7th January 2020
Running an international business may on the face of it be fairly time intensive, however, I am comforted by the diversification we have achieved during the last couple of years, especially as the volatility in world affairs make it increasingly difficult to plan. These days, Langham Hall is broadly split 50% each between private equity and real estate asset classes, with infrastructure and debt falling into one of these depending on their characteristics. It’s the geographic diversification that gives me greater cause for comfort, especially given the dearth of new capital in the UK the last two years, unrest in Hong Kong and the knock-on effects of the US/China trade war.
We usually tour advisors in Asia and the US in early January to understand investment intentions for the coming year. In January 2019, the main theme was an expected downturn in 2020 so that fund raising plans were being brought forward. In January 2020, the feeling is still positive, and one suspects the current bull run is, as usual, merely playing out longer than it should. Asset prices are still extremely high but the memories of the last crash retain a tempering effect on the excesses of the last cycle. Speaking to advisors at the end of 2019, most expect a pretty good fund raising and investment environment next year, with the usual note of caution about a possible slowdown.
Langham Hall Global Update
I have summarised below a few jurisdictional market nuances that we are seeing, and have outlined key updates on the Langham Hall Group. Overall 2019 has been a reasonable year, with over 20% organic top line growth, despite the paralysis in the UK market. We are now 430 people in the key jurisdictions of London, Hong Kong, Singapore, New York, Luxembourg, Jersey and Guernsey. Diversification through the addition of Depositary and host-AIFM services has been especially important as we have observed the step up in marketing efforts from US and Asian GPs in Europe.
We spent a great deal of time on two other initiatives in 2019. Firstly, on our professional services model. Unlike competitors, Langham Hall is run exclusively by people regularly performing client work and this sets the tone for the rest of the group. We have been working hard on expanding our graduate intake, and on initiatives to accelerate their learning and development at all levels through a variety of techniques.
The second initiative has been on our client systems R&D, and I am pleased to report that through the use of dataflow technology (Wolfram) we have been able to produce investor reports to sit alongside our usual investor reporting. We have long believed that an open architecture philosophy is preferable to static “black box” technology, so the ability to decide what to do with the data at the end rather than being forced to decide at the beginning is a more appropriate response to the volatility and changing stakeholder demands we are all facing. We remain excited by the opportunities to further advance this in 2020.
UK/ Channel Islands
Most people agree that global investors are underweight in the UK and a catch up will feature in 2020. The last 12 months has seen the continued use of the Channel Islands with a renaissance in Guernsey for sub-AIFMD threshold private equity funds locating there to target the UK, opting over Luxembourg for speed and cost. Large single asset transactions have also featured, and we have been involved with many of these on the Real Estate side.
We now have 110 people in the Channel Islands and 150 in the UK.
It is no surprise that this has been a significant growth area for Langham Hall. The team is now 80 people and work comprises a broad mix of real estate and private equity clients. Being able to provide a one stop shop of Administration, Depositary and Host-AIFM services remains an increasingly important feature of the business, as well as ensuring we maintain the lowest staff turnover levels in Luxembourg, providing stability to clients.
The troubles we have seen in the press have affected the local economy but have not had much of an effect on global capital flows into Asia, and the use of Hong Kong for those purposes. That said, we do believe 2020 will be slower than 2019.
We remain the largest fund administrator in Asia with 80 people in the region.
This is a very exciting new business for the group with now a dozen people looking after 30 fund structures. We are working mostly on mid-market private equity structures although there are a few real estate clients. The ability to do domestic administration work, but also to coordinate US GP’s AIFMD queries remains powerful. In an AIFMD context, we are working for many of the largest private equity and real estate GPs in the fund management industry, which helps to reinforce our US operation’s credentials.
We remain probably the largest Depositary for UK illiquid real estate and private equity funds, and it is from the UK office we perform much of the AIFMD Annex IV and Depositary Lite services for US and Asian GPs.
The Luxembourg Depositary business is also now significant in size, with services more likely to sit alongside administration for Luxembourg funds.
Host-AIFM and Appointed Representative services
Our Host-AIFM business is now live on 20 mandates, making us one of the largest in the industry. Having grown it from scratch allows us to understand where the risks exist, and protects our clients from sharing a licence with less reputable GPs. The UK Host-AIFM business is still growing, despite the general shift to Luxembourg caused by the exit of the UK from Europe. Open-ended real estate funds and REITs still require a UK AIFM, but the high growth area is our Appointed Rep service.
We are now live on 16 Appointed Representative mandates for new real estate and private equity GPs that require our regulatory umbrella. We can also act as operator and do a GP’s corporate accounting.
In summary, a satisfying year but as ever there is much to do as we look forward to the challenges in 2020. Thank you for the support you have given us over the last year. We never take it for granted and hope we can repay your loyalty. I wish you all luck for the coming 12 months.