WHY LUXEMBOURG? OPPORTUNITIES FOR SWEDISH INVESTORS MAY 22, This event is organised with the kind support of:

Transcription

1 WHY LUXEMBOURG? OPPORTUNITIES FOR SWEDISH INVESTORS MAY 22, 2013 This event is organised with the kind support of: 1

2 WELCOME ADDRESS H.E. Mr Gérard Philipps Ambassador of the Grand Duchy of Luxembourg to Sweden

3 KEYNOTE SPEECH H.E. Mr Luc Frieden Minister of Finance, Grand Duchy of Luxembourg

4 A SWEDISH VIEW ON LUXEMBOURG Tonika Hirdman Director General, Fondation de Luxembourg

5 STOCKHOLM THE FINANCIAL CENTRE Thomas Östros Managing Director, Svenska Bankföreningen

6 INVESTMENT FUNDS: LUXEMBOURG THE GLOBAL OPPORTUNITY FOR ASSET MANAGEMENT Moderator: Anja Grenner, Associate Director, Ernst & Young Panelists: Martin Bock, Senior Manager, Deloitte Gast Juncker, Partner, Elvinger, Hoss & Prussen Prussen Francis Kass, Partner, Investment Funds Practice, Arendt & Medernach Pierre Kreemer, Tax Partner, Head of Real Estate & Infrastructure, KPMG Serge d Orazio, Head of Investment Funds & Global Custody, KBL European Private Bankers Testimonial: Anders Malcolm, Conducting Officer, SEB Fund Services

7 TOPICS Luxembourg Investment Funds A short overview of the current state of art ---- Ucits Where are we now and where do we head? Alternative Funds in Luxembourg Why Luxembourg for PE, RE or HF? AIFMD: How do we position ourselves vis-à-vis other countries? Possible structures The new Bill Sustainable Investments - What we do in Luxembourg 7

8 Luxembourg Investment Funds A short overview of the current state of art 8

9 Luxembourg and the worldwide fund industry Global net assets: bn 75 in % Worldwide Mutual Funds 50 LUXEMBOURG is the second largest fund centre in the world after the USA 25 49% 10 % 0 21% 12% USA Europe Asia & Pacific Figures as at December 31, 2012 Source: Investment Company Institute (ICI) - EU data are UCITS only

10 Net assets of Luxembourg domiciled UCIs Net assets in EUR billlions 3000, , , , ,399 IF/SIF PART II } NON-UCITS 1500, , ,596 UCITS 500,000 0,000 Figures as at February 28, 2013 Source: CSSF

11 Luxembourg investment vehicles CSSF Custodian Regula3on & Safety Less regulated Non regulated Soparfi More Regulated Auditor Central administra'on SICAR Lightly Regulated SIF Securi'- za'on More Flexible UCI UCITS Less Flexible UCITS and UCI EUR bn AuM distribution agreements for UCITS Thereof SIFs 272 SICARs (Risk Capital)

12 Ucits Where are we now and where do we head? 12

13 Luxembourg funds: the vehicle of choice for cross-border distribution Luxembourg market share of foreign cross-border funds registered for sale Sweden, 71% France, 70% Germany, 67% Switzerland, 70% Bahrain, 76% South Korea, 100% Japan, 61% Taiwan, 75% Hong Kong, 73% Peru, 64% Singapore, 71% Chile, 73% Source: Global Fund Distribution analysis December 31, 2011.

14 Net sales in Europe billions 97 Net sales of UCITS per fund domicile Q1- Q4 / Luxembourg Ireland United Kingdom Others Italy Spain France Figures as at December 31, 2012 Source: EFAMA

15 Europe s leading fund domicile UCITS Country Total assets under management millions Market share in % Luxembourg France Ireland United Kingdom Germany Switzerland Sweden Spain Italy Belgium Others Total Figures as at December 31, 2012 Source: EFAMA

16 UCITS History UCITS 20 December 1985 UCITS III 21 January 2002 UCITS IV 13 July 2009 UCITS V Expected 2013 Driving Forces Permit cross-border offering of open-ended investment funds to EU investors More asset classes eligible (bank deposits, units of other UCIs, MM and use of derivatives) Permit industry consolidation, improve efficiency and increase investor protection Responsibility of depositary, policies on remuneration, sanctioning regime Benefits Harmonization of investor protection rules Marketing through simple notification process - passport Widening of investment power and product offering in UCITS Enhanced RMP Principal amendments to UCITS regime: Simplified notification procedures KII EU-wide fund merger regime Management Company Passport Harmonize EU approach on eligible entities acting as depositories Clarify depository responsibilities Reduce conflicts of interest Facilitate enforcement Master-Feeder structures

17 UCITS IV- where are we now?

18 UCITS IV: New substance requirements CSSF Circular 12/546 for UCITS Management Companies or UCITS SIAGs: Notion of Promoter has been abandoned Head office in Luxembourg, consisting of a decisionmaking centre and administrative centre Own compliance function and own internal audit function Conducting Officers Requirements on the appointment and monitoring of delegates Management Information Principle of proportionality Principles relating to the freedom of establishment and freedom to provide services

19 UCITS V : depositary requirements Increased liability Increased costs Review of sub-custodian arrangements VAT charges as supervision is not exempt Annual certification of assets held

20 UCITS V : remuneration requirements General principles: Remuneration policies and practices applicable to staff with material impact on the risk profiles of the UCITS Fixed and variable components covered Proportionality principle Enhanced transparency / Disclosures Remuneration committee UCITS V: Variable portion more strictly regulated

21 UCITS topics and issues currently under discussion

22 Alternative Funds in Luxembourg Why Luxembourg for PE, RE or HF? AIFMD: How do we position ourselves visà-vis other countries? Possible Structures The new Bill

