 14
to repeat everything three times. So, although you service the client from the jurisdiction in which they are located, certain services such as accounting or capital call statements can be performed in one place for all three jurisdictions.” The main objective of this is of course to keep costs at a reasonable level. This said, certain services must be performed within the fund’s domestic jurisdiction. For example, in case of a Luxembourg fund the maintenance of the investor register has to be retained in Luxembourg. The growth in parallel funds is also contributing to expansion in Luxembourg, as non-EU managers look to set up European versions of their product, using Luxembourg as their gateway. Grenner comments: “We still see increasing levels of new assets coming in and over the last few years the concept of Alternative Investment Fund Managers (AIFMs) in Luxembourg has risen to an impressive number. There are now more than 260 AIFMs in the country and although not all are third party AIFMs, a good number of them are. This has given non-EU asset managers, especially from US, an option to continue to market their funds in the EU.” Changing needs TMF Group itself has recently announced the acquisition of an existing AIFM in Luxembourg, which means the firm will now be able to offer clients a one-stop shop solution across fund administration, depositary and management company services. Being part of a large, global group, the firm benefits from constant evolution. Grenner points out: “We are always rolling out new systems, new architecture and new software to add onto existing systems worldwide. So, although TMF Group in LUXEMBOURG FUND SERVICES IN FOCUS | Oct 2020
