STOCKHOLM! MAY 4, 2015! LUXEMBOURG SOLUTIONS FOR FUND DISTRIBUTION!

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1 STOCKHOLM MAY 4, 2015 LUXEMBOURG SOLUTIONS FOR FUND DISTRIBUTION

2 27 Our panellists Moderator: Marc-André Bechet, Director Legal & Tax, Association of the Luxembourg Fund Industry (ALFI) Experts: Johan Lindberg, Director, Sales & Distribution, RBC Investor & Treasury Services, Luxembourg Charles Muller, Partner, KPMG Luxembourg Kim Pilgaard, Managing Director, Nordea Investment Funds S.A., Luxembourg Florence Stainier, Partner, Arendt & Medernach S.A., Luxembourg

3 The Luxembourg Fund Industry at a glance 3,893 investment funds (as of February 2015) 13,902 portfolios (as of February 2015) 18% growth in 2014 Net subscriptions account for 52% 42% of net sales in Europe Sweden among top 10 by origin of fund promoters Number 1 fund center in Europe, 2 in the world 28

4 29 Management Company and Distribution Fund Board of Directors Management Company Board of Directors Management Company Conducting Officers Internal Committees Management Company Functions Internal Audit Compliance Risk Management Investment Management Delegated Functions Fund Administration Distribution Appointed by the Fund Depositary Bank External Auditor Risk Management Framework (investment, counterparty, liquidity, operational, etc.)

5 Management Company & Distribution Different operational models Role of ManCo in distribution Testimonial: Why Luxembourg? Substance 30

6 Luxembourg funds: the vehicle of choice for cross-border distribution Luxembourg: The gateway to the European Union and beyond Setting-up and authorisation of the fund in Luxembourg Passport for distribution in 28 other EU Member States Access to non-eu jurisdictions Top priorities for opening new markets: Mainland China Brazil, Mexico Australia Canada 31

7 Luxembourg funds: the vehicle of choice for cross-border distribution Luxembourg: The gateway to the European Union and beyond Sweden, 67% France, 63% Poland, 94% Germany, 61% Switzerland, 67% Bahrain, 75% South Korea, 96% Japan, 59% Taiwan, 76% Hong Kong, 71% Peru, 46% Singapore, 69% Chile, 66% Sources: Global Fund Distribution analysis - December 31,

8 Luxembourg funds: the vehicle of choice for cross-border distribution Principal markets for distribution of Luxembourg investment funds (in terms of the number of registrations) Europe Asia Pacific Americas Germany Switzerland Austria France United Kingdom Netherlands Spain Italy Sweden Finland Belgium Norway Singapore Denmark Ireland Portugal Chile Greece Hong Kong Liechtenstein DE CH AT FR UK NL ES IT SE FI BE NO SG DK IE PT CL GR HK LI Sources: Global Fund Distribution analysis Poster

9 Luxembourg funds: the vehicle of choice for cross-border distribution Growing your business Value-added services as a support to distribution Passport Value-added services for registration and distribution 34

10 Sources Cerulli Associates 35

11 Demystifying MiFID 2 The basics MiFID: Impact on distribution Solutions 36

12 AIFMD First Reflections Authorised / Registered AIFMs: 799 UK, France, Luxembourg No 3 Passport for distribution in 15 countries Limited Partnerships:

13 AIFs A New Brand? AIF brand Retail distribution 38

14 Luxembourg: a fully fledged market infrastructure 69 Custodians Stock exchange share classes listed Financial Sectors Prof. (PSF) funds EUR billion in AUM jobs Distributors 1. Private Banks 2. Life Insurance 3. Platforms 160 Fund Administrators 386 Management Companies (including 3rd party ManCo) Auditors/ lawyers Regulator CSSF 39

15 THANK YOU

16 MADE IN LUXEMBOURG CROSS-BORDER SOLUTIONS FOR SWEDISH INVESTORS LUXEMBOURG: AN ATTRACTIVE AND DYNAMICALLY GROWING PLATFORM FOR PRIVATE EQUITY AND VENTURE CAPITAL FUNDS STOCKHOLM MAY 4, 2015

17 42 Our panellists Moderator: Anja Grenner, Private Equity & Real Estate Leader, SGG Luxembourg Experts: Alain Farana, Managing Associate, Linklaters, Stockholm Stefan Holmér, Managing Director, EQT Management, Luxembourg Magnus Lekander, General Counsel, East Capital, Stockholm Lionel Noguera, Partner (Tax), Bonn & Schmitt, Luxembourg

