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Private equity
Business report
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Leading Luxembourg fund industry figures generally don’t like to play up the talk of competition with Ireland. There is a r ivalry all the same. Hence the reform late last year of the 1994 Irish Limited Partnership Act. This change brings Irish vehicles into line with those in the grand duchy in terms of their absence of legal personality, confidentiality requirements, structuring flexibility, contractual freedom, tax transparency and the possibility of being able to use an umbrella structure. Little advantage “Although this new regime certainly reinforces the attractiveness of Ireland for alternative asset managers, the ILP doesn’t create any key differentiators compared to the well-established and familiar Luxem bourg solutions,” said Laurent Capolaghi, a partner and private equity leader with EY Luxembourg. He is referring to the Luxemb ourg regime which, in 2013, revamped the rules applicable to the common limited partnership (the SCS) and adopted a new, simplified form of limited partnership without legal personality (the SCSp). His colleague Vincent Remy, an international tax partner, agreed that the reform will give little extra advantage: “The time
Laurent Capolaghi Vincent Remy
to market will not be speedier, the flexibility and contractual freedom will generally neither be more--nor less--efficient,” he said. “It will also be interesting to consider certain aspects that may prove to be more restrictive, such as the limited use of leverage, the eligibility criteria for the directors, the creation of new compartments subject to pre-approval, certain investment restrictions or diversification requirements on a compartment basis.” Luxembourg and Ireland are neckand-neck in terms of alternative i nvestment fund net assets domiciled in these jurisdictions: €815bn and €796bn r espectively in the fourth quarter of 2020, according to the European Fund and Asset Management Association. H owever, and significantly, there are 42.5% more alternative funds based in the grand duchy than Dublin: 4,427 compared to 3,105. This points to greater flexibility to a range of investment strategies here. An individual decision “Lux or Dublin, I don’t think it’s a question of either/or,” said Martin Vogel, CEO of the fund services firm MDO, speaking to the virtual Alfi European Asset Manage ment conference in March. He said there were arguments to be made for either jurisdiction. “There are some significant nuances between asset classes, with one being maybe a little bit more suited for one than the other, and sometimes this choice is driven by double tax treaties,” he said.
Nevertheless, this move should keep Luxembourg on its toes. “As Ireland will aim to catch up with Luxembourg’s top position for AIF l aunches, it will be critical for the grand duchy to demonstrate, once more, its business-friendly stance, flexibility and ability to adjust quickly to align with market expectations,” said Remy. Words STEPHEN EVANS
ALTERNATIVE INVESTMENT FUNDS, 2020 Dublin and Luxembourg had nearly the same amount of assets under management in alternative investment funds at the end of last year. Source European Fund and Asset Management Association
Total net assets* in €bn
Total number of AIFs*
7,100
35,000
...
30,000
1,000
25,000
800
20,000
600
15,000
400
10,000
200
5,000
0
Ireland Europe * as of 31 December 2020
0
Luxembourg
EY Luxembourg
Ireland has just reformed its law on limited partnerships, bringing it in line with comparable structures in the EU’s leading crossborder funds jurisdiction, Luxembourg. How will this affect the appeal of these countries to alternative investment fund managers?
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FEBRUARY MAY 2021
Implication of Irish limited partnership reform