The Commission de Surveillance du Secteur Financier (CSSF) acknowledges the growing interest in virtual assets, such as tokens issued through distributed ledger technology, and advocates for a cautious regulatory approach. Luxembourg-based alternative investment fund manager 6 Monks (6M), introduces AIFM services for crypto funds, reinforcing the Grand Duchy’s position while strengthening its status as a market leader in Europe.
Recently, 6 Monks (6M) reached a significant milestone by becoming the first independent alternative investment fund manager (AIFM) in Luxembourg to provide services specifically tailored to third-party funds aiming to pursue investment strategies in private equity, Web3, and crypto-assets, through regulated investment vehicles benefiting from the European passport.
This authorization to operate as an AIFM for crypto funds unlocks opportunities to serve asset managers in the crypto and Web3 spaces. Julien Wolff, head of risk management at 6M, tell us more.
Congratulations on being the first authorized Luxembourgish AIFM to provide dedicated services to crypto funds. Can you explain the significance of this achievement for 6M and the broader market?
This authorization marks a significant milestone for 6M and the Luxembourg market. It allows 6M to operate as an authorised AIFM for crypto funds, which is a big step forward for the Luxembourgish market, signalling readiness to deliver services to asset managers in the crypto industry. This development opens doors for regulated investment vehicles in crypto, paving the way for broader participation and growth in the market.
We anticipate a positive response from the market, particularly from asset managers across Europe. With 6M’s authorization, asset managers can now utilise regulated investment vehicles comparable to those in traditional finance, enabling them to propose investment strategies to their LPs with increased transparency and investor protection. This news is expected to boost confidence and drive further growth in the Luxembourg market for crypto assets.
How does becoming the first AIFM to offer services for crypto funds impact 6M’s portfolio management strategies?
This authorization empowers 6M to deliver portfolio management services along with the appropriate risk management framework.. As an authorised AIFM, 6M can now ensure compliance with regulatory requirements and maintain transparent reporting standards. This allows for the seamless integration of crypto assets and Web3-based projects into investment portfolios, providing clients with enhanced risk management and investment outcomes.
“Luxembourg is poised to become a prominent center for crypto investment, leveraging its established fund industry ecosystem and regulatory expertise.”
Julien Wolff, head of risk management at 6M
How will 6M ensure that its portfolio management strategies for crypto assets and Web3-based projects are effectively communicated to clients?
We have set up a dedicated team for this purpose only. The team is in charge of monitoring the performance and the risk exposure of the funds. The team is also in charge of producing the fund report that will be distributed to the investors. So we are very conscious that it’s key for them to understand what is the positioning of the fund and what is the evolution of the strategy of the fund. In this context, we invested in the digitalization and the automation of our processes ensuring the scalability of our solution and a streamlined experience for our clients.
Are there any partnerships that have been forged resulting from this achievement?
6M’s trusted advisor and partner, Dair Capital, will be the first third-party asset manager to launch alternative funds investing directly in crypto-assets with an authorized AIFM in Luxembourg. It was really important for us to disclose the capital of our first clients because they trusted us even before we had obtained our license. We’re in discussions with several other prospects who are seeking fully regulated services like ours, and while many are interested, they were waiting for us to secure the license before finalizing anything. This partnership represents a significant milestone for us as we’re now fully engaged in managing their fund, making them our first official client at 6M.
Studies estimate that the cryptocurrency market in Luxembourg is projected to grow by 9.14% from 2024-2028. Given the news, how do you perceive the market to grow after today?
At 6 Monks (6M), we are optimistic about the demand for our services, especially given the success of recent ETF launches and interest from institutional investors. Despite virtual assets currently representing less than 1% of alternative assets, we see significant potential for growth in assets under management (AUM), with projections suggesting it could reach around €500bn within three to five years at the European level. This optimism is rooted in our belief that the market is poised for expansion, despite existing limitations on marketing and distribution of funds.
We anticipate significant growth in the market for crypto assets, particularly in Luxembourg and Europe. With 6