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    Highlights of the ALFI EAIF conference: videos, photos, reports! december 8, 2014    
          in this edition      
         
 
   

EAIF 2014: 600 attendees, 82 speakers, 45 exhibitors!

The ALFI European Alternative Investment Funds Conference took place on November 25-26 2014, and was attended by delegates from at least 20 countries.

In his introductory speech to the conference, the chairman of ALFI, Marc Saluzzi (on the left), said: "The 600-plus attendees at this year’s European alternative investment funds conference shows the huge interest in the AIFMD, in alternatives in general, and in Luxembourg."

He added that although the Luxembourg financial centre oversaw EUR 3tn in AuM, there is scope to improve its global position in alternatives. “Luxembourg is still behind the Caymans and Delaware in alternatives," Mr Saluzzi said. "Our goal is to build a balanced, sustainable fund centre."

The conference chairperson (day 1 morning sessions), Steven Libby, Asset Management Leader at PwC Luxembourg (on the right), noted the size of the opportunity for Luxembourg and for the alternatives industry in general. "There is a USD 2tn financing gap in infrastructure and a USD 5tn financing gap for SMEs. It is clear that the world economy needs alternatives."

 

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Conference photo gallery

To view the photo galery, please click on the picture below:

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Conference video

The video of the conference can be viewed be clicking on the image below:

 

Click on the image below and view the podcast of Marc Saluzzi, chairman on ALFI, who  discusses ALFI's ambition in the alternative world and highlights the growing importance of the European Alternative Investment Funds conference organized every year by the association in Luxembourg. The conference focuses on real estate, hedge funds and private equity sectors!

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Alternatives are resurgent

Delegates working in the three main alternative asset classes – real estate, hedge funds and private equity – mainly reported high levels of investor interest and largely favourable investment conditions. 

In real estate, it was noted that unleveraged returns in Europe will be 18-19% in 2014, and perhaps 10 percentage points higher for leveraged transactions. A Belgium-based real estate investor said: ‘I've never seen such demand for office space from banks and other companies’. Loans to value (LTV) are approaching pre-crisis levels, even if the terms are more stringent. Competition between loan originators is now so fierce that new entrants such as insurance companies are competing with banks.

The hedge fund industry, which has attracted criticism for recent performance, was strongly defended by practitioners. One argued: ‘Why is the hedge fund industry depicted as underperforming? Returns over the last 20 years were overall good.’ Amid the continuing search by pension funds for yield, many are now turning away from traditional bonds and are looking to hedge fund strategies to provide income from alternative sources. In some countries, however, there is unwillingness to address the complexity of hedge fund strategies.

Private equity fundraising and returns are also returning to pre-crisis levels, particularly in the mid-market tier, which has captured some of the flows that previously went to large buyout funds. There are indications too, of a comeback for venture capital (VC) after years of poor returns and fundraising following the dotcom crash in 2000. John Holloway, a director of the European Investment Fund (EIF), said although VC may not fully recover until 2020, it is already showing signs of an upturn. ‘Don't be cynical about VC,’ he told ALFI conference delegates. ‘Be positive, you may be surprised’.  He said the EIF has committed E10bn to more than 400 GPs over the last 14 years, and 6,000 European companies have received funding.

Conference attendees were also reminded not to ignore Africa as a destination for private equity capital. In anticipation of Africa's current 1bn population swelling and its middle classes expanding, there has been a six-fold increase in FDI in Africa in the last decade, said Bruce McGlogan of Maitland (on the left side on the picture), a South African investment firm. But specific investment solutions must be applied to the continent because of its geography and politics, which create barriers. Technology will be a major driver of increased investment flows in Africa, according to one African-based private equity firm.

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Creating AIF operating models

The transposition of the Alternative Investment Fund Managers Directive (AIFMD) into national law across Europe has put the emphasis on setting up compliant funds and using the Directive to the advantage of investment firms and their clients.

In response to the question whether the AIFMD passport works, Denise Voss of Franklin Templeton said: ‘We passported a Luxembourg AIF to five countries. Four were straightforward so we were satisfied with the process.’ Another Luxembourg-based investment firm noted: ‘We got a marketing passport for our AIF in just five days. I have nothing but admiration for the CSSF (the Luxembourg regulator).’

It was noted, though, that the rollout of AIFs across Europe can only be successful if sufficient depositary services exist. With the new strict liability rule, many depositories are cautious about the risks they are willing to assume. One investment firm said: ‘It was hard to find a depositary that could provide services for the UK, Netherlands and Luxembourg.’

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European fund domiciles benefit

One impact of the advent of AIFMD has been strong growth in European onshore locations. A report by ALFI/Oliver Wyman, presented at the conference, showed that the number of alternative investment funds in the EU has increased by 10% since 2010 and alternative assets under management are up by 13% over the same period.

Domiciles offering ‘one-stop-shop’ solutions gathered assets at the expense of domiciles with poorer infrastructure. Luxembourg, which accounts for 60% of EU alternative funds, grew by 11%, with the strongest growth from private equity and real estate funds. Ireland, which has a 21% market share in alternatives, grew by 58%, mainly due to its hedge funds expertise.

At the same time, the traditional offshore domiciles of the Cayman Islands and Delaware have continued to prosper, leveraging their powerful market positions.

Download the report here.

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Attractiveness of Luxembourg for alternative funds

Luxembourg is proving popular for the establishment for AIFs, just as it has been for UCITS funds for many years. One large Swiss fund management firm noted: ‘Luxembourg is attractive because it's comfortable with regulatory and legal regimes outside its own borders.’ Another said that gold-plating regulatory moves in some other European jurisdictions would drive more funds to Luxembourg.

A German-based firm said: ‘Our platform was in the Caymans, but with AIFMD and 60% of our investors in Europe, we decided to set up in Luxembourg. Meanwhile, a Nordic asset manager told delegates: ‘Our ambition was to grow outside Sweden and Nordics, so we set up a SuperManco in Luxembourg.’

However, Luxembourg can still improve. One delegate said operating an AIF in Luxembourg could be eased if Luxembourg GAAP was replaced by IFRS, while another reported that fund launches had been delayed because of a lack of service provider capacity amid huge demand in Luxembourg to establish AIFs.

 

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The private placement conundrum

The private placement regime across Europe has always been complicated, but has become even more vexed in the wake of AIFMD.

The treatment of private placements varies across Europe and is subject to constant change, conference participants noted. One said: ‘Fly-in fly-out investment business in Switzerland is no longer allowed to non-qualified investors.’ Another noted that the generous marketing options afforded under the old private placement regime in Germany are no longer available. A manager operating in Asia said: ‘Asia is tightening its private placement regimes, but HK is still pretty liberal and does not usually require registration.’

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