EUROPE -The establishment of Unilever's global equity asset pooling vehicle in Luxembourg will fuel the demand for tax transparent vehicles designed to pool assets from pensions schemes based across the globe, according to industry experts.
Typically aimed for large multinationals with combined pension scheme assets off roughly over a e1bn, the vehicle is designed to enhance the net return from the assets and reduce the associated risk.
However many multinational companies who have shown interest in the vehicle have been slow to take them up due to concerns over their complexity and the fact their is a very limited track record.
Both Luxembourg and Ireland are at the forefront of providing cross -border asset pooling vehicles with the Fonds Commun de Placement (FCP) and the Common Contractual Fund (CCF) respectively.
Unilever’s decision to create Univest using the Luxembourg FCP, to be managed by Northern Trust, may send a significant message about Luxembourg’s potential as a country well-placed to provide the vehicle.
However it is widely held Ireland struck the first deal with a multinational back in September 2005 using the CCF which was set up approximately 2 years ago and is heavily promoted by the Irish government
Ian Baillie, managing director of Northern Trust Luxembourg, said: “We are convinced this will gather momentum. A thought leader like Unilever and the size of it as a corporation will give credibility to Luxembourg as an ideal location for the pooling of these equity assets. The government has made significant tax steps to ensure this vehicle is a success.”
Baillie described the announcement as a move that would benefit both Ireland and Luxembourg: “At Northern Trust we are ambivalent because we can offer both the CCF and FCP in Ireland and Luxembourg respectively but there’s a very large pie to slice between the two.”
Gavin Nangle from State Street Global Advisors in Dublin said: “I think its clearly a positive step for pension pooling developments generally. There’s a lot of multinationals looking at pooling products across the domiciles of Ireland and Luxembourg.
“But having vehicles up and running in both jurisdictions is overall a very positive move and hopefully will be influential in focussing the mind further of those parties already looking at vehicles and showing them its no longer a theoretical capability.”
Nangle did not see Unilever’s public announcement as a blow to Irish hopes for forging a reputation as a hub for pension assets. He concluded it would be a “good driver” for Ireland to bring on as much business as possible.
A well placed Luxembourg source suggested large continental multinationals would likely be in favour of choosing Luxembourg over Dublin for cultural and linguistic reasons.
He said: “Its very conceivable that if you look at the way fund launches go today between Luxembourg and Dublin - Anglo-saxons would generally gravitate towards Dublin and a continental European may very well be comfortable with Luxembourg.”
A spokesman for Unilever said: “We have been looking at this for some time. And when we first looked there wasn’t a scheme in Ireland at all. So we had to go along with the FCP route and didn’t switch horses midstream. I don’t think there was a race as such.”
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