Across its global network of 21 offices and 23 remote offices across five continents, SGG Group continues its strong growth momentum, while servicing illiquid asset fund managers, corporate and private clients. Serge Krancenblum, CEO of the group, talks to Leaders League about the market evolution, analyses SGG’s strengths and strategy, and sheds light on the impact of the Brexit.
Leaders League. What is the breakdown of your clientele?
Serge Krancenblum. Currently, 45% of our clients are illiquid investment fund managers, the majority of which are Europe and US-based; another 40% are multinational companies from the US, Europe and Asia, particularly India; the remaining 15% are family offices or ultra-high-net-worth individuals (UNHWI), mainly from Europe, the Middle East and Asia.
Over the years, we have attracted an increasing amount of prime institutional clients, with a growing number of large private equity, real estate and infrastructure players, as well as debt and other traditional and alternative investment structures. SGG Group is the only Luxembourg player offering a vertically and horizontally integrated range of fund services, which explains our phenomenal growth in this field in the recent years.
Leaders League. Is such an evolution a response to the market or a strategic choice of the Group?
S. K. Both! We want to remain firmly present in every segment of the market - not as a generalist, but as a specialized niche player, as we continue to expand our offering for both our existing and future clientele. Paradoxically, while they insource a number of functions, fund managers have an increasingly strong need for outsourcing, including operational support to management companies, fund administration, registrar and transfer agency, depositary and AIFM services, just to name a few.
Leaders League. Why do fund managers outsource?
S. K. Mainly due to the introduction of new regulations, coupled with the fact that fund teams prefer to dedicate their time to their core business, rather than administrative tasks and compliance work. On one hand, more and more fund service providers have the capacity to provide added-value assistance in complex situations; on the other hand, when entering into new territories, fund managers are required to implement essential procedures so as to comply with the complex and cumbersome regulations of each country (such as FACTA in the USA and CRS in Europe). Outsourcing these kinds of tasks has proven to be a very efficient solution.
Leaders League. How does SGG Group differentiate itself from other (sometimes larger) players in the market place?
S. K. The first thing that comes to mind is the DNA of our Group. At SGG, our one and only goal is to support our clients’ ambitions by ensuring the perfect execution of noncore tasks. SGG is led by entrepreneurs and has very few layers of hierarchy; our management team – which we call our “leadership team” – is completely immersed in operational work and client relationships.
I spend at least 25% of my time developing client relationships, and this is the case for all of our Group Management Board members. At SGG, we don’t have managers, but rather people who are experts in their professions and stay by their clients’ side.
Another element that sets us apart is our responsiveness - we invent new solutions at the forefront of the market trends and respond to the concrete and immediate needs of our clients.
Last but not least, we have a special focus across all market segments. For instance, many of our competitors are reluctant to service private clients, especially the highly sophisticated ones, which are sometimes as large as institutions; but still call for a particularly personalized approach. Our Family Office and UHNWI teams are highly specialized and we are determined to continue servicing this unique type of client.
Leaders League. From Singapore to the UAE and then Belgium, SGG was quite active in 2015 in terms of geographical expansion. What is your strategy for international development, and what is your next step?
S. K. We have a dual strategy: the first one is our commercial strategy, meaning that we have representative/business development offices in regions such as North America and India, where our clients are based. There, our main objective is to be close to their core decision-making center and be available for them at all times. At the same time, we also have a global servicing/operational platform allowing us to support our clients where they need us, globally; with our top servicing locations being
Luxembourg, the Netherlands, Belgium, the Caribbean and Hong Kong.
As for the next step, we are considering expanding our servicing platform into Anglo-Saxon countries.
Leaders League. How can your new shareholder, Astorg Partners, contribute to SGG’s strategy?
S. K. We have known Astorg Partners for a long time, as they used to be our (happy) clients. They are fully committed to our strategy in terms of both our approach to services and our ambition for expansion: not only do they bring us capital for acquisitions, but they have also introduced teams who are fully competent in successfully closing complex M&A deals.
Leaders League. How will Brexit impact your sector of activity and SGG Group?
S. K. As a fervent defender of the EU, I am devastated by what happened, and I think this is the real turning point for our Union; however, from the point of view of our activity, I believe the impact on the sector can only be positive.
First of all, since we only have a representative office, and no operations in the UK, the Brexit will not negatively impact SGG. On the contrary, we believe that places like Luxembourg, where our head office is located, will be strongly boosted by the Brexit, as an atmosphere of uncertainty was generated after the referendum. International companies who really want to be certain of entering Europe won’t choose the UK from now on, which will of course create a positive impact, for example for the Netherlands. Asset managers based in the UK will set up shop in other EU countries in order to continue having the passport to market their services in the EU. Therefore, we expect a spike in activity in our principal locations, and mainly in Luxembourg.
Leaders League. How can Luxembourg seize this opportunity?
S. K. This is indeed a great opportunity for Luxembourg; it is perfectly placed and equipped to welcome new asset managers and holding groups. We may see prestigious banks such as J.P. Morgan go to Dublin,
Frankfurt or Paris; whereas smaller entities, management companies or international companies with a vocation for Europe will create their holdings in Luxembourg, rather than the UK.
Leaders League. In one word, how do you envisage the future for SGG?
S. K. “Good!” (Laughs) We have such a strong eagerness to grow, that even when I hear bad news such as the Brexit, although worrisome, all I see are the new business opportunities that the situation can create.
We are very optimistic based on the fact that the increase in regulatory developments is one of the main drivers of our activity. The issuing of each new piece of legislation adds further work, such as new reporting obligations, so it’s important to know how to redirect our activity over time. SGG has always identified how to do this and we will work hard to retain it as one of our strong points for the future. For example, OECD’s BEPS (Base Erosion and Profit Shifting) rules that hinder companies from creating vehicles in countries with low taxation can generate a lot of business for service providers like us; either for restructuring or for creating new substances in locations where they should be.
For private equity clients, we are going to build other solutions in jurisdictions that have the presence of important funds. For corporate clients, we are going to provide them with more diversified support services. As for family offices, we want to provide more services in the countries where their business is important.
Jeanne Yizhen Yin