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More than one year in the aftermath of Brexit, most of the financial players have made up their mind for a “post brexit” strategy. Looking at the announcements that have been made so far, Luxembourg appears to be a serious contender when it comes to re-domiciliation of funds.
Hard to say if that comes as a direct consequence of the said aftermath or if it is due to other factors but all market players over the past few months seem to have noticed a vibrant interest in setting up new Luxembourg funds. Reasons officially being put forward are that flexibility and sophistication of the legislation offer the right balance between investors’ needs and managers’ possibilities.
Because AIFMD regulations have been incorporated quickly, Anglo-Saxon players seem to be increasingly familiar with (and ready to take advantage of) the Luxembourg offer. On that front, one can only welcome initiatives regarding the special limited partnership widely replicating Anglo-Saxon limited partnership. Not to be forgotten is the introduction of the reserved alternative investment fund, a pragmatic outcome of the AIFMD, which competes with non-EU funds vehicles in terms of time to market and offer the much looked after EU marketing passport available under AIFMD.
It remains to be seen to what extent Luxembourg setups will be able to rely on delegates that could be located elsewhere.
In these competitive times, being over optimistic should however not be an option. Other countries, especially those active in the alternative asset management segment, openly plan to take advantage of Brexit. Some challenges remain particularly vivid, should Luxembourg wish to remain on the center stage, notably overall set up and maintenance costs of the funds as well as the ability to locate some key functions such as portfolio management or fund raising in Luxembourg.
It might also be the right time to consider whether Luxembourg will be able to leverage on the situation and demonstrate an ability to attract new assets classes such as hedge funds.