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Top law firms Simpson Thacher & Bartlett and Herbert Smith Freehills are opening offices in Luxembourg, as they look to capitalise on the country’s growing status as the “gateway to Europe” for private capital.
Both firms are planning to open their offices early next year, they confirmed to the Financial Times. US law firm Simpson Thacher has hired three funds partners from “magic circle” rivals A&O Shearman and Clifford Chance to start its office, while London-headquartered HSF has also hired two lawyers from A&O Shearman and a partner from Maples & Calder.
Simpson Thacher’s prominent private funds practice has advised on some of the largest recent fundraisings, including those by Blackstone, CVC and EQT.
Herbert Smith Freehills also counts Blackstone and EQT among its roster of clients.
A number of large private equity houses and alternative asset managers are focusing their attention on Luxembourg in a bid to take advantage of its legal and regulatory environment, tax efficiencies and a growing retail market for wealthy individuals.
“The reality is that Luxembourg has become the gateway to Europe for large private equity funds, so if you want to market to European investors you’re almost certainly going to do that through Luxembourg,” said Gareth Earl, head of Simpson Thacher’s European funds practice.
“The other significant catalyst has been the ‘retailisation’ of alternatives [ . . .] which enable sponsors to market alternative strategies like private equity [ . . .] to mass-affluent individuals in Europe,” he added.
Assets under management of private equity and venture capital funds in Luxembourg grew 5.7 per cent to €174bn in the year to December 2023, according to the Association of the Luxembourg Fund Industry.
Among European-managed private capital funds that have started investing this year, 54 per cent have been domiciled in Luxembourg, according to Preqin. This compares with 10 per cent in Jersey, the second most popular destination, and 7 per cent in the UK.
“For investors seeking a regulated jurisdiction for funds outside the US, Luxembourg stands out for its access to European jurisdictions,” said Sunaina Sinha Haldea, global head of private capital advisory at wealth management firm Raymond James.
“With the rise of private wealth into private markets investing, Luxembourg becomes an even more important gateway to capital.”
Blackstone has raised $6bn for a private equity fund tailored to wealthy individual clients as it looks to reach beyond its institutional base.
Apollo Global Management and State Street also combined forces this year to launch an exchange traded fund that invests in both private and public credit in a push towards retail investors. Apollo said last month it plans to more than double in size to $1.5tn in assets over the next five years.
The move by Simpson comes as US law firms have been aggressively growing in Europe, particularly in London, to take advantage of US private equity investment in the region. The expansion has disrupted the market and pushed up lawyer pay across the board as UK-founded firms have tried to compete.
While the Luxembourg office will be Simpson’s third outpost in Europe, alongside London and Brussels, it should not be taken as a signal of ambitions to open more offices on the continent, Earl said, but a specific move driven by the funds market.
Meanwhile, UK-founded firms have also been pushing into the US market. HSF announced plans this month to merge with US-based Kramer Levin to form one of the top 20 law firms globally by headcount.