Banque Degroof Luxembourg (BDL) has joined a growing list of fund administration providers with operations in Asia and is picking up clients in the region, senior executives tell AsianInvestor on a visit to Hong Kong last week.
The firm, part of Belgian group Banque Degroof, hired Cecilia Chin as general manager in Hong Kong in September, to tap rising demand in the region for Luxembourg fund structures.
BDL, which has private banking and asset management capabilities, also has aspirations to service private-wealth clients in Asia, says Geert De Bruyne, Luxembourg-based chief executive.
Perhaps 85% of BDL’s focus in Asia – at least initially – will be on fund admin. For the remaining 15%, BDL will take an opportunistic approach whereby it will seek to advise, say, Chinese firms that want to buy assets in Europe and European companies looking to do the same in Asia.
Aside from its internal funds, BDL already services three Asia equities funds in Hong Kong and Singapore, says Marc-André Bechet, Luxembourg-based director of investment funds. The firm also has institutional fund-admin clients in Hong Kong and Singapore, and a couple of new deals in the pipeline, he adds. The bank has also in the past month taken on a Hong Kong-run Luxembourg Sicar vehicle for a private equity fund.
BDL hopes to attract more business by offering local Asian manager capabilities to European clients or helping Asia-based managers to create Ucits versions of their funds, such as mainland Chinese firms setting up in Hong Kong.
However, the company is not looking to compete with the big fund admin players – the likes of BNY Mellon or JP Morgan – but taking a “more focused approach” targeting small and mid-sized funds, says Bechet.
BDL’s typical fund admin client size is $50 million to $200 million, which may grow into larger firms in time. An example of such a fund is one that started at €15 million and has reached €630 million within three years.
Hong Kong has used Luxembourg fund structures for a long time, so there is a strong connection between the two jurisdictions in terms of fund servicing, notes Bechet – 75% of foreign mutual funds sold in Hong Kong are Luxembourg-domiciled.
As a representative office, BDL’s Hong Kong branch does not yet have a banking or dealing licence, but it may consider expanding into areas such as asset management or private banking in the next two years or so.
As for other markets in the region, BDL sees Korea as likely to yield business opportunities down the line. Fund houses there are showing interest in setting up Luxembourg Ucits funds, says Bechet, with a view to selling them in Europe, Hong Kong and elsewhere.
When asked his view on the competition that seems likely to emerge to the Ucits structure in Asia – in the form of regional fund passporting (via schemes proposed by both the Asean countries and Australia) – Bechet is sanguine.
“Competition is always good – we are not afraid of it. After all, Ucits is already competitive, with two domiciles and there are also other offshore centres [like the British Virgin Islands and the Cayman Islands].” In any case, he suggests bilateral agreements are more likely to be used in Asia than a region-wide passporting scheme.
This readiness to take on the competition is no bad thing, since BDL is just one of a number of fund service providers to have set up in Asia in recent months.
Vistra Fund Services Asia, part of US-based Vistra, announced its opening last week in Hong Kong, where the office will be run by Charles Kwun. He is joined by Andrew Mascall-Robson, previously of JP Morgan; Shirley Yuen, who was most recently at BNY Mellon; and Fang Ling Khor, previously at Standard Chartered Bank.
Meanwhile, US-based Viteos last month opened an Asia headquarters in Singapore, as AsianInvestor reported. It will focus initially on providing hedge funds and family offices in Hong Kong and Singapore with fund admin, middle-office services and consulting on implementation.
Moreover, firms specialising in Luxembourg law are getting in on the action. Netherlands-based Loyens & Loeff celebrated the official opening of its Hong Kong office last week, adding to its offices in Singapore and Tokyo. This follows the arrival in the territory of Luxembourg-based Arendt & Medernach at the end of 2009.
This series of moves is perhaps not surprising, given that Asian demand both for buying and setting up Ucits funds – which can be domiciled in Dublin or Luxembourg – has reportedly been rising significantly in recent years.
Certainly the overall Luxembourg funds market is growing at a good clip – the annualised growth rate has been 9.13% since 2000, reaching €2.1 trillion by the end of last year. BDL’s own pace of growth in terms of funds under management has been more than double that, at 19.81%, and stood at €17.5 billion as of December.