Nathanael Benzaken, Deputy Head of the Alternative Investment Business Line at Lyxor AM

xxxxxx xxxxxx xxxx xxxx

le 10/06/2013 L'AGEFI Hebdo

Will the implementation of the AIFM directive on 22 July create real opportunities for alternative fund managers?

It is undoubtedly an excellent opportunity since it will bring the European hedge fund industry onshore from its offshore environment, which corresponds to a need among many investors. Furthermore, fund managers will now be able to market their products to their professional clients, whereas our marketing activities have until now been strictly controlled, since in the case of offshore funds we could only respond to unsolicited requests. The private placement procedure, which is likely to disappear gradually, was somewhat complicated. We are also convinced that many investors, in particular European institutional investors are interested in hedge funds, but refrained from investing in offshore products for regulatory reasons, and also because of internal rules. We even expect that institutional clients that already invest in alternative management solutions will also want to favour onshore solutions at the expense of offshore solutions.

In your opinion, where will these European hedge funds be mainly domiciled?

Historically, fund managers have tended to favour Luxembourg and Ireland for the domiciliation of their alternative funds and the AIFM directive is likely to confirm the special status of these two centres. For our part, we intend to start transferring offshore funds from Jersey to Luxembourg this summer. Therefore, there will be a transition period, during which we will maintain an offshore offering and an onshore offering, before the range is switched onshore. However, from 2015, the European Union is due to offer non-European funds a selective passport solution, which will enable them to be marketed in all European countries, and the financial centre of Jersey could benefit from this. However, we are not banking on this development and we prefer to favour the new regulatory framework, which is better suited to the institutional market.

Which countries are likely to have the greatest appetite for these new offerings?

The UK, the Netherlands, Germany, Italy and the Scandinavian countries have the largest number of investors, pensions funds, insurers and large companies, open to alternative funds. France is lagging somewhat behind, but this new regulatory framework could trigger a redevelopment of the market. In the past, French multi-managers have based their development above all on foreign investors.

Won’t the existence of a dynamic alternative UCITS fund market be an obstacle to the development of this onshore alternative funds offering?

It is true that UCITS are an excellent tool for distributing certain alternative strategies. But these UCITS are subject to serious constraints, in terms of liquidity, diversification, leverage, the use of short positions, which prevent them from implementing a large number of strategies, such as event-driven strategies, credit and asset strategies, such as loans and commodities. In addition, these funds offer private clients access to alternative management solutions, with a reasonably low minimum subscription, often around 10,000 euros, whereas the funds covered by the AIFM directive are intended exclusively for professionals, with a minimum subscription of 125,000 euros for example in Luxembourg. That is why we see them as very complementary. Moreover, initially, we will choose to launch, on our new platform, ten or so diversified strategies which are not in competition with alternative UCITS.

Are you also banking on the image of these regulated European alternative funds to market them outside Europe, based on the UCITS model?

These alternative funds will certainly be of interest to investors from countries which have not put in place local regulations governing alternative management. We are seeing expressions of interest in these new vehicles from Latin American pension funds, for example, and we will be able to rely on our sales teams outside Europe, which already distribute our alternative management offerings, our UCITS products and our managed accounts platform.

A lire aussi