Unlock the Editor’s Digest free of charge
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.
High regulation corporations Simpson Thacher & Bartlett and Herbert Smith Freehills are opening places of work in Luxembourg, as they appear to capitalise on the nation’s rising standing because the “gateway to Europe” for private capital.
Each corporations are planning to open their places of work early subsequent yr, they confirmed to the Monetary Occasions. US law firm Simpson Thacher has employed three funds companions from “magic circle” rivals A&O Shearman and Clifford Probability to start out its workplace, whereas London-headquartered HSF has additionally employed two attorneys from A&O Shearman and a companion from Maples & Calder.
Simpson Thacher’s outstanding non-public funds follow has suggested on a number of the largest current fundraisings, together with these by Blackstone, CVC and EQT.
Herbert Smith Freehills additionally counts Blackstone and EQT amongst its roster of purchasers.
A variety of giant non-public fairness homes and different asset managers are focusing their consideration on Luxembourg in a bid to make the most of its authorized and regulatory surroundings, tax efficiencies and a rising retail marketplace for rich people.
“The truth is that Luxembourg has turn out to be the gateway to Europe for big non-public fairness funds, so if you wish to market to European traders you’re virtually definitely going to try this by way of Luxembourg,” mentioned Gareth Earl, head of Simpson Thacher’s European funds follow.
“The opposite vital catalyst has been the ‘retailisation’ of alternate options [ . . .] which allow sponsors to market different methods like non-public fairness [ . . .] to mass-affluent people in Europe,” he added.
Property below administration of personal fairness and enterprise capital funds in Luxembourg grew 5.7 per cent to €174bn within the yr to December 2023, in response to the Affiliation of the Luxembourg Fund Business.
Amongst European-managed non-public capital funds which have began investing this yr, 54 per cent have been domiciled in Luxembourg, in response to Preqin. This compares with 10 per cent in Jersey, the second hottest vacation spot, and seven per cent within the UK.
“For traders looking for a regulated jurisdiction for funds exterior the US, Luxembourg stands out for its entry to European jurisdictions,” mentioned Sunaina Sinha Haldea, international head of personal capital advisory at wealth administration agency Raymond James.
“With the rise of personal wealth into non-public markets investing, Luxembourg turns into an much more essential gateway to capital.”
Blackstone has raised $6bn for a private equity fund tailor-made to rich particular person purchasers because it seems to be to achieve past its institutional base.
Apollo International Administration and State Road also combined forces this year to launch an trade traded fund that invests in each non-public and public credit score in a push in direction of retail traders. Apollo said last month it plans to greater than double in dimension to $1.5tn in belongings over the subsequent 5 years.
The transfer by Simpson comes as US regulation corporations have been aggressively rising in Europe, notably in London, to make the most of US non-public fairness funding within the area. The growth has disrupted the market and pushed up lawyer pay across the board as UK-founded corporations have tried to compete.
Whereas the Luxembourg workplace shall be Simpson’s third outpost in Europe, alongside London and Brussels, it shouldn’t be taken as a sign of ambitions to open extra places of work on the continent, Earl mentioned, however a particular transfer pushed by the funds market.
In the meantime, UK-founded corporations have additionally been pushing into the US market. HSF announced plans this month to merge with US-based Kramer Levin to type one of many high 20 regulation corporations globally by headcount.