18 43 Agenda The advantages of Luxembourg from a Luxembourg and a Swedish perspective Structuring a PE and a VC Fund The Luxembourg Limited Partnership Case Studies: AIFMD solutions in practice The Luxembourg Operating Model The Luxembourg Cluster Concept

19 Advantages of Luxembourg from a Lux. perspective... and from a Swedish perspective Flexibility and Stability Legal and administrative framework: PE-specific laws and infrastructure Fin. Services are a key sector in terms of GDP (36%) Fiscal transparency of the vehicles Modern investment fund tax law Unique infrastructure of the financial sector The concept of EU fund distribution was implemented in Lux with UCITS in 1986 and transposed to AIF in 2013 PE The development of the Private Equity sector is top on the agenda of the Luxembourg government Distribution in the EU to: Institutional investors Professional and semi-professional investors with or without EU-passport Private investors Pragmatic legal framework / experienced and accessible regulator VAT exemption for the administration of Investment Funds 44

20 45 Structuring a PE and VC fund Non regulated: Soparfi / AIF SICAR SIF Corporate type Non- Corporate type Corporate type Non- Corporate type Corporate type Non- Corporate type SCA SA SCS SCSp SCA SA SCS SCSp SCA SA SCS FCP SCSp Distribution regimes: AIFMD compliance (with / without size exemption) EuVECA (AIFMD «light») Private placement

21 The Limited Partnership Regime Modernisation of the existing regime for Limited Partnerships (S.C.S.) and introduction of a new structure without own legal personality (S.C.Sp.) Background / Solution Due to the lack of flexibility of the existing partnership law, Luxembourg could not compete with other jurisdictions Introduction of a Best-in-class solution, compared to other internationally available structures Main characteristics Set us as regulated or unregulated vehicle Contractual freedom Confidentiality List of activities limited partners can perform while maintaining their limited liability Ownership of assets of the S.C.Sp. and restrictions of the rights of the creditor Full tax transparency and neutrality with regards to Lux. direct taxes (income / net wealth / municipal & business tax) Result Many PE houses that used to structure their funds via Anglo-saxon LPs now use Luxembourg LPs 46

22 Case Study: East Capital Luxemburg ManCo with dual-license (UCITS & AIFMD Management company dual licensed (UCITS & AIFMD) Cross-border management of feeders ü Central hub for services procurement, delegation, and supervision ü Passporting and management of distribution network ü Retaining risk management and compliance ü Investment committees for certain AIF strategies East Capital (Lux) S.C.A, SICAV-SIF (AIF platform) Management Agreements East Capital (Lux) S.A., SICAV (UCITS platform) Delegation and Services Procurement East Capital Asset Management S.A. (Luxemburg) Investment Managers (Local) Fund Administration (Luxemburg) Investment Advisors (Local) 47

23 48 Case Study: East Capital: From crossborder UCITS to cross-border AIFs? Sweden" Russia Fund (Feeder) Baltic Fund (Feeder) East European Fund (Feeder) Balkan Fund (Feeder) Turkish Fund (Feeder) 100% Luxembourg East Capital (Lux) SICAV Russia Fund A SEK (Master) Baltic Fund A SEK (Master) East European Fund - A SEK (Master) Balkan Fund A SEK (Master) Turkish Fund A SEK (Master) China Fund East Asia Fund

24 Case Study: EQT Fund examples* EQT Ventures (GP) EQT Holdings AB EQT Fund Management S.à r.l. (AIFM) Sw Lux INVESTORS EQT Ventures (The Fund) Investment platform Sub Fund I EQT Sr Debt FCP-SIF (The Fund) Sub Fund 2 Sub Fund 3 Sub Fund 4" INVESTMENTS" INVESTMENTS" Global * Simplified Structures 49

25 The Luxembourg operative model General Partner (GP) Limited Partners (LPs) Limited Partnership (LP) SCA or SCSp/SCS Portfolio management Risk Management Compliance Valuation Investments Distribution Delegates Administrator, transfer agent, domiciliary agent Internal audit Service providers Depositary Auditor Lawyers Holding company (SPV) Underlying asset (indirectly held) Underlying asset (directly held) Investment adviser 50

26 Cluster Concept: a well-oiled machinery of different competencies Specialized Private Equity back-office services (depositary, accounting, reporting, value-added services) Professional personnel (independent directors, other directors, consultants, management companies) Existence of Specialized Private Equity tax consultants, lawyers and auditors The Luxembourg regulatory authority (CSSF) maintains the balance between control / supervision and openness and a sense for practicability and commerciality Presence of Middle/Back-Offices of many Top 20 PE Houses as well as headquarter to several local PE houses Cluster of Private Equity competencies Use of Luxembourg for international PE acquisitions 51

27 THANK YOU