Demand grows for Ucits and AIFM advice in Asia
Arendt & Medernach, Luxembourg's largest law firm, is receiving an increasing number of enquiries about the Ucits standard, Luxembourg funds law and the implications of pending European regulation from Asian clients.
Having set up in Hong Kong last year, it hired Nelly Zhang on May 10 to help deal with the increasing amount of business in the Hong Kong and mainland China markets.
Her experience in the Greater China legal profession, coupled with training by Arendt & Medernach in Luxembourg law, will enable the firm's Hong Kong office to foster closer ties with its clients in the region.
Zhang joined from the Hong Kong Bar Association, where she was the mainland affairs coordinator. She also acted as a translator and interpreter at various law-related, policy-making conferences and seminars.
Guy Harles, founding partner of Arendt & Medernach and head of international development and strategy, says: "Nelly's skills uniquely complement those of our Chinese-speaking staff based in Luxembourg. She will be a great asset to the firm, particularly in forging closer relationships with our Mandarin and Cantonese speaking clients."
The firm will also be moving more people to Hong Kong to cover corporate, capital markets and taxation; there should be six staff in the territory in the next six months.
Asset managers, as well as institutional investors, are increasingly looking for information about new trends emerging from the Ucits standard and forthcoming changes related to the alternative investment fund manager (AIFM) directive in Europe, says Stéphane Karolczuk, head of Arendt & Medernach's Hong Kong office.
The firm is also receiving a lot of enquiries from Asian firms about the Newcits standard and the double-tax treaty between Hong Kong and Luxembourg.
(The Ucits III directive opened up new possibilities for investment managers regarding, in particular, the use of derivatives, investments in structured products, other funds, financial indices, hedge fund indices and so on. Some fund managers are using those possibilities to implement alternative-investment strategies, in a format known as Newcits.)
The AIFM directive and the discussion of its various drafts over the past few months has created a lot of uncertainty about how Europe will regulate 'third country' asset managers, he adds. "There is divergence between EU institutions and EU member states as to how to cover this area," says Karolczuk.
Despite suggestions by organisations such as the Alternative Investment Management Association that market participants should wait until they know the outcome of the rules before acting, many fund managers are looking to pre-empt regulatory moves, to an extent, he adds.
"They feel that since they're going to be regulated anyway, they should rather anticipate and set up a lightly regulated structure in Luxembourg, for example, that is separate from those in, say, the Caymans," says Karolczuk. "That way, they remove some of the uncertainty.
"It's often investor-driven," he adds. If asset managers have EU-based investors, they prefer to have Ucits- and/or Luxembourg-compliant, lightly regulated vehicles, he says, and the larger firms are also thinking about Newcits.
There may well be regulations coming on Newcits, possibly to restrict Newcits to professional and institutional investors, says Karolczuk. It may even be that two levels of Newcits standards emerge, covering sophisticated and non-sophisticated investors.