US Roadshow 2010 HEDGE FUNDS WORKSHOP

Transcription

1 US Roadshow 2010 HEDGE FUNDS WORKSHOP

2 US Roadshow 2010 Welcome Claude Kremer Chairman of ALFI

3 US Roadshow 2010 Richard Baker President & CEO Managed Funds Association (MFA) New York

4 US Roadshow 2010: WORKSHOP I Key Developments in the European Hedge Fund Industry and the Luxembourg Opportunity Moderator: Michael Ferguson, Ernst & Young Michèle Eisenhuth, Arendt & Medernach Marty Dobbins, State Street Bank Luxembourg S.A. Régis Malcourant, PricewaterhouseCoopers Jérôme Wigny, Elvinger Hoss & Prussen

5 Luxembourg - The European Hub for Hedge Funds Setting the scene Hedge-Funds like UCITS Non-UCITS Hedge-Funds Overview of the market Regulatory requirements Operating models in Luxembourg Regulatory developments Re-domiciliation Why Luxembourg Hedge Funds? Q & A

6 Overview of the market - UCITS Evolution of the hedge fund-like UCITS market AUM (EUR million) # products AUM HF like UCITS # HF like UCITS

7 Overview of the market - UCITS Strategies of hedge fund-like UCITS Equity Long/Short Market Neutral Commodity Absolute Return / Relative Value Index Linked Global Macro CTA Event Driven - Merger Arbitrage as well as Fund of UCITS HF

8 Overview of Market - UCITS Number of hedge fund-like UCITS ,0 25,0 83, ,0 68,0 60,0 21,0 16,0 131,0 47,0 55,0 127,0 13,0 10,0 37,0 47,0 121,0 39,0 114,0 91, ,0 30, ,0 45,0 84,0 Luxembourg Spain France Other Ireland UK Source : Lipper -Sum of UCITS Hedge Funds + UCITS 130/30 + UCITS Absolute return according to Lipper category

9 Regulatory requirements Comparison of legal structures available for hedge funds Eligible investors Investment restrictions Cross-border distribution UCITS Retail, institutional and professional investors Yes, quantitative & qualitative Cross-border distribution via European passport SIF Well-informed investors Only flexible principle based risk diversification requirements No European passport; distribution on a private placement basis Approval of initiator Yes No Prospectus Comply with detailed provisions No specific content of prospectus prescribed

10 Overview of the market Non-UCITS Hedge Funds The SIF success Story SIF Law 13 Feb 2007 Annual Monthly Source: CSSF Strong growth under the SIF Law since February 2007

11 Overview of the market Non-UCITS Hedge Funds 11% 2% 3% 11% 21% SIF investment policies 1% 1% 0% 29% 21% Fixed Income Mixed Fund of funds Real Estate Variable yield Futures and/or options Non listed Cash Other securities Source: CSSF

12 Key characteristics of all Luxembourg funds Flexible structuring possibilities Creation of sub-funds/multiple share classes No restrictions on dividend distribution No corporate income tax and municipal business tax No withholding taxes on dividends Access to many of Luxembourg s double tax treaties

13 Operating models in Luxembourg Luxembourg the service model for hedge funds Over 2,000 hedge funds and funds of hedge funds administered in Luxembourg Over US$ 190 billion of hedge fund assets administered in Luxembourg Growth of around 200% in last 3 years Leading hedge fund service providers present in Luxembourg Breath and depth of services offered Global distribution support US$ 190 billion in assets Over 2,000 funds

14 Regulatory developments UCITS IV

15 Regulatory developments Alternative Investment Fund Managers (AIFM) Directive Directive proposed in April 2009, could enter into force as early as 2011 Regulation of AIFM, indirect regulation of alternative investment funds (AIFs) One size fits all approach: all types of AIFs (HF, PE, RE funds, ) Creation of EU passports: for cross-border management of AIFs for cross- border distribution of AIFs to professional investors Open issues: Scope Third countries Depository Expected timeline for completion

16 Re-domiciliation Drivers for re-domiciliation G20 discussions Prohibition on investors investing in the so-called offshore tax haven funds Increasing pressure by home country regulators Accounting standards e.g. Fin 48 AIFM Directive

17 Re-domicilation Re-domiciliation of funds (incl. UCITS) from end 2007 to end 2009 Countries of origin Target countries Over 30% of re-domiciliations of funds between were to Luxembourg Source : Lipper

18 Why Luxembourg Hedge Funds? Long established financial center of first class reputation A world renowned Quality Brand Legal structures catering for all segments of the alternative investment funds industry Fastest growing alternative investment fund sector in the world Deep levels of expertise in all aspects of fund creation, administration and distribution A highly qualified multi-lingual workforce Highly respected regulator, and efficient supervision

19 Why Luxembourg Hedge Funds? Enhanced trend of conversion from offshore centers from Luxembourg Access to worldwide distribution Attractive tax regime Presence of global asset managers Expertise and know-how Commitment to excellence and reliability Stable jurisdiction, predictable planning and long-term investment decisions High conversion into Luxembourg Access to worldwide distribution

