Operational flexibility was found to be the most significant factor for PE firms when deciding where to domicile a fund, according to new research by the Aztec Group.
In partnership with leading research agency, Acuris, the Aztec Group recently surveyed private equity CFOs and COOs based in the UK and Europe to gain insight into the main challenges facing the industry, the factors driving their decision-making and their current and future priorities.
From the results of this survey, the Group has now published its report, ‘Conquering Complexity: How Europe’s CFOs and COOs are setting themselves up for success’.
The report covers five core themes: the current operational environment in 2021, setting up a fund, reporting guidelines and ESG, outsourcing and technology. Key findings included:
– When choosing a fund domicile, operational flexibility was the number one deciding factor for 31% of respondents, with an additional 10% citing it as the second most important factor.
– Speed of set-up times and tax treatment came in joint second place, with 13% of respondents citing each as the first most important factor.
– Accessibility/transport links attracted more second (14%) and third place votes (14%) than any other factor.
– When deciding where to domicile a fund, the anchor LP was the most influential stakeholder according to 24% of respondents, with 22% citing the placement agent and just 18% stating the manager’s lawyers.
– More than a quarter of respondents cited regulatory risk as the greatest challenge facing the PE industry in Europe, with 86% expecting the regulatory environment to become increasingly complex over the next 12 months.
– Investors were found to be exerting more influence than ever, with 98% of respondents saying that LPs are directly driving the need for new operational solutions.
Matt Horton, Group Head of Private Equity at the Aztec Group, said: “The findings of our report reflect what we see regularly from our clients – when deciding where to domicile a fund they look for jurisidictions that offer fast, efficient set-up times, a seamless process to onboard investors and depth of experience of advisors.
“This operational flexibility, coupled with many years of expertise and stability, and links to the world’s leading financial centres, reinforce the Channel Islands’ strong position as a leading jurisdiction of choice for private equity fund managers across the UK and Europe.
“It’s interesting to note that transport and travel links remained a key factor for respondents, even amid the current travel restrictions caused by the Covid-19 pandemic. This suggests that face-to-face meetings are still important to PE’s operational leaders, and that maintaining strong travel links should be a key imperative for the Islands as restrictions begin to ease.”
Joe Moynihan, Chief Executive Officer, Jersey Finance, added: “These latest findings mirror many of the pointers generated from our own research which has shown how much investors prize stability and jurisdictional expertise. This study also flags concerns about the increasingly complex regulatory environment, which reaffirms Jersey’s focus in maintaining a straightforward investor friendly platform as part of its offering as a specialist, high quality funds centre and adding to Jersey’s appeal to the funds community worldwide.”
The full report can be downloaded here: https://www.aztecgroup.co.uk/conquering-complexity/