The University of Glasgow research cited in your article “Private equity’s dash offshore triggers concerns over transparency of funds” (Report, January 12) completely misses the point. First, Luxembourg is not an offshore jurisdiction but very much an onshore EU location, with access to the EU savings market of 450mn people, something that is no longer true for the UK post-Brexit. Second, the EU Alternative Investment Fund Manager Directive requires that, in most member states, professional investors, including pension funds and insurance companies, invest in AIFMD-compliant funds. Clearly UK and Channel Island funds are outside the EU and hence non-compliant. PE firms naturally wish to access large pools of savings; with a UK fund they cannot approach EU investors.
To suggest that “know your customer” rules and regulatory reporting rules in Luxembourg and the EU are less stringent than in the UK is rubbish. There is full transparency in front of EU regulators. As to the remarks of Michael Moore, the chief executive of British Private Equity & Venture Capital Association, the UK may be the second-largest private capital hub in the world for PE managers, but not for PE funds.
Unless the UK joins the single market or the European Economic Area, UK funds will not be AIFMD-compliant. But then the EU will invoke the so-called Farage clause, giving the EU compensation if Nigel Farage, as a future UK prime minster, scraps the arrangements.
UK PE firms are just following the money and establishing AIFMD-compliant Luxembourg funds to access the EU professional pools of capital.
Nigel Williams
Chair, Royalton Partners, Luxembourg