Back in 2015 nearly half of European-focused private capital funds were structured in either the UK, Jersey or Guernsey. By 2018 that had fallen to under a third and Luxembourg had jumped from 9% up to 28, says Daniela Klasén-Martin.
In order to mitigate passporting difficulties triggered by hard Brexit, many large funds adopted a multi-jurisdictional approach adding political momentum to third party management companies.
Whether in-house or outsourced, jurisdictional agnosticism will continue to be important for large funds, for smaller funds, from a pricing perspective, outsourcing will be a viable option to achieve this.
On another front, what is the importance of cost in domiciling decisions compared to other factors like transparency, robust regulation and ESG?
For managers considering domiciliation, cost is a diminishing factor. As investors become more involved so do considerations around transparency, robust regulation and ESG.
We are already seeing a shift towards better regulated jurisdictions that were previously price prohibitive.
Accelerated by Covid-19, the momentum around sustainable finance will remain a keystone issue for years to come.
We have already seen hugely positive change in this arena, as of Jan 2021, 195 countries have signed up to the Paris Agreement. The EU taxonomy has been instigated and the number of ESG/impact funds is rapidly increasing.
Sustainability and transparency are top of mind for investors and managers. Jurisdictions that forge successful frameworks to support this will be favored by decision makers but jurisdictional agnosticism will likely continue to be an ironclad strategy for bringing products to the whole European market.
Daniela Klasén-Martin is group head of management company services and managing director Luxembourg at Crestbridge.
