AIFMD prompts shift onshore for funds
The Alternative Investment Fund Managers Directive (AIFMD) has prompted strong growth in European fund domiciles, with total Assets under Management (AuM) in the EU growing by 13 per-cent to $3.7 trillion, according to a study by the Association of the Luxembourg Fund Industry (ALFI) and Oliver Wyman.
Luxembourg, home to 60 per-cent of EU alternative funds, grew by 11 per-cent between 2010 and 2013, with an additional 169 funds electing to domicile in the country. The strongest growth came from private equity and real estate. Ireland, which is the domicile of choice for 21 per-cent of EU alternative funds, grew by 58 per-cent, which was driven primarily by the surge in hedge funds choosing to domicile there. Ireland has successfully capitalised on its strong reputation for hedge fund administration, with 40 per-cent of hedge funds globally administered there.
Malta is also emerging as a strong domicile and is successfully catering to niche or smaller managers with less than €20 million, compared with Luxembourg and Ireland, which typically service managers running around €80 million to €100 million. Stefan Jaecklin, partner at Oliver Wyman and the report’s co-author, speaking at the ALFI European Alternative Investment Funds conference in Luxembourg, said Malta had marketed itself as a specialist domicile.
Cayman Islands grew its market share from 39 per-cent in 2010 to 43 per-cent in 2013. A number of non-EU managers are circumventing the EU for the time being so as to avoid the compliance obligations under AIFMD. Many are still uncertain about the rules and are adopting a wait and see approach before marketing to institutional investors in the EU. Cayman Islands is still the dominant domicile hedge funds, accounting for 60 per-cent of market share.
Funds domiciled in Delaware remained steady too, said the report. Fifty-seven per-cent of private equity vehicles are domiciled in Delaware although Luxembourg dominates the EU for private equity with 90 per-cent of onshore private equity vehicles domiciled there.
However, the Channel Islands saw their market share of funds drop, as did other Caribbean domiciles such as Bermuda and the British Virgin Islands (BVI). “Some of the smaller offshore centres in the Caribbean and Channel Islands have lost market share, and they are not faring very well,” said Jaecklin.
The study said interest in alternative UCITS structures had risen significantly since the financial crisis as investors increasingly demand enhanced transparency and liquidity within a regulated framework. AuM in alternative UCITS stands at just over €160 billion, a growth rate of 63 per-cent since 2010, said the study.