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Growing appetite for hybrid fund structures

“There has been a lot of fund activity in Luxembourg this year focused on private equity and real estate. It’s an area of growing investor demand. They are looking for different options now and ways for investing that go beyond hedge funds,” observes Jesper Steiness, director of business development EMEA at Advent (Luxembourg).

This is encouraging news for the jurisdiction and suggests the early signs of greater private equity fund formation are favourable. But as Steiness’s colleague Roger Woolman, senior solutions consultant at Advent notes, the firm is also working more with hybrid fund structures on a global basis.
 
“What I mean by hybrid structures is bank loan funds, real estate debt funds. The hybrid functionality that we have in Geneva has been designed to support these funds that have a private equity-style flow of capital. In addition to hybrid structures we’ve responded to increased investment activity among the private equity management community by adding native transaction capabilities into Geneva,” confirms Woolman.
 
 “We’ve added functionality around closed-ended funds for fund-of-private-equity-fund investors,” says Woolman. “In recent weeks we’ve had a number of enquiries from firms making direct investments into real estate who want to track the attributions of a building: who is the manager? What is the square footage of the building? What’s the rental income?”
 
Debt products have become an important diversifier for institutional investors. Their proliferation coincides at a time when European banks are removing non-performing loans off their balance sheets in response to Basel III.
 
Regardless of whether they are portfolios of real assets (companies, properties) or loans, this hasn’t put any undue pressure on Advent. As Woolman comments:
 
“Geneva uses an object-based approach to say ‘How does this asset behave?’ Some will behave more like fixed income assets, others will behave more like private equity or real estate: real illiquid assets. That’s an area where we’ve really built out functionality over the last two or three years.
 
“If you put hedge funds in the middle, on the one side you’ve got private equity and on the other side you’ve got liquid alternative funds. We get pushed in all directions from managers and service providers. Their client base is not only requesting hedge fund structures but asking managers to do things in private equity and real estate, even asking them to launch long-only funds,” adds Steiness. “Today’s alternative manager is increasingly doing everything under the sun.”
 
The advantage of using Advent Geneva is that it doesn’t matter what the regulation is because of the way the system architecture has been designed – data is derived as and when needed. That’s a big advantage, especially to fund administrators who need greater automation to support private equity and hybrid funds.
 
“We don’t need to create new tables or batches; we simply derive what we need in real time. We store very basic information: what are people buying, what are they selling and how does that particular instrument behave?
 
“From those attributes of a particular instrument we derive things like accruals, cash flows and so on. This places us at an advantage in being able to provide new views, more transparency and different ways to slice and dice data. Providing the relevant information required for the various regulatory requirements is not a problem for Advent Geneva,” concludes Woolman. 

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