Luxembourg In Pole Position As AIFMD Compliance Looms

With little more than five months to go before alternative managers active in Europe must be fully compliant with the European Union's Alternative Investment Fund Managers Directive, Luxembourg is perfectly positioned to accommodate fund firms, from global investment houses to specialist boutiques, eager to exploit the potential of a passport to an EU-wide market.

Luxembourg's law of July 12, 2013 may have been approved by parliament just a matter of days before the deadline for EU member states to adopt the directive into their national legislation, but the country's fund practitioners regard it as more important that the statute incorporated the creation of a new legal partnership form designed to boost the grand duchy's appeal to the global private equity industry.

Similarly, French industry members have boasted about the number of local managers that have already received authorisation from the country's Financial Markets Authority. But 16 firms, including some big global asset management groups, had already been approved by the Financial Sector Supervisory Authority (CSSF) as of February 7, and as many as 90 more applications are in the pipeline, in good time to receive regulatory endorsement by the time of the full implementation of the directive on July 22 this year.

Media debate about which jurisdictions are "winning the race" to sign up managers under the directive is something of a red herring since there is no evidence that fund firms are opting for authorisation by whichever jurisdiction is first in a position to do so. What matters more is that many potential applicants already have the comfort of an existing relationship with the CSSF.

A favoured domicile

Luxembourg already enjoys a significant advantage when asset managers are deciding the most favourable domicile for their AIFMD management company because of its longstanding role as a home for conventional funds that benefit from the UCITS fund passport for retail cross-border investment vehicles.

Many groups that already have a business infrastructure and service provider relationships (especially with a depositary) in the grand duchy have the opportunity to develop further economies of scale if they establish a Luxembourg 'super-ManCo' authorised to manage and distribute both types of fund through their respective passporting regimes.

The synergies offered by Luxembourg are particularly attractive because it has already emerged as Europe's largest domicile and servicing...