20 Q & A We are pleased to take your questions

21 Thank you for attending Please join us for cocktails

22 US Roadshow 2010 PE & REIFs WORKSHOP

23 US Roadshow 2010 Welcome Camille Thommes Director General of ALFI

24 US Roadshow 2010 Luxembourg a Vibrant Private Equity Hub Alain Kinsch EMEIA Private Equity Fund Leader Managing Partner Ernst & Young Luxembourg

25 I. The right environment for PE: the Luxembourg DNA Pro-Business attitude of authorities Quick and efficient approval/setup process Direct and personal contact with CSSF (regulator) and Tax Administration Binding verbal agreements with Tax Administration One of the world s most attractive tax regimes Flexibility, Security and Predictability Numerous tax-efficient structuring solutions Over 60 Double Taxation Treaties, continuous pipeline of new treaties Laws and regulations provide maximum structuring flexibility Investor protection Stable political, economic and social environment Unrivaled Financial Infrastructure Highly qualified and multi-lingual workforce Strong established reputation as a European on-shore financial centre centrally located Presence of global players Pragmatic & accessible supervisor Strong reputation of supervisor facilitates cross-border distribution Accessible: close relationship with market players Pragmatic interpretation of law and supervision

26 II. Luxembourg a vibrant PE Cluster Cluster of PE Skills & Services Use of Luxembourg for international PE acquisitions Specialized Private Equity back-office services (custody, accounting, reporting, value-added services) Specialized Private Equity tax consultants, lawyers and auditors Specialized section for SICAR file approvals and monitoring within the Luxembourg regulatory authority (CSSF) Existing local Private Equity GPs (f.ex. Mangrove, BIP, Luxempart), deals (f.ex. IEE, Skype, SBS Broadcasting) Existence of Working Groups and Associations dedicated to Private Equity activities in Luxembourg (LPEA, ALFI etc.) Private Equity solutions for Private Banking

27 III. Strong Private Equity Product Portfolio Regulated: the PE Fund family Standard Supervision UCI Part II Light Supervision SICAR SIF Unregulated: the PE Acquisition family SOPARFI > 25,000 Securitization Undertakings 24 Source: CSSF March 2010

28 IV. Processing center for PE: towards the middle- and back-office of European PE A large number of PE houses have their processing center for PE funds in Luxembourg Key competitive advantages Luxembourg is the unrivaled back-office of Europe s fund industry Numerous PE Houses have established offices with middle- and back-office operations in Luxembourg Third party service providers specialized on PE offer a large variety of services: Fund Accounting and Custody services Fund Operations (investor and portfolio transactions) Cash handling Capital Call facilities / Bridge financing Who has a PE middle- or back-office presence in Luxembourg? Examples 3i Apax BC Partners Cinven Colony CVC Eurazeo Lone Star PAI The Carlyle Group Warburg Pincus Who offers third party PE fund Administration in Luxembourg? The large institutional players either have or are building PE fund administration capabilities in Luxembourg Independent specialized PE Fund administrators are coming to Luxembourg.

29 US Roadshow 2010 Real Estate and Private Equity Funds - Luxembourg s Role as the European Center Moderator: Freddy Brausch, Linklaters LLP Georges Bock, KPMG Keith Burman, Brown Brothers Harriman Gilles Dusemon, Loyens & Loeff Raymond Krawczykowski, Deloitte S.A.

30 The Luxembourg Fund Model Summary overview of fund regimes Latest developments Global structuring efficiency Trends: Migration New thematic asset classes AIFMD 3 0

31 3 1 The Luxembourg Fund Model:

32 The Luxembourg Fund Model (I) INVESTOR/MANAGER LEVEL CONSIDERATIONS FUND LEVEL CONSIDERATIONS INVESTMENT LEVEL CONSIDERATIONS 3 2

33 The Luxembourg Fund Model (II) STRUCTURING FLEXIBILITY INVESTOR / INVESTMENT PROTECTION TAX NEUTRALITY/ EFFICIENCY 3 3

34 3 4 PE/VC/RE Investment Funds (AIF): Summary overview

35 Fund regime overview Regulation - eligible asset classes only - public distribution EU Passport - high level of regulation - risk capital only (including PERE) - qualiyfing investors only - medium level regulation - all asset classes - public distribution no EU passport - medium level regulation UCITS UCI Part II SIF SICAR - all asset classes - qualifying investors only - medium level regulation Structuring - flexibility 3 5

36 3 6 PE/VC/RE Investment Funds (AIF): Latest Developments

37 Luxembourg European Center for International Private Equity and Venture Capital Funds Leading EU center for regulated PE/VC funds More than 300 regulated PE/VC funds AUM in excess of USD 40 billion 850% increase in AUM over 5 years Leading PE/VC services providers Leading global PE houses > USD 40 billion AUM > 300 PE/VC Funds 3 7

