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Alternative Market Briefing

An increasing number of hedge funds have set up UCITS and AIF products over the last decade

Friday, May 13, 2022

amb
Julian Mayo
B. G., Opalesque Geneva:

The European funds market may be a complex environment, but ManCos are here to take on the burden of the paperwork and transform most funds into a European vehicle ready for distribution.

A management company, a.k.a. ManCo, is a company that performs collective portfolio management services (e.g. portfolio management, administration and marketing) of UCITS and/or alternative investment funds. Luxembourg hosts more than 300 ManCos with a UCITS or an AIFM (Alternative Investment Fund Manager) licence, or both.

ManCos have evolved over the years along with the funds industry. Furthermore, there is still untapped potential within reach for ManCos, explains Julian Mayo, head of business development at Universal Investment, a ManCo founded in 1968 with offices in Frankfurt, Luxembourg, Dublin, London, Hamburg and Krakow.

Over the last few years, Universal Investment has joined a small number of major international players in the market. Last month for example Universal partnered with EFA (European Fund Administration - Banque de Luxembourg, Banque et Caisse d'Épargne de l'État, Oddo BHF, Quintet Private Bank (Europe) S.A.) and saw it as another milestone to reach the ambition of becoming the leading European investor services platform and Super ManCo. Internationalisation is a keyword for Universal, as the firm looks to fund managers from within and outside of Europe.

Julian Mayo will present at the next Opalesque webinar on May 19th: MANAGER WORKSHOP: Market Entry Into Europe Made Easy (details below).

In this interview, Mayo talks to Opalesque about the convergence that has been taking place within the fund industry in Europe, how this has affected ManCos, what ManCos' clients want, and the polarised views of the European funds market.


Opalesque: Could you give a brief overview of Universal?

Julian Mayo: We are the largest independent ManCo and AIFM in Luxembourg and Germany: we provide the legal and technical fund structures for funds looking to set up in in Luxembourg, Germany as well as Ireland. We have on our platform over $800bn of client assets, 1,100 employees, and we work with more than 450 asset management firms worldwide.

Opalesque: How has the alternative investments industry evolved, from a ManCo's perspective?

J. M.: Over the last decade, there has been some convergence in the alternative fund industry in terms of what people look for and what people buy.

Retail investors and regulated institutional investors in Europe have generally put their money into UCITS-type structures for some time; it has been an established path over the last 30 years or so, starting with Luxembourg funds, and then Ireland and local markets throughout Europe.

The alternative to retail was almost a parallel universe in which products were typically domiciled in Cayman, BVI, offshore UK islands, Delaware, and various other jurisdictions, and were unregulated from an EU viewpoint. This was the domain of some institutions, endowments in particular, and some family offices, but also the fund of funds industry and the private wealth industry for the ultra-high-net-worth private market.

Opalesque: What about the convergence in the alternative fund industry?

J. M.: There has been a convergence over the last decade or so. An increasing number of hedge funds have set up UCITS-style products and more broadly alternatives are looking to set up AIF-type products.

One of the drivers for that is growing consumer demand. Furthermore, from the supply perspective, an alternative fund manager may find that the market segment for his particular product is quite mature and see a largely untapped market at the retail end of the market.

Opalesque: But growing demand is not the only factor.

J. M.: At the same time, there has been much greater oversight on the part of regulators in terms of what you can and cannot look at - a lot of this is a consequence of the Bernie Madoff scandal. So if you are a private bank in Switzerland or elsewhere looking after money for the HNWIs, there was an increasing risk that if you put client portfolios into products that were under-regulated, you were exposing yourself to greater regulatory scrutiny.

The final part of this development is that as a result of a low-interest rate world, the typical private investor or ultimate private investor portfolios had to change very significantly from the typical investments. We saw extreme cases in our home market of Germany: the German investors, who are known for being some of the most conservative investors in Europe, used to invest a very high ratio of their portfolios in the Bunds. In the last 10 years or so, there has been a massive quest for yield due to the low-interest rate environment. That has given rise to a huge increase in the demand for alternative products, in particular private debt, infrastructure, real estate, and anything which generates a yield. The ESG environment has also benefited, as renewable energy is seen as one potential source of income.

Part 2 of the interview will be featured in Monday's Alternative Market Briefing, Opalesque's daily newsletter.


Webinar:

MANAGER WORKSHOP: Market Entry Into Europe - Made Easy

Hear from our expert panel:

1. What is the set-up of the European market?
2. How does the structuring process for alternatives work in Europe?
3. How can managers get the best and most cost efficient guidance through the jungle of regulatory requirements?
4. Case Studies and practical examples

With:

- Dr. Sofia Harrschar, Country Head Universal-Investment-Luxembourg S.A.
- Markus Bannwart, Director, Head of Capital Markets and Fund Structuring Alternative Investments, Universal Investment
- Julian Mayo, Head of Business Development, Universal-Investment Ireland (UK Branch)

When: Thursday, May 19th, at 11 am ET / 4pm UK time / 5pm CET

Free registration here: www.opalesque.com/webinar/

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