www.pwc.lu Alternative Investments Conference 29 January 2014
Welcome Régis Malcourant Luxembourg
Agenda 9:00 9:50 AIFMD Lessons learned and strategic positioning post July 2014 9:50 10:30 Operating alternative funds in the current tax climate 10:30 10:45 Coffee break 10:45 11:30 AIFMD: New opportunities for the distribution of AIFs 11:30 12:15 EMIR and AIFMD: operational challenges for AIFs As from 12:15 Buffet lunch
Luxembourg as Alternative Investment Funds Domicile Myths or Realities? Régis Malcourant Luxembourg
Myths or Realities How important is the institutionalization of HF investors? Which is the fastest growing Alternative Investment Funds domicile? Which is the most successful Sophisticated Investment Vehicle in Europe? Which is the largest Alternative UCITS domicile? Luxembourg in the eyes of main HF service providers? Luxembourg in the eyes of major HF managers?
Global Hedge Funds by Source of Capital 100% 90% 80% 70% 8% 8% 12% 9% 18% 11% 15% 11% 15% 9% 9% 8% 26% 25% 25% 60% 50% 24% 23% 32% 14% 16% 22% Institutional Investors 40% 30% 29% 27 % 25% 20% 10% 44% 40% 30% 22% 23% 20% 0% 2004 2006 2008 2010 2011 2012 Individuals Fund of funds Pension funds Corporations & other Endowments & foundations Institutional money represents now more than 55% of the Global source of capital (FoF excluded!)
Global Alternative Investment Fund Domiciliation 45% 40% 40.1% % of hedge funds assets by main country of domicile 35% 30% 29.8% 27.7% 25% 20% 23.0% 20.8% 21.7% 15% 10% 5% 0% Source: HFR 11.4% 9.7% 6.9% 4.4% 3.3% 1.3% Caymans Delaware BVI Ireland Luxembourg Others 2008 2009 2010 2011 2012 Luxembourg posted the largest growth in term of relative weight of domiciled funds, from 1.3% in 2008 to 11.4% in 2012.
Sophisticated Investment Funds in Europe Number of sub-funds AuM in EUR bn 3,500 3,153 350 3,000 2,7 96 3,023 300 277 288 2,500 2,000 1,500 1,000 2,507 2,119 1,815 1,317 1,028 1,115 1,174 1,217 1,420 1,776 1,664 250 200 150 100 117 109 131 94 154 113 214 153 239 182 204 225 500 *SIFs estimated in August 2013 according to the av erage number of sub-funds by fund in 2012 50-2007 2008 2009 2010 2011 2012 Aug-13 0 2007 2008 2009 2010 2011 2012 Aug-13 # of SIFs # of QIFs SIF QIF Luxembourg SIF is the preferred sophisticated investment vehicle in Europe and the largest AUM collector
Alternative UCITS by domicile In number of sub-funds Others, 9.0% UK, 4.4% Germany, 4.5% Spain, 5.2% Luxembourg, 49.4% Ireland, 13.2% France, 14.4% 1 Alternative UCITS out of 2 is currently domiciled in Luxembourg
The top 10 HF / FoHF Administrators # HF / FoHF Administrators ranked by $AUA Present in Luxembourg? 1 State Street Yes 2 Citco Fund Services Yes 3 BNY Mellon Yes 4 Citi Group Yes 5 J.P. Morgan Global Fund Services Yes 6 SS&C GlobeOp Yes 7 SEI 9 Northern Trust Yes 9 RBC Inv estor Services Yes 10 Morgan Stanley Fund Services, Inc - - 8 out of the top 10 HF / FoHF Administrators are currently active in Luxembourg
The top 10 HF Managers # Hedge funds managers Location Assets (USD bn) June 12 HF, FoHF, Alternative UCITS domiciled in Luxembourg? 1 Bridgewater Associates Westport (US) 80.9 2 BlackRock NY /London 50.2 3 JP Morgan AM/Highbridge New Y ork 44.4 4 Man Investments London 41.4 5 Brevan Howard London 36.7 6 BlueCrest Capital Management London 31.1 7 Och-Ziff CM New Y ork 31.0 8 Winton Capital Management London 28.5 9 Standard Life Investments London 27.3 10 Angelo Gordon New Y ork 24.0 NO YES YES YES YES YES YES NO YES NO Source: The Hedge fund journal, Monterey 7 out of the top 10 HF Managers are currently active in Luxembourg
Contacts Régis Malcourant Hedge Funds Leader, Luxembourg 2014 PricewaterhouseCoopers, Société coopérative. All rights reserved. In this document, refers to PricewaterhouseCoopers, Société coopérative, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
AIFMD Lessons learned and strategic positioning post July 2014 Olivier Carré Luxembourg
AIFM licences Key challenges & lessons learned AIFM - Opportunity Monitoring of cash flows Safekeeping duties Oversight duties Liability regime 1 2 Depositary Function 3 AIFM - Conformity Depositary - Conformity Key Aspects Authorisation Conduct of Business Remuneration guidelines Conflicts of interest Authorisation deadlines Capital requirements Specific Provisions Management / Marketing Passport Functions and services Valuation Risk & liquidity management Delegation Substance 6 Transparency 4 Leverage 5 Reporting to regulator Disclosure to investors