38 Luxembourg European Center for International Private Equity and Venture Capital Funds European center for international/global players 3i American Capital Apax Partners Bain Capital BC Partners Carlyle Group CapMan Cinven CVC Francisco Partners Fortress Goldman Sachs Hellman & Friedman Investcorp JP Morgan KKR Kredietanstanlt für Wiederaufbau (KfW) Lazard LGT Capital Partners Oaktree Capital Permira Silverlake Capital Partners TPG Unicapital Warburg Pincus [ ] 38

39 Luxembourg European Center for International Real Estate Funds Leading European center for regulated real estate funds More than 150 real estate funds More than 35 funds of real estate funds AUM in excess of USD 50 billion 500% increase in AUM over 5 years Leading real estate fund services providers Leading global real estate (fund) managers 39 > USD 50 billion AUM > 150 Real Estate Funds

40 Luxembourg European Center for International Real Estate Funds European center for international/global players Aberdeen AMB Capital Aviva BlackRock BNP Paribas CBRE Investors Deutsche Bank Fidelity Franklin Templeton Heitman Henderson Global Investors Hines ING JPMorgan LaSalle Morgan Stanley Pramerica Prologis Tishman Speyer UBS 40

41 41 PE/VC/RE Investment Funds (AIF): Global Structuring

42 «Global» Structuring Efficiency Investor categories - international/eu institutional investors - family office investors - wealth/asset management Lux. Fund platform - legal certainty - structuring flexibility - investor protection - tax neutrality - Lux brand recognition SPV - tax neutrality - DTT access - legal certainty - all PE/VC/RE asset classes/strategies investments - well tested acquisition/financing and realisation scenarios 42

43 Luxembourg The European Hub for Alternative Investment Funds - Tax Treatment a practical case Investors Corporate Individual Partnership SIF Feeder Other Feeder Level 1 Luxembourg SIF Master FCP/SICAV Level 2 Luxembourg Lux-Finance HoldCo Level 3 Investment countries EU Assets Asia Property Owning Companies US Assets 43 Key objectives - optimize payout to investors - capital gain / dividend exemptions - no withholding taxes on distributions - minimize loss of foreign tax credits

44 Luxembourg The European Hub for Alternative Investment Funds - Tax Treatment a practical case Investors Pay out Dividend (Level 2) 357 Financing Income (Level 2 cost) 490 Level 1 Luxembourg SIF Master FCP/SICAV Tax Result Withholding Pay out 847 Dividend (Level 3) 350 Financing Income (Level 3 cost) 500 Level 2 Luxembourg Lux-Finance HoldCo Financing cost (Level 1 income) Tax Result Withholding 0 Pay out 354 Income Level 3 Investment countries Assets Financing Cost (Level 2 Income) Tax Result Withholding Source: KPMG Pay out

45 Luxembourg DTT Network 01. Österreich 02. Aserbaidschan 03. Belgien 05. Bulgarien 08. Tschech. Rep. 09. Dänemark 10. Estland 11. Finnland 12. Frankreich 13. Deutschland 14. Griechenland 16. Ungarn 17. Island 19. Irland 21. Italien 24. Lettland 25. Litauen 27. Malta 32. Niederlande 33. Norwegen 34. Polen 35. Portugal 36. Rumänien 37. Russland 38. San Marino 40. Slowakei 41. Slowenien 43. Spanien 44. Schweden 45. Schweiz 49. Türkei 50.Großbritannien 52. Usbekistan 55. Georgien 57. Moldau 59. Zypern 61. Albanien 62. Kasachstan 64. Kirgisistan 66. Liechtenstein 67. Mazedonien 74. Armenien 69. Monaco 72. Serbien 75. Ukraine 04. Brazilien 06. Kanada 29. Mexiko 47. Trinidad & Tobago 51. USA 60. Argentinien 68. Barbados DTT in force DTT under negotiation Israel 28. Mauritius 31. Marokko 56. V.A.E. 42. Süd Afrika 48. Tunesien 54. Indien 58. Bahrain 63. Kuwait 65. Libanon 70. Pakistan 71. Katar 73. Syrien

46 46 PE/VC/RE Investment Funds (AIF): Trends

47 AIF: Migratory Trends Why? Distribution/placement Regulation Consolidation (hub) Structuring Where from? Cayman, BVI, Bermuda Jersey, Guernsey How? Cross-border merger / reorganisation Contribution in kind Transfer of registered seat / effective PoM 47

48 PE/VC/RE Trends: Thematic Funds SRI funds Distressed (property) asset funds Green PE/VC funds Green infrastructure (wind, solar, water) funds Sharia compliant PE/RE funds 48

49 49 Alternative Investment Fund Managers Directive (AIFMD)

50 AIFMD Key objectives Systemic Risk Investor Protection Single Market Key issues: Scope Valuation Depository Delegation Third country issues Policy considerations legislative process What does it mean for existing funds and managers? What does it mean for future business? 50

51 51 Q & A

52 Thank you for attending Please join us for cocktails