The introduction of the AIFMD has increased the attractiveness of European onshore domiciles for non-EU managers, according to a report published by the Association of the Luxembourg Fund Industry (ALFI), carried out by Oliver Wyman.

Pierre Oberlé, Business Development Manager at ALFI, said the introduction of AIFMD “increased the attractiveness of European onshore domiciles” for non-European fund managers.

“The survey results show that the majority of market participants see opportunity arising from the new regulation and would look to set up some form of EU operations to take advantage of the AIFMD – a trend which is confirmed by the growth in total number of AIFs and corresponding AUM. European domiciles report strongest growth among all regions, both in terms of number of funds and the underlying assets,” he told Africa Global Funds.

The introduction of the AIFMD (Alternative Investment Fund Managers Directive) has fuelled strong growth in European fund domiciles, with the number of alternative investment funds increasing by 10% since 2010, and assets under management increasing by 13%, according to the study.

Oberlé said: “A finding of the survey is that the strong growth in European domiciles is indeed fuelled by the introduction of the AIFMD.”

“A trend that has been identified by Oliver Wyman is the “co-domiciliation” which allows fund managers the option to keep the original fund domiciled in the offshore jurisdiction and operate a regulated parallel fund in the EU at the same time,” he added.

Oberlé said that with the introduction of the AIFMD, many non-EU fund managers have set-up AIFMs in Europe to take advantage of the EU passport.

“The choice of moving to the EU depends on the size of European investor base,” he added.

The study analyzed alternative funds domiciled in key AIF (alternative investment funds) domiciles.

Between 2010 and 2013 traditional offshore domiciles confirmed their dominant role within respective AIF asset classes.

For hedge funds, Cayman Islands, traditionally the global home of hedge funds, is estimated to have increased its AUM share from 55% to 60% during the period of 2010 and 2013.

Luxembourg and Ireland are popular among UK and European fund managers, however Ireland is experiencing a growing number of registrations from US fund managers.

For private equity, Delaware, which is by far the most important domicile for this alternative asset class, is estimated to account for around 57% of the analysed 5,500 funds.

In the EU, Luxembourg holds the dominant position in private equity with 90% of the analysed EU funds domiciled in the Grand Duchy.

Guernsey is the third largest domicile for private equity funds by AUM, seeing high growth in the last four years and today private equity funds account for nearly three quarters of all Guernsey domiciled funds.

Delaware is also the domicile of choice for the majority of real estate funds, with 67% of the analysed assets estimated to be domiciled in the US state, up from 60% in 2010.

Looking forward, the report expects most of the existing trends to continue or strengthen over the coming years, fuelled by regulatory developments and investor demand.

“Oliver Wyman expect AIFMD compliant vehicles to become the preferred investment regime for investors that look for a combination of both regulated vehicle and full blown alternative investment strategies,” said Oberlé.

Oliver Wyman is a management consulting firm, a wholly owned subsidiary of Marsh & McLennan Companies.

The Association of the Luxembourg Fund Industry (ALFI) is the representative body of the Luxembourg investment fund community.

Created in 1988, the Association today represents over 1300 Luxembourg domiciled investment funds, asset management companies and a wide range of service providers.