Identifying an attractive investment opportunity or asset class is only part of Prime Capital’s offering. For many clients it is suboptimal or not possible at all to gain access to certain asset classes via direct investments – this is especially true for more complex and illiquid forms of investment.
Direct investments are typically made directly on the balance sheet through fund shares, investments in products of asset managers or through the acquisition of financial and/or tangible assets. The difficulties associated with such direct investment can be many and varied. They can affect all categories of investors, whether regulated or not. Typical considerations that militate against booking as a direct investment include points such as:
- Regulatory eligibility
- Capital efficiency (Solvency II)
- Tax considerations
- Accounting requirements
- Risk Management or other internal requirements
- Cost considersations
All requirements at a glance
In designing efficient access solutions, Prime Capital places particular emphasis on taking into account the different (and often competing) requirements and finding the optimal access route. This is implemented by launching tailor-made Luxembourg fund solutions or by an independent securitisation structure.
A solution can be developed solely for a single investment opportunity or act as a more comprehensive platform for further investments in the same asset class or across multiple asset classes.
Regardless of which structural building blocks are used for each solution, the following principles apply to all solutions:
- Any structural proposal must be combinable with strict operational, risk management and control processes.
- The operator of the platform or investment vehicle is only as good as its understanding and experience of the specifications of each asset class.
- Continuous monitoring of all parties (service providers, lawyers, potential sourcing banks and asset managers) plays an important role in a successful (and possibly long-term) platform.
- Customised reporting (including regulatory and risk reporting), ongoing accountability and transparency for investors are key to providing the control and certainty needed for indirect investments.