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Accessing EU Alts Investors via Luxembourg Parallel Funds

Insights into why a parallel fund structure may offer a way for non-European Union (EU) based managers to access EU alternative investment fund investors and key operational factors to consider.

Fund managers in Asia-Pacific and the United States (US) are increasingly considering a Luxembourg parallel fund vehicle to access EU investors alongside an established domestic alternative investment fund. In this structure the vehicle typically sits alongside a non-EU ‘master vehicle’ and may be comprised of several parallel funds co-investing in the same assets. As the parallel structure is in effect mirroring the master structure, it may offer operational efficiencies compared to other distribution routes. However, there are numerous factors to consider including the roles of the various key service providers such as the depositary and fund administrator to ensure a smooth operating model and robust governance before launching a parallel fund structure. Northern Trust’s new paper explores key considerations from an operational perspective, including:

  • Luxembourg’s flexible structuring solutions tool kit for alternative investment funds which includes a variety of options, depending on the investor requirements and fund size under the wider ambit of the Alternative Investment Fund Managers Directive
  • Why the governance model should be discussed upfront as part of the structuring discussion

Why Parallel Funds?

Non-EU based managers looking to widen their investor base to European investors may seek to deploy a parallel fund structure as it offers a number of advantages:

  • A parallel fund replicates the successful domestic fund ranges, optimising the investment process
  • It helps managers access new capital by tapping into different investor pools, whilst leveraging the domestic funds track record
  • Parallel funds typically adopt the same or very similar investment and divestment policies, targets and risk profiles as the original fund, which makes them relatively quick to establish
  • They may also support managers to achieve operational efficiencies by being able to replicate some of their operational processes across both their domestic and European fund, together with offering a more cost-effective structure

To read more, download the paper.

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