(even though we know it’s not perfect!)
Read on to discover why Luxembourg is still the best place to domicile your fund.
Attending another event lately, and as the subject turns to fund domiciling, we get the usual answers from the room, coupled with the usual frustrations. But this conversation has now been going for 20+ years. I think it might be time to update the narrative. The truth is that Luxembourg is still the only country in Europe to have the right mix of a stable political approach to funds, combined with a successful legal and tax regime.
I.e. One that is not going to accidentally levy double-taxation on portfolio investments or investor returns, and one that comes with solid security requirements – thereby offering a safe and transparent way for investors to invest.
Safe mechanisms which allow Funds to distribute all across Europe (and beyond) without issue. Imagine domiciling your fund in a country which later decided to change the rules? Half way through your fund cycle? Or half way through a fund-raise?
Or, in a location which required a completely separate domicile or tax ruling for every location or investor?
And that brings us to the next point: INVESTORS like it. They know it, they trust it, ”they won’t question a Luxembourg fund.”
Focusing on value creation
This translates into Asset Managers actually being able to manage their business of investing and producing returns, instead of worrying about legal, risk, and other middle and back office issues. The returns available in freeing up this kind of headspace for asset managers are huge. Legal, tax and compliance issues are both dramatic and dangerous.
As a former client once told me,
”we didn’t care what the Lux office was doing, until all the deals started collapsing, then suddenly, everyone cared.”
Everyone knows a horror story or two, of days gone by, where new Company Secretarial Managers would come in, and inherit a backlog of 2 years or more of Board minutes that still haven’t been written, recorded or filed in time.
But that was 10+ years ago now.
The days when Luxembourg offices haven’t worked as a part of a well-oiled machine have long since passed.
As have the days when Luxembourg employees were involved as an afterthought – right at the end of a deal or transaction.
Now we have profiles who are working not even in Asset Managers, but in fact, working in 3rd party Fund Administrators, who are not only handling the accounting and the transactions, but are actually involved in conversations with investors in the planning phases of activity in the funds; planning transactions, drawdowns, everything related to the major activities within a fund.
Having a functional middle and back-office you can rely on, is enormously important.
Among the room there were expressions of frustration around the ease of finding (and keeping) staff, but still the underlying point was agreed among almost everybody.
There is still no better place to domicile your fund in all Europe.
If you struggle with recruitment or company culture here, I don’t think it’s entirely fair to generalise the whole ‘Luxembourg’ thing anymore. You might just have the wrong people, or the wrong people partner. Luxembourg is attracting high quality talent from a lot of locations – including the UK and right across Europe, but for the majority of our roles, we hire right from within Luxembourg itself.
Rana is a Managing Director of Funds Talent; a Culture, HR and Recruitment Specialist for the Funds Industry. Along with being a company director, she is a passionate people person, and an executive head-hunter for the funds and asset management industry.
