Private equity and real estate fund administrator Augentius has launched operations in Luxembourg, pending regulatory approval from the CSSF – the country’s financial regulator – and the Ministry of Finance.
Augentius has been looking into establishing a presence in Luxembourg for two years, but the final decision to set up in Luxembourg is a response to increased demand from the firm’s European and US clients in the last year, said David Bailey, the firm’s managing partner.
“We’ve got clients that want us to either open in Luxembourg, or they want to transfer their business to us from existing Luxembourg providers because they’re not getting the standards they’re looking for,” Bailey said. He added Augentius has lined up four private equity and real estate funds to launch in Luxembourg over the next two to three months.
Much of this demand stems the threat of the EU’s draft AIFM Directive. For most foreign offshore jurisdictions, such as the Cayman Islands, applying for an “passport” to market within the EU under the directive would prevent funds domiciled there from marketing to European LPs for three years. But Luxembourg has the advantage of being a member of the EU. In the last six to nine months, European funds worried the Directive will pass into law as written have been exploring foreign domiciles, Bailey said, and many Augentius clients have come to the conclusion that Luxembourg is best suited for their needs.
Augentius also said in a statement the creation and refinement of SICAR and SIF products have made the country more attractive to the private equity and property communities. SICAR is a fund structure specially designed for European private equity and venture capital funds. SIFs are used by a variety of investors and can invest in a wide range of securities.
The application process for setting up an office in Luxembourg has taken the better part of a year, Bailey said. After 17 Luxembourg funds had to halt redemptions due to investments with Bernard Madoff, the country has made the process more rigorous and thorough, and consequently it takes longer to register there than in other jurisdictions.
The next jurisdiction in which Augentius intends to set up “very, very soon” is Mauritius, Bailey said. This location will enable the firm to better service clients in Africa and India.
Augentius also relocated a US employee to Hong Kong and Singapore in early January, where he will begin building the Asian side of the business, Bailey said.