Many GPs set up their fund structures in Luxembourg because this is what LPs expect; why is this the case?
Pierre Weimerskirch: Luxembourg is known as the preferred financial hub of choice for setting up international funds in Europe. European LPs are already very familiar with the jurisdiction, its regulations, fund structures and don’t have to do additional new due diligence on investment structures, even when working with new GPs.
The depth of the knowledge, expertise and experience of service providers here is world renowned. It is a professional ecosystem that has a deep understanding of local and international nuances and knowledge of how international investment structures should function.
One of the key challenges GPs face in Luxembourg is with the regulator. What are the main problems with how the CSSF operates compared to other jurisdictions?
PW: We do hear very often that Luxembourg is tougher than other jurisdictions when it comes to anti money laundering (AML) and countering terrorism financing (CTF) rules. While this may relate to the enforcement of these rules, in the end all these requirements are based on the same EU directives.
All institutions are currently very sensitive to the topic as Luxembourg’s AML, and CFT systems are currently being evaluated by the International Financial Action Task Force. Nevertheless, Luxembourg remains very pragmatic and business oriented and the CSSF is responsive to concerns from stakeholders.
Another key challenge for GPs is service provision, with many third parties over stretched or suffering from high levels of churn. How can this be tackled?
Luxembourg is a victim of its own success. Our growing and highly international finance industry has been stretched to find adequate and experienced professionals. We have historically drawn heavily on cross-border workers from Belgium, France, and Germany, but now we are going further afield.
At Apex Group, and specifically in Luxembourg we started recruiting from Ireland and more recently launched our global mobility program ‘Jump’. Its aim is to attract and promote talent from within and offer professionals from as far as South Africa or Mauritius a chance to work within the business from various locations.
Also challenging in Luxembourg is setting up bank accounts, what can GPs do to create accounts for SVPs more easily?
Banks in Luxembourg are very strict. There’s a lot of documents to be provided and it comes back to the CSSF, AML and CFT enforcement. What we see is more GPs using digital banking solutions or banks across the border. As you don't need to have the bank relationship in the jurisdiction where you have the fund.
What’s your outlook for Luxembourg as a fund domicile over the coming years?
Luxembourg has established itself as a brand when it comes to investment funds. We have to go broader and make inroads with GPs from countries, and cities where we don’t have yet as many managers like Asia, Canada, and parts of North America like Texas or Miami. The current environment is a bit tougher and more difficult, however we still see a fair amount of new funds being launched.
