domiciles of alternative investment funds | current trends
TRANSCRIPT
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DOMICILES OF ALTERNATIVE INVESTMENT FUNDS – CURRENT TRENDS
21 April 2015
NICSA webinar sponsored by ALFI
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• The following presentation analyses trends in choice of domicile for Alternative Investment Funds, prepared by Oliver Wyman for the Association of the Luxembourg Fund Industry (ALFI) in November 2014
• Alternative Investment Funds (AIFs) are defined as investment schemes that apply investment strategies typically not available to traditional mutual funds (e.g. UCITS). AIFs can be grouped into three main asset classes:– Hedge Funds– Private Equity funds– Real Estate funds
• The report examines only those domiciles attracting largest number of Alternative Investment Funds by number fund registrations and asset under management. These are:– The Cayman Islands– State of Delaware in the United States of America– Key AIF domiciles in the European Union: Luxembourg, Ireland and Malta– The Channel Islands comprising Jersey, Isle of Man and Guernsey– Other Caribbean Islands: Bermuda and British Virgin Islands (BVI)
• In order to ensure desired level of accuracy, the report uses publicly available information from local monetary authorities and industry associations (to the extent available), commonly used fund databases (e.g. Preqin, EurekaHedge, Monterey Insight). But since much data is not disclosed, this has been complemented by proprietary data and interviews with industry experts to derive estimates for AIF domicile choices
Introduction
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The number of Alternative Investment Funds has increased by 10% since 2010
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Domiciliation in the EU and the more traditional hubs of Delaware and Cayman Islands show the strongest growth
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Traditional offshore domiciles confirm their dominant role within the respective AIF asset classes
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In summary therefore, we see four main trends which we now examine in turn
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AIFMD increased the attractiveness of European onshore domiciles
1
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The three EU AIFs domiciles are all growing strongly, each with differing ‘sweet spots’
1
• Luxembourg with strong growth in Real Estate and Private Equity funds
– Number of RE and PE funds up by more than 35% since 2010 (estimate)
– Decreasing number of Hedge Funds and Fund of Funds since 2010
• Ireland with strong focus on Hedge Funds
– Large centre for Hedge Fund administration
– >60% growth in number of Hedge Funds since 2010
• Malta attracting niche markets within the hedge fund industry
– Focus on small funds, with Malta’s average fund size below €20m, compared with ~€80-120m for Luxembourg or Ireland
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Co-domiciliation is an increasingly favoured response for onshoring AIFs – evidence from Luxembourg and Ireland
1
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Demand for regulated AIFs triggered an increase in UCITS compliant replications of alternative investment strategies
2
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Moreover AIFs under regulated mutual fund structures also report significantly higher asset growth in the US through ’40 Act funds
2
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Domiciles offering ‘one-stop-shop’ solutions continue to attract funds at expense of domiciles with less well developed fund infrastructure
3
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The dominant position of traditionally successful domiciles seems entrenched
4
Cayman Islands has traditionally been seen as the global home of Hedge Funds and has strengthened that role over the last four years
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Around 60% of global offshore Hedge Fund assets are domiciled on the Cayman Islands
4
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Most Private Equity funds are domiciled in Delaware with Guernsey gaining some ground
4
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Delaware also remains an important domicile for Real Estate funds – with other Real Estate focused domiciles under pressure
4
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Summary of key success factors4
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Overall, we expect the demand for regulated AIFs to continue and the boundary between traditional AIFs and mutual funds to diminish yet further
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Contacts at Oliver Wyman