Fund hotels a new trend, niche seen also for Estonia

Fund hotels a new trend, niche seen also for Estonia
FEIF2014 parallel session 2: FUND ADMINISTRATION

Fund management is about to see further consolidation with the recent trend of fund hotels springing up, however there is an opportunity for Estonia to grab a share in niche fund management services, experts noted at the Finance Estonia International Forum in Tallinn.

Frederic Blomme Sekund, vice president of Swedbank Securities Services said that the trend in Sweden is to move fund management into complex fund hotels. A fund hotel is basically a fund management company that is fully responsible for all the back-office services. For example, a client comes to the fund hotel and says he would like to set up a UCITS fund. Fund hotel sets up prospectus, controls compliance, risk, fund administration, etc, he explained.

In this way it is possible to get a hold of full business and you are able to charge more if you serve the whole package, Sekund said.

Yves Lacroix, partner of Arendt & Medernach said that fund hotel structure is good for private banking and family offices, where manager does not have to worry about compliance aspect. All large banks offer this service in Luxembourg, Lacroix, who is himself placed in Luxembourg, told.

The experts noted that the fund administration business is captured by big players as size really matters. Luxembourg is the choice country when it comes to outsourcing. In niche areas there are less larger players dominating the market and this could also be an opportunity for Estonia to grab a share, they said.

Talking about the recent topics in fund management, the experts noted that close cooperation between the regulators and market participants is very important. “It is not a real customer protection case where FSA just takes away the licence,” Sekund explained the importance of regular communication with authorities.

Explaining the success of Luxembourg as a success story as a fund capital, Lacroix noted that the legal framework there is simple, easily understandable and short. It does not take too long to implement new laws – usually less than a year. The regulators are also always open to discuss issues with market participants and they are keen to find joint solutions. Furthermore, it is important to have a good tax regime that is going to stay like that also in the future, he added. “It is important not to change the rules, if changed, it will take ages to regain trust, “ Lacroix said.