Damien Degros (ING):
Can you briefly describe ING’s funds activity?
ING has a dual role: like other banks we are part of an international banking group in Luxembourg, but while our competitors only serve the local market, we combine local and international activities to meet the needs of Luxembourg’s fund management industry. To do so, we have developed a franchise for the financial industry and PE/RE funds. We started more than ten years ago mainly with cash management and payment flows. As our clients increased their presence in Luxembourg, there was a business case for ING to insource parts of their activities. We did that for instance with forex transactions: if you manage payments, sometimes you have to manage currency exchange. So, based on the services provided by our local dealing room, we started offering favorable FX rates to our clients. In the same context, we have developed a dedicated approach for PE / RE funds on Custody and Depositary services based on our expertise in securities services.
How is ING helping PR/RE funds meet short-term financing needs?
We have extensive activities linked to PE/RE funds. Seven years ago, we saw clients decide to establish new securities-based activities in Luxembourg, so it was important for us to provide the services they expected. More recently, based on requests from clients who asked whether we could offer bridge financing solutions in Luxembourg, we called on the expertise of colleagues in London to help us develop and offer the service directly out of our Luxembourg office. We sent staff from our department to join the ING team in London for six months to gain the necessary knowledge and expertise. The new activity grew much faster than anticipated. PE/RE funds start their business committing to a certain fund size, but there is a lapse of time until the investors’ money is received. During the structuring phase, the borrowing base is constructed by analyzing the credit quality of the underlying investors and assigning relevant advance rates and concentration limits. The facilities are used to make investments in underlying assets whereby speed of execution, administrative ease or IRR enhancements are reasons to borrow rather than call down capital from investors. The client gains flexibility and efficiency in terms of cash management. It allows the fund manager to better predict future fund cash flows.
How do you adapt your business model to your clients’ needs?
At ING, wholesale banking serves two types of client. The first is the industrial sector composed of local SMEs and international corporates. The second is the financial industry composed of Private Equity actors, Real Estate Investors, alternative funds, banks and insurance companies. Our department is unique in Luxembourg mixing both clients within the same organization. We can successfully “copy and paste” ideas from one client to another. For example, in cash management there are simple and sophisticated solutions designed for international corporates that we have successfully adapted to the financial industry. Another example is the securities custody business, familiar activity to both insurance companies and funds. It is now considered by some treasury centers in charge of the management of shareholdings for international corporates. In this case we can also transfer our experience from the insurance and funds sector onto international corporates and treasury centers.
We see this cross-sell between departments as our “cross-fertilization.”