BC Partners is to set up a Luxembourg fund so it has an onshore presence in Europe following Brexit, according to the firm’s head of compliance, Andrew Devine.
“I think everyone [in the industry] is in the same boat,” he told delegates at the ALFI London conference on Tuesday.
If the UK was not leaving the EU the firm could have remained as a third country Guernsey portfolio manager, or converted its [London based] investment adviser into a portfolio manager, Devine said.
“We chose Luxembourg, because of its flexible commercial regime, it’s also a similar regime to the UK,” he said.
Client demand for Alternative Investment Fund Managers Directive-compliant funds also played into the decision.
“We had requests from clients to raise a fund that was not a traditional Guernsey fund. There were several LPs from France, Germany and Switzerland who asked for a full AIFMD structure, due to the challenges of using the national private placement regime to market in some of those countries,” he said.
He added that there are cost considerations in setting up an AIFMD regulated fund, such as the requirement to use a depository and employ a risk officer.
“It is an expensive structure, larger firms may need about €100-150 million in the vehicle to make it cost effective,” he added.
On regulation, the burden has never been greater for the firm, but wasn’t a deciding factor in its Luxembourg move; as a mega buyout firm it is subject to heavy regulation regardless of its choice of jurisdiction.
“We’re now subject to three significant regulatory regimes from the UK, the US and Luxembourg. In terms of which jurisdiction to choose, there are only certain jurisdictions that understand private equity and have a significant private equity market, with good service providers on the ground,” he said.