“The lion’s share of the business in Luxembourg… is setting up the funds and then administering them. In Europe, it’s 90% the funds going through Luxembourg,” according to Alan Dundon, chair of the L3A trade association. He explained that some general partners (GPs) will do the administration of middle and back-office operations internally, “but the vast majority are outsourced… that’s where the alternative administrators come in.”

Dundon explained during an interview that the L3A created three committees focusing on operations, tax and regulatory matters, and HR which look at the opportunities and the challenges of the industry. It then writes papers or guidance after meeting and lobbying, when necessary, the tax administration or the Financial Sector Supervisory Commission (CSSF) to improve the environment for doing business.

Sylvain Barrette: Where do you see the greatest gaps in services for the industry?

: We see a huge increase in regulations… and quite often, we’re behind the curve in terms of just trying to catch up… and do all the reporting around it.

A second another gap is around ESG. I’m not sure if the industry has yet a solution around how we monitor and report on ESG regulations such as CSRD [Corporate Sustainability Reporting Directive]. I think there’s a good opportunity for an independent or entrepreneur that comes in and just focuses on ESG regulations and its requirement and works with all our members.

Another gap more for the industry is around managing data. It is a big issue around private assets, much more so than public assets, where it’s much more standardised.

Luxembourg is much better than other centres in terms of peers working together.

Through the catapult program at the Lhoft [Luxembourg House of Financial Technology]… we want an effective transfer of data and documents, and to move those efficiently around the industry. A client who must give the same piece of information to five, six different people, whether it's the notary, the auditors and the banks--so much inefficiency and duplication. Getting this right is about a single piece of data that can get shared across. It’s not only a challenge, but also an opportunity, because you can really speed up and enhance the level of reporting.

This industry has moved almost from an unregulated, pretty easy to service where you report once a year to a much more regulated and complex environment. With new regulations coming through every six months… you also have these managers who are looking for much more data and reporting than they ever did in the past… with structures that are becoming more complex.

Is there a market for entrepreneurs?

[The industry] has left behind a few GPs that are smaller in nature. If GPs want to raise €50m or €100m, it is very difficult to come to Luxembourg now because the very big engines are expensive… as many of our members invest heavily in technology. I think there’s a gap there in terms of fulfilling the needs of smaller managers. [The big engines such as his employer, Alter Domus] will not give you all the very complex data points…  but we are going to be complying with all the regulations. But we’re just going to provide you at a very basic service, but it will be enough for you to be able to launch your fund.

There is an opening in serving smaller managers in a way that’s compliant with regulations and doesn’t necessarily need all that technology. It is going to be difficult for an entrepreneur looking to set up a fund administration business to try and compete head on with us.

We don’t necessarily want managers saying, you know, you guys are too expensive. The guy who starts with €50m often becomes the guy whose fund three is raising a billion. So you’ve missed that opportunity for that sort of startup entrepreneur.

What are the roles missing in the industry?

We are pretty good at developing all the products that’s needed and getting all the expertise in developing the systems that are needed. I don’t see a huge number of gaps in terms of opportunities for entrepreneurs to come in and create a new service or a new product. That’s because it has already happened, and we’ve been pretty innovative about setting up whatever new product or service.