Luxembourg Preferred Domicile For Cross-Border Fund Launches
State Street Corporation's latest research piece, the State Street 2018 Fund Strategy Survey, surveyed 250 asset managers globally and analysed how they are developing cross-border strategies, including the factors influencing their choice of fund vehicle, passport and domicile location.
According to the survey, 64 percent of respondents are planning to launch cross-border products in the next five years. During the same timeframe, cross-border fund domiciles are also envisioned to experience accelerated growth.
Just over two thirds (62 percent) of asset managers that responded to the survey plan to domicile their funds in Luxembourg, a 16-percent rise from today; 55 percent in Ireland, a 13-percent increase from today; and 25 percent in the Cayman Islands, a six-percent increase from today. All three domiciles are among the top five most sought-after locations, with Ireland expected to overtake the United States and United Kingdom (both of which are jurisdictions historically associated with domiciling funds for domestic distribution).
“Asset managers are expanding geographically to bring new products to market and tap new growth opportunities,” said Liz Nolan, State Street’s chief executive officer for EMEA. “As cross-border strategies rapidly gain traction, asset managers will seek scale and efficiency in a cost-pressure environment by choosing domiciles where they can distribute across jurisdictions, structures and governance frameworks.”
Geographical dynamics also feed into the challenges asset managers face in launching new products; with the greatest cited as understanding the impact of local regulations on strategy, noted by 23 percent of respondents. This was followed by 21 percent who cited building brand awareness as most challenging; and 18 percent who found accelerating time to market a challenge.
“As cross-border products are increasingly seen as the optimal path for growth, asset managers are looking for domiciles with an established regulatory environment,” said David Suetens, head of State Street in Luxembourg. “Locations such as Luxembourg and Ireland that can meet regulatory obligations confidently and efficiently are seen as the natural choice by asset managers, allowing them to mitigate risk, achieve economies of scale and reach investors globally.”
To access the full findings, click here.