Animated movies. German real estate. Trade finance. Polish mortgages. Industrial lasers. Environmental intelligence. Pharmaceutical services. The Luxembourg-domiciled alternative investment funds under the wings of Fuchs Asset Management present a small microcosm of alternative investments managed via the Grand Duchy.
The management company is for sale. Fuchs AM itself has not disclosed its fund assets under management or custody. Investment Officer has researched 19 annual reports of the 48 reserved alternative funds - Raifs - for which Fuchs AM serves as the supervised entity under its AIFM licence. The review shows these funds hold international investments of at least 1.5 billion euro, according to asset values reported per end 2021.
Fuchs & Associes, which owned 100% of Fuchs Asset Management at the end of 2021, entered liquidation last month and since then the search for a buyer has been stepped up.
The firm reports that “several” parties have told the liquidator they are interested.
Jean-Jacques Lava, deputy-CEO at Fuchs AM, said in an email to Investment Officer that the sale process is going according to plan. “Our sale is by no means ‘difficult’,” Lava said. “I will only respond that several interested parties have confirmed their interest to the liquidator in writing and that our sale process is moving forward swiftly as initially planned.”
‘Low risk and good pedigree’
Several people familiar with alternative investments told Investment Officer that finding another management company who wants to take over Fuchs AM, one of 261 similar firms active in the Grand Duchy, is a challenge and said that more established larger ManCos are generally not keen to snap up smaller firms.
“For all the talk about consolidation in the sector, the reality is very different,” said a fund liquidation specialist who asked not to be named, commenting in general terms and not specifically about Fuchs. “Established ManCos look for low risk and good pedigree. They don’t want to risk trouble with the investor side with valuations that may have gone stale.”
Luxembourg’s financial supervisor CSSF said any buyer of Fuchs AM will need its approval.
“The primary consequence of the liquidation of (Fuchs & Associes) is that the liquidator will first have to analyse the situation and try to sell the shares as quickly as possible, i.e. find another shareholder acceptable to the CSSF,” a CSSF spokesman told Investment Officer. “The CSSF will of course have to take into account the overall situation.”
‘Serious breaches’ at parent company
CSSF in July withdrew its authorisation for Fuchs & Associes to provide financial services after it found “serious breaches of essential legal and regulatory requirements” relating to its capital base and prudential ratios, and concerning its governance. A Luxembourg judge then appointed Alain Rukavina as liquidator and judge Maria Faria Alves as official receiver. A deadline for claims has been set for 19 January 2024.
Public data in the Luxembourg Business Register (LBR) shows Fuchs AM manages 48 Raifs. About a dozen or so launched during the last two years and have yet to meet funding objectives, which means annual reports are not yet required. But most of those that launched between 2016 and 2019 have deposited a number of public annual reports.
19 fund reports reviewed
A review by Investment Officer of 19 reports posted by Raifs managed via Fuchs AM makes clear that professional investors between 2016 and 2019 have entrusted these funds with assets worth more than 1.5 billion euro.
Fuchs’ deputy-CEO nevertheless described the numbers stemming from this research as “miles away from reality”. He did not provide an official number. Fuchs, in addition to its AIFM licence, also has a licence to service Ucits funds. It advertises these services on its website but it is not clear how many of these funds are served, if any.
Data from the LBR shows that a significant part of investor exposure to Fuchs-managed Raifs are assets valued at 760 million euro per end 2022 held in the Horizon Capital Fund, a Swiss-controlled fund with several sub-funds, including a trade finance fund and one fund “specialised on European borrowers with activities in physical commodities”.
‘Spooktacular’
Another Raif is Take One Fund SCA, a Swiss-controlled film fund which raised 42 million euro between 2018 and 2020 using the Luxembourg structure. Among the films being released this year are ‘10 Lives’, an animation about a pampered and selfish cat called Beckett, and ‘The Canterville Ghost’, a “spooktacular” animation story.
Fuch’s first-ever Raif is the Mercureim Eurofund I S.C.A. SICAV-FIAR, registered in October 2016. Mercureim has reported net assets worth 97.5 million euro in German real estate per end 2021, with investments in 17 office properties across Germany. British and US real estate is held via sub-funds of another Raif, Katch Fund Solutions, which also includes a fascinating sub-fund exposed to 33 million dollars in litigation investments per end 2021.
Polish mortgages are assets in the Poland Direct Lending Fund. The Harewood SCA Raif held 98 million via five sub-funds at the end of 2021. Fuchs registered the YCAP Income Credit Fund in 2018. This fund has since been renamed to the Tahoe Income Credit Fund, which reported 45 million euro in assets held via two sub-funds. This fund in 2022 obtained a sustainability label at Luxflag.
None of the funds mentioned in this article responded to an email request to comment.