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Q&A: Robert Brimeyer, Alter Domus

Nicholas Neveling 29 October 2020

Alter Domus’s Luxembourg head Robert Brimeyer discusses navigating lockdown, the evolution of the relationship between fund administrators and private equity clients and why the KYC process would benefit from standardisation.

How did Luxembourg’s financial services industry come through the lockdown period?

Overall, I would say Luxembourg has come through lockdown well. All regulated entities were required to have sound business continuity plans in place before the Covid-19 pandemic, and although nobody could have anticipated what would happen this year, those processes have proven resilient.

The fund administration industry has also been fortunate to have made strong advancements in digitalisation. At Alter Domus, we normally have 1,000 people in our Luxembourg office, but during lockdown we had less than 10 people coming in to answer phones, open and dispatch mail and send faxes. It was a huge transition, but it went very smoothly because the digital infrastructure was already there.

One ongoing concern has been the large proportion of our workforce that live in Belgium, France and Germany —if they work from home beyond a certain threshold, their personal tax positions are impacted. Governments have been pragmatic and initially made allowances for this until the end of June and those allowances were then extended to the end of the year. We’re hopeful that those allowances will continue into next year as we continue operating under this new normal.

What about your clients across the alternatives space? How have they reacted and what impact has there been on new fundraising and fund formation activity?

It is important to point out that in the alternatives space, the fund cycle is a long one. It can take up to a year from the moment we win a new fund client to when the fund is actually launched, investors are onboarded, and capital calls can commence.

Although some fund launches may have been postponed, we continue to be on track to meet our annual sales target, and I sense that our peer group have had a similar experience. Launches may take a little longer, but overall the market has proven resilient. Many of our clients have been very quick to improve their liquidity positions early on in the crisis and none have faced any significant issues. However, medium and long term impacts will exist and will probably vary significantly depending on each fund’s investment strategy.

Alternative assets have undergone a significant period of growth and transformation during the last decade. How has the relationship between the fund administrator and client evolved?

Fifteen years ago, alternative assets were a young asset class in Luxembourg. There were only a few specialised service providers and most of them provided a very basic service. Another observation is that fund terms, as well as reporting requirements, were all quite bespoke at that time.

Today, fund administrators are more sophisticated and have built up specialised teams, systems and processes. There has also been a push for more standardisation of terms and reporting templates which has allowed for more automation to happen.

While in the past, fund administrators merely tried to fulfil client requests and instructions, specialised players are now actively supporting their clients to become more efficient and accepting more standardisation and automation. Administrators today are delivering real added value and are able to support managers in handling the complexity of regulatory compliance.

In the current market, what would you say a private equity firm looks for when deciding which fund jurisdiction to choose?

Investor preferences are the number one criteria. Investors will only back funds that are in credible jurisdictions where it is easy to do business. Luxembourg has a long track record as a fund structuring jurisdiction and has built a cluster of specialised service providers, a stable regulatory and tax environment and an attractive suite of vehicles for structuring funds. This is all it takes to be competitive in the eyes of fund managers and investors alike.

How has the focus on ESG changed the way firms report and think about their businesses?

ESG has moved away from nice marketing to something that firms and investors take very seriously. It has gone beyond a statement on a website to something that actually makes a difference in how companies operate. The work we do for clients on ESG is much greater than it was as recently as two years ago. With sound ESG reporting now in place with many fund managers, the focus has shifted to embedding ESG into investment decision making. Managers want to invest in robust target companies that deliver a meaningful contribution in terms of ESG and thereby generate sustainable added value to their investors.

A recurring theme for all stakeholders in the fund industry is KYC and AML requirements. Where do those regulations stand and is there anything that can be done to improve the process?

Complying with AML/KYC rules both on the investor and investment side is no longer a differentiator; it’s a “must have” or “must comply” topic where focus should now be on boosting efficiencies for all stakeholders. Many players have implemented investor portals and other ways to automate the KYC processes, but a lack of standardisation and efficiency across the market is penalising all stakeholders. Presently, every stakeholder has slightly different processes and standards, and investors have to provide slightly different identification packs to different funds. The industry should strive for more standardisation and efficiency around this process. 

Categories: Expert Commentaries

TAGS: Fund Administration Luxembourg Private Equity

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