AIFMD licences Where do we stand in Luxembourg? 1 12 AIFMs have officially been authorised (8 Chapter 15 UCITS ManCos) 2 Approximately 90 AIFM applications pending with CSSF 3 First AIFs prospectuses have been approved by CSSF
AIFMD licences How do we compare to other domiciles? AIFM applications and authorizations per domicile 400 350 300 350 In average 8% of the expected AIFMs are authorized 250 200 150 100 I 100 100 150 150 50 0 31 32 4 8 12 UK France Germany Ireland Luxembourg Licences Full scope AIFM (estimate)
Panel discussion What is your chosen AIFM strategic positioning after the AIFMD transition period end in July 2014?
Panel discussion What are the major threats and opportunities arising out of AIFMD?
Panel discussion How do you perceive the readiness of your peer asset managers?
Panel discussion How do you perceive the awareness of the distribution channels and institutional investors?
Non-EU AIFM marketing Non-EU AIF in EU Private Placement (2013 through 2018) Non-EU AIFM Non-EU AIF Caymans not on FATF blacklist US not on FATF blacklist Cooperation agreement between US and each EU country where AIF is marketed US AIFM must comply with transparency (and controlling interest provisions of AIFMD, if applicable) EU Investors Private Placement Rules Marketing to professional investors Retail investors continue to be subject to domestic (private placement) rules
Non- EU AIFM marketing Non-EU AIF in EU EU Passport as from 2015 Non-EU AIFM US not on FATF blacklist US AIFM must generally fully comply with AIFMD Non-EU AIF Cooperation agreement between US and Caymans and MSR Tax agreement between US and Caymans and MSR Jersey not on FATF blacklist Tax Agreements between Caymans and each EU member state where AIF is marketed Member State of Reference (MSR) Legal Representative EU Passport EU Investors Marketing to professional investors (MiFID) via EU Passport Marketing to retail investors continues to be subject to domestic (private placement) rules
Private Placement Map Private Placement allowed Private Placement conditioned Private Placement abandoned
Panel discussion Do you consider the AIFM passport as a must-have? Is private placement still an option?
Panel discussion What needs to be modified or enhanced under AIFMD 2?
Contacts Rudolf Kömen Conducting Officer, Credit Suisse Fund Management S.A. Andreas Rizos CFO, Golding Capital Partners Olivier Carré Partner, Luxembourg 2014 PricewaterhouseCoopers, Société coopérative. All rights reserved. In this document, refers to PricewaterhouseCoopers, Société coopérative, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
Operating alternative funds in the current tax climate Wim Piot Luxembourg
Contacts Wim Piot Partner, Luxembourg Begga Sigurdardottir Partner, Luxembourg Will Taggart Tax Asset Management Leader, US Oscar Teunissen Partner, Global and US Tax Financial Services and Sovereign Wealth Fund Leader, US 2014 PricewaterhouseCoopers, Société coopérative. All rights reserved. In this document, refers to PricewaterhouseCoopers, Société coopérative, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
AIFMD: New opportunities for the distribution of AIFs Christophe Saint-Mard Luxembourg
The marketing passport The Marketing passport In scope of the AIFMD marketing provisions 4 conditions: - Marketing of AIF ( a direct or indirect offering or placement); - At the initiative of the managing AIFM; - To professional investors domiciled or with a registered office in the EU; A notification process is required from Home to Host regulator to start marketing. Passive marketing or reverse solicitation outside the scope of AIFM Directive
AIFMD benefits Establishment of common requirements to achieve a passport to distribute on a cross border basis to professional investors - Consistent approach to market to professional investors in the EU Set up of minimum conditions for marketing in the EU without passport (Article 42 of the AIFMD directive) - Each M.S. can have stricter rules and may forbid marketing without passport to professional investors. To open the EU market to non EU AIFM/AIFs - What are the options to market in EU to professional investors?
Overview of the market access options 22 July 2013 Deadline for the implementation of AIFMD in the Member States 22 July 2014 Grandfathering provisions. Delay to apply for AIFM licence ESMA Decision on availability of EU Passport for non EU AIFM and non EU AIF ESMA Decision on Private Placement Regime 2013 2014 2015 2016 2017 2018 2019 EU AIFM/EU AIF EU PASSPORT EUAIFM/ Non EU AIF Private Placement EU Passport? Non EU AIFM/ EU AIF Private Placement EU Passport? Non EU AIFM/ Non EU AIF Private Placement EU Passport?
Market access options: Private placement Before AIFMD: National rules govern the ability to market non harmonised funds to professional investors; AIFMD: Articles 36, 42 and 43 set up minimum conditions for marketing in the EU without passport but M.S can have stricter rules and may forbid marketing without passport to professional (and may not allow marketing to retail investors). =>With AIFMD implementation, some M.S are reviewing/changing their PPRs
Market access options: Private placement Private Placement permitted to non-eu structures if: Cooperation arrangements are in place between AIF s country, AIFM s MS and target MS The AIFM complies with the AIFMD s transparency requirement (AR, reporting to investors/regulators) The AIF is not established in a country listed as a NCCT by FATF The targeted member states must allow private placement The AIFM complies with the specific Host MS additional country requirements for marketing to professional investors under PP
Market access options: Private placement There are important benefits for the investment fund industry to allow transactions under private placement But no regime at EU level and national regimes are more closing than opening to private placement Closing private placement between professionals for UCITS funds could be detrimental as institutional investors have the majority in UCITS funds Is the future an EU private placement regime or simply passport or nothing (ESMA decision)?
Contacts Marnix Aricks Managing Director, BNP Paribas Investments Partners Belgium Luc de Vet Managing Director, Citco Fund Services (Luxembourg) S.A. William Jones Managing Partner, Management Plus (Luxembourg) S.A. Christophe Saint-Mard Partner, Luxembourg 2014 PricewaterhouseCoopers, Société coopérative. All rights reserved. In this document, refers to PricewaterhouseCoopers, Société coopérative, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
EMIR and AIFMD: operational challenges for AIFs Lionel Nicolas Luxembourg
AIFMD Key dates AIFMD Areas Steps Entry into force 21 July 2011 AIFM set-up Level 2 measures by the EU commission December 2012 Deadline for the authorisation of AIFM 21 July 2014! Reporting Reporting to the Regulator Reporting in the financial statements 31 October 2014 (latest)! Closing following the! authorisation
EMIR Key dates EMIR Areas Provisions Timely confirmation Mark-to-market/Marking-to-model 15 March 2013 Clearing (OTC) Risk Mitigation Techniques (RMT) Dispute resolution Portfolio Compression Portfolio Reconciliation Collateral exchange (including margin requirements) 15 September 2013 To be defined? Central Clearing Clearing via CCPs 15 May 2014 (min.) 16 March 2015 (max.)? Reporting 12 February 2014!
The operational challenges EMIR AIFMD ISDA agreements Delegation Data availability Safekeeping Eligible counterparties Risk Management CCP Valuation Central clearing ESMA Oversight SLAs & contracts RMT Eligible collateral Regulatory technical standards Reporting Trade repositories Due diligence
The new operating model Investor! Heavily im pacted New actors AIF!!! AIFM Depositary CSSF! CPs Admin. Prime Broker Sub Custodian Trade Repository External Valuer CCP Clearing Member
Contacts Benjamin Gauthier Director, Luxembourg Franck Wassmer Deputy General Manager, BNY Mellon Lionel Nicolas Partner, Luxembourg 2014 PricewaterhouseCoopers, Société coopérative. All rights reserved. In this document, refers to PricewaterhouseCoopers, Société coopérative, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.