Big four accountancy and advisory firm Ernst & Young has published the first edition of Hedge Funds in Luxembourg
– a technical guide.
The 130 page publication provides a comprehensive guide to the establishment and
running of Luxembourg hedge funds, along with details of the key regulations
applicable.
Luxembourg administers hedge funds and funds of hedge funds with combined assets
representing around 10% of the global hedge fund industry.
With the introduction
of the Specialized Investment Fund (SIF) Law in February 2007, there is strong
growth in this sector; Ernst & Young expects that this growth will be sustained
going forward.
On top of this, with continued convergence between traditional
and alternative products, Ernst & Young also sees strong growth in the so
called “sophisticated UCITS” segment; these sophisticated UCITS
are in many cases replicating certain types of hedge fund strategies.
On the global front, Ernst & Young’s 2007 Global Hedge Fund Survey
– Navigating New Complexities identified three key challenges: managing
operational risk, attracting and retaining talent, and managing the growth of
the business. Finding, hiring and retaining the "right" people remains
the key theme in attempting to deal with all these challenges.
According to Ernst & Young, three key trends also stand out. Firstly, institutionalization
of the hedge fund industry continues, both in terms of the way hedge fund managers
organize their own operations and in terms of the investor base.
Secondly hedge
funds are diversifying into such areas as private equity and real estate.
Thirdly,
in terms of asset flows, the big are continuing to get bigger; it is estimated
that around 5% of the total hedge fund managers manage 80% of the global hedge
fund assets.
Ernst & Young also welcomes the recent development of industry best practice
standards which aim to address areas of concern such as disclosure, valuation,
risk management, fund governance and shareholder conduct.
Launching the guide, Michael Ferguson, E&Y Asset Management Leader observed that: “The
trends and developments we see in the hedge fund industry are indicative of
a maturing industry."
"Luxembourg is in an excellent position to benefit from
this, offering flexible onshore solutions for structuring and distributing hedge
funds. This guide is one of our contributions to the promotion of Luxembourg
as a leading hedge fund centre.”
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