Inreasing role of debt funds
Debt funds play an increasingly important role in addressing the imbalance in liquidity supply/demand and helping businesses raise capital and stimulating economic growth. Regulators and policy makers in Europe are becoming aware of the benefits of non-bank intermediation and especially debt funds as they provide an alternative to the banking industry in proposing to the real economy a different source of financing with little maturity transformation and limited leverage. A key building block in the EU Commission’s Capital Markets Union (CMU) initiative for unlocking funding for Europe’s growth is to encourage “greater diversity in funding”.
Measures presented by the EU Commission in its “Investment Plan for Europe” for the short term include the implementation of the European Long-Term Investment Funds (ELTIF) regulation and ‘high-quality’ securitisation. The ELTIF regulation has entered into force in December 2015.
Why is Luxembourg the best place for debt funds?
- Over 70% of the top 30 debt fund managers worldwide are present in Luxembourg. Over more than two decades Luxembourg has offered an unparalleled breadth of solutions for debt funds including for debt origination and direct lending funds.
- Placed at the heart of Europe, Luxembourg is ideally positioned to help global debt funds deal with the complexity of European financial market rules and regulations (incl. distribution, banking regulations).
- Luxembourg is the ideal platform for pan-European and global marketing, with a proven track record in cross-border distribution.
- With over 50 years of history and over EUR 1 trillion in bond listings a year, Luxembourg is also a key domicile for European capital markets.
- All types of debt strategies are accommodated and have been successfully operating out of Luxembourg for a number of years, including: origination, secondaries, mezzanine, distressed, various debt instruments, etc.
- Open-ended, semi open-ended and closed-ended debt funds may all be structured, using a variety of Luxembourg legal forms and regulatory regimes.
- IFRS, Lux GAAP and US GAAP can be opted for. Valuation of the loans whether at fair value or amortised cost are both possible under certain circumstances.
ALFI issued guidelines "Debt Funds - An Alternative Source of Financing for the European Economy” providing detailed information on this topic.
Download the document here.