23 Luxembourg key success features for alternative assets Pro-Business attitude of authorities Efficient approval/ setup process Direct and personal contact with Supervisory Authority and Tax Administration Binding agreements with Tax Administration Flexibility, security and predictability Laws and regulations provide maximum structuring flexibility Pragmatic interpretation of laws and regulations Investor and investment protection Unrivaled financial infrastructure Highly qualified and multi-lingual workforce Strong established reputation as a European on-shore financial centre Presence of global players and services providers Strong reputation of Supervisory Authority

24 Luxembourg ALTERNATIVE investment vehicles CSSF Less regulated Non regulated Custodian Regula3on & Safety Soparfi Auditor Central administra'on Lightly Regulated Securi'- za'on More Regulated SICAR SIF More Flexible UCI UCITS Less Flexible

25 Luxembourg is a leading player in alternative assets (1) " ANY: # of SIFs and net assets in bn " PE: # of SICARs and net assets in bn SIFs Number of SIF SIFs Net assets in bn Net assets in bn. Number of SICAR

26 Luxembourg is a leading player in alternative assets (2) " RE: Market share by domicile (# of funds) " HF: # of units of HF and FoHF June 10 Dec 10 June 11 Dec 11 June 12 Dec 12 Hedge Funds Fund of Hedge Funds

27 The AIFM directive - what is it about? What does the AIFM Directive regulate? Opportunities Direct regulation of Alternative Investment Funds Managers (AIFM) Indirect regulation of : Alternative Investment Funds (AIF) Service providers to AIF Investors in AIF European AIF Brand Passport for marketing AIF in EU Passport for managing AIF in EU Risk Marketing via private placement allowed Marketing via private placement forbidden or restricted

28 AIFMD Directive How do we position ourselves vis-à-vis other countries? Degree of Readiness Luxembourg AIF Luxembourg AIFM Prudential Supervision Depositary Transparency Delegation Passporting Financial Sector and Government Highest compatibility - UCI/SIF/SICAR Highest compatibility and UCITS ManCo track record Already standard Already standard Already standard Already standard Luxembourg sets global standard for distribution Luxembourg financial sector actively involved Special task force established by the Minister of Finance, Luxembourg 8 February 2012

29 AIFMD SUBSTANCE VS. TAX SUBSTANCE: A SOURCE OF QUESTIONS LEADING TO DIFFERENT MODELS AIFMD Substance TAX SUBSTANCE Minimum equity to be considered and to be invested in liquid assets (EUR 125,000 or EUR 300,000) Senior management at the level of the AIFM to be genuinely active and competent. AIFM must engage human and technical resources Functions can be delegated AIFMD allows to appoint an AIFM located in another EU Member State than the Member State of the AIF DOMESTIC Lux: Statutory seat or central administration criteria subscription tax for regulated funds income/net wealth tax for nonregulated fully taxable companies INTERNATIONAL: Double Tax treaties (DTT): Place of effective management. Subscription tax not covered by DTT BILL: AIFM in Lux does NOT attract tax residency of a foreign AIF to Lux

30 AIFMD & possible tax mismatches AIFM A Country A: ALrac'on of tax residency of AIF based on effec've management Services Investors Country B: Tax residency of AIF in country of legal residence Possible double taxa'on AIF B PropCo PropCos Country A: No alrac'on of tax residency of AIF based on effec've management Country B: Tax residency of AIF in country of effec've management Double exemp'on

31 Structuring Options (I) * = AIFM GP (Lux.) SCS (Lux.) AIFM (Lux.) delegation Depositary (Lux.) SPV (Lux.) Investment Manager (Sweden) Target Target Target 31

32 Structuring Options (II) */** = AIFM GP** (Lux.) SCS (Lux.) AIFM (Lux.) Depositary (Lux.) SPV (Lux.) Branch (Sweden) Target Target Target 32

33 Structuring Options (III) * = AIFM GP (Lux.) SCS (Lux.) AIFM (Sweden) Depositary (Lux.) SPV (Lux.) Branch (Lux.) Target Target Target 33

34 Operational aspects Reporting Investment Advisor / Manager Risk Manager Portfolio Management Risk Management AIFM Valuation NAV Calculation Other functions (e.g. Administration, Marketing) Independent Valuer Central Administration Management Company Depositary Luxembourg AIF SICAV Luxembourg AIF FCP SPV 34

35 The New Bill AIFMD New status for depositaries for non-financial assets New regime for non-ucits ManCos The Limited Partnership Regime Carried Interest Regime 35

36 Sustainable Investments What we do in Luxembourg 36

37 Why Luxembourg for sustainable investments? Responsible Investment Funds in % of nb of funds Total of funds Rest of World 29% CH 4% UK 8% Belgium 16% Luxembourg 27% France 16% SIFs, SICAR and SV are flexible vehicles to structure SRI LuxFlag labels certify best practice Luxembourg institutions active in SRI ADA, ALFI, ATTF, ETIKA, LuxFlag Many activities with e-mpf, midis de la microfinance, dedicated ALFI SRI conferences,... Experienced service providers Important investors with EIF and EIB 37

38 LuxFlag labels to assure investors Slide 9 Launched in 2007 Launched in MIVs - $3.9 bn 6 EIVs - $0.6 bn 50% of worldwide AuM 1 US fund 1 French fund

39 SEB Coping with Change a practical example Point of Departure Successful Special Fond Manager Restructuring facing AIFMD Change of strategy to UCITS Delega'on opera'ng model Fund Board Milestones SEB FS How to transfer assets - clients How to organize own opera'ons Management Company Challenges Administrator Inv Mgr Distributor Cross border service provision Delega'ng party to service provider Repor'ng and interfaces Distribu'on / Retail

40 THANK YOU! 40