12th January 2021
It has certainly been a challenging year to be in business and, above all, we consider ourselves fortunate to be in such a resilient sector of the market. Given the reluctance to invest over the past few years, this time last year we were looking forward to an increase in international investment into UK markets to ‘even up’ global investor allocations and in early January we did see quite an uptick. However, as concerns grew about the pandemic, it became apparent that North American LPs had stopped travelling, indicating the possibility of a period of uncertainty.
In the early part of the year, however, transaction volumes remained high in the Channel Islands and Luxembourg as our clients finalised completed funds. There then followed a lull in May and June as clients concluded internal reviews, and since the end of the summer it has been extremely busy. Like many of us, a very worrying start to the year but as we went on the market adapted and in the latter part of the year it has almost seemed like “business as usual”.
Langham Hall Group Update
Langham Hall Group has again grown by over 20% in the past year. We have taken on 50 new employees and now number 480 people in the key jurisdictions of London, Hong Kong, Singapore, New York, Luxembourg, Jersey and Guernsey. We have had strong growth in Luxembourg, Asia and the US. An extra 20 US and Canadian GPs are now using us for AIFMD work, taking the total to 50, and the AIFM business has increased from 20 to 30 live mandates. We strongly believe that the arrival of international capital into sub threshold UK-focused private equity and real estate funds will continue to advance our Channel Island offices, which experienced 20-30% growth in 2020.
Our group turnover remains split 50:50 between private equity and real estate asset classes, with infrastructure and debt falling into one of these, depending on their characteristics. Across the asset classes clients have adapted strategies to suit the current environment; within private equity we have taken on a number of new clients in the technology and healthcare sectors and in real estate we have seen data centres, residential, logistics and life science assets all prove popular, and we expect these to remain so during 2021. Infrastructure has also featured prominently with several new clients bridging the gap in public finances. We also expect these trends to continue in 2021, together with other market nuances, such as the plethora of high-quality open-ended funds seeking to provide badly needed income to investors. We took on a number of these in 2020, mostly in Luxembourg, but also in London where we are seeing a resurgence of the use of the UK Limited Partnership.
We continue to work hard on a number of important initiatives including our professional services model. Langham Hall’s leadership team is all client facing, which means they are uniquely placed to ensure all teams receive appropriate oversight and support with client work.
Much progress has been made on Wolfram, our client system research and development project. Wolfram allows us to collect an unlimited variety and quantity of data, which is then interrogated by Wolfram code to produce calculations, graphical output and reports. Last year we were able to reproduce our investor reports using dataflow technology and we have produced a prototype dashboard with a variety of fund and asset level performance calculations. One of the advantages of the dashboard is early reporting to our clients and their investors if they require it. Using the same technology and harnessing the flexibility of the platform, we have produced a prototype ESG dashboard and are in the process of partnering with a private equity group, which focuses in this area, to help perfect the collection and synthesis of relevant data. We remain excited by the opportunities to advance these initiatives further in 2021.
I have summarised below a brief update on each of our jurisdictions.
UK/ Channel Islands
Global investors are still under committed in the UK and a catch up should now feature in 2021. The past 12 months has seen the continued use of the Channel Islands, with a resurgence in Guernsey with sub AIFMD threshold private equity funds locating there to target the UK and opting for Guernsey 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.
Our business in Asia is heavily influenced by US LPs and, while some new funds have gone ahead, many were postponed until 2021 when LPs anticipate being able to travel again. Despite this we were able to grow the business successfully, especially regarding Australian private equity clients where we are now the main provider of administration services. We remain the largest fund administrator in Asia with 90 people in the region.
Being owner managed has become a unique selling point in the US. The ability to do domestic administration work but also to coordinate North American GPs’ AIFMD queries remains powerful. In an AIFMD context, working with 50 of the largest private equity and real estate GPs in the fund management industry helps to reinforce our US operation’s credentials.
Luxembourg remains an area of significant growth for Langham Hall. The team is now over 100 people, and work comprises a broad mix of real estate and private equity clients. Being able to provide a one stop shop for administration, depositary and host AIFM services remains an increasingly important feature of the business, as well as ensuring we strive to maintain the lowest staff turnover levels in Luxembourg to provide stability to clients.
We remain one of the largest depositaries 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 North American and Asian GPs.
The Luxembourg Depositary business is also now significant 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 30 mandates, making us one of the largest in the industry. Having started it from scratch we understand where the risks exist and can safeguard our clients from sharing a licence with less reputable GPs. The AIFM, Administration and Depositary businesses are aligned on the commercial interpretation of the Luxembourg regulatory guidelines so, unlike market practice, we protect our clients from having to coordinate different views, for example, on asset level Anti Money Laundering requirements.
The business has also set up a subsidiary in Malta to establish tied agent relationships in order to market funds post Brexit.
In the UK AIFM business the surge in spinouts means we have doubled the number of Appointed Representative mandates since last year and we now have 30 real estate and private equity clients using our regulatory umbrella.
To conclude, it has been a challenging but productive year and, as ever, there is much to do as we look forward to 2021. Thank you for all the support you have given us over the past year. We never take it for granted and hope to repay your loyalty.
I wish you every success for the coming 12 months.