Luxembourg, 18th December 2019
In recent years, Luxembourg has become one of the most popular jurisdictions for Private Equity (PE) funds with multiple large international houses setting up and conducting business there.
The benefits of doing business in Luxembourg are many: a business-friendly environment, a flexible and efficient fiscal and legal framework, backed by a direct links to Europe. According to ALFI, Luxembourg now accounts for 4.3% of the global private equity fund industry and this number is set to rise.
General Partners (GPs) also enjoy the benefits of outsourcing their fund administration services through greater efficiencies and improved market knowledge. As fund managers outsource more work than ever to third-party administrators, fund administrators face both operational challenges and opportunities for growth in 2020 in this evolving market:
1. FUND STRUCTURES ARE BECOMING MORE COMPLEX
PE firms are expanding their operations across continents, into new jurisdictions and investments. They need guidance from their administrators in navigating differing local requirements – both regulatory and operational. Centaur handles the demands of complex structures for its clients across multiple jurisdictions and legal forms. Their experience helps them achieve results that would be challenging and time consuming for GPs to achieve on their own.
Antonio Frias, CEO of Centaur Luxembourg, comments: "Centaur has a presence in jurisdictions such as Luxembourg, Ireland, Guernsey, the USA, Bermuda and the Cayman Islands which has enabled us to provide local administration solutions for clients. Fund structures have become vastly more complex over the past few years and Centaur provides the skillsets that are simply not available internally with PE managers.”
He continues: “We recruit the best talent, both local and multijurisdictional. It is challenging to recruit skilled teams in this area and Centaur is working hard in Luxembourg towards the goal of having the most experienced team in the industry.”
2. CLIENTS SEEK TRUSTED LONG-TERM PARTNERSHIPS
As asset managers outsource increasing responsibilities to third-party providers, they are focusing on building long-term working relationships with administrators. Value and service quality has become the primary focus - Managers stress the importance of being valued, understood and serviced by an administrator that has the flexibility and expertise to grow with their business.
Antonio explains: “At Centaur, we are finding that PE clients are moving away from short-term opportunistic transactions towards long-term, structured relationships. We support managers with the functionality and visibility needed to service existing investors and attract new ones.”
3. TECHNOLOGY WILL TAKE AN EVEN BIGGER ROLE
GPs are growing more serious about offering the long-term reliability and a transparent audit trail that investors now demand. As a result, administrators are realizing that they need to increase their technology capabilities to service increasing complexity in fund structures and investment strategies.
Antonio says: “Leading fund administrators, such as Centaur, invest heavily in their technology platform. This ensures open, transparent, customizable and most importantly, secure reporting, based on client requirements. PE firms can reap the benefits of these systems without the cost and time associated with implementing and maintaining in-house systems.”
Antonio concludes: “The trend to outsource is set to continue as market pressure remains for GPs to deliver tighter accounting processes with greater transparency. Using a third-party administrator such as Centaur adds credibility to PE funds. Our focus on long-term partnerships is well-known in the marketplace – we have not lost a client since our inception 10 years ago. We pride ourselves on around the clock support using the best people, backed by the best processes and technology in the industry.”
ABOUT ANTONIO FRIAS
Antonio Frias is CEO of Centaur Luxembourg. Antonio is a qualified accountant who has worked with leading international financial services companies in North America and Europe since 2001. Prior to his appointment as CEO of Centaur Luxembourg, he was Head of Operations of Centaur Fund Services. Prior to joining Centaur, Antonio was a Vice President for Citi Hedge Fund Services (subsidiary of Citigroup Inc.) in Bermuda. For more information about Frias, see his LinkedIn profile.