Domiciles of Alternative Investment Funds

The following study identifies reasons behind choice of domicile for alternative investment funds (AIFs) and discusses future trends. The study was commissioned by the Association of the Luxembourg Fund Industry (ALFI) for their annual conference on Alternative Investments in Luxembourg.

We estimate that since 2010 the number of AIFs have increased by 10% and assets under management (AuM) by 13%. The distribution of domiciles remained relatively stable during this time, but there are a number of clear trends emerging.

The study identifies four main trends in choice of domicile for AIFs:

  1. Strong growth in European domiciles, fuelled by the introduction of the Alternative Investment Funds Manager Directive (AIFMD)
  2. Demand for AIFs under mutual fund structures/UCITS
  3. Demand for ‘one-stop-shop’ domiciles and the decreasing appeal of smaller offshore domiciles
  4. Successful domiciles maintaining or strengthening their dominant role (Cayman Islands for hedge funds, Delaware for private equity and real estate funds)

Going forward, we expect the demand for regulated AIFs to continue to drive growth in European onshore domiciles. The traditional demarcation between regulated mutual funds and non- or less-regulated AIFs are diminishing yet further. AIMFD-compliant vehicles are expected to become the preferred investment structure for investors looking for a combination of both a regulated vehicle and full blown alternative investment strategies.

Domiciles of Alternative Investment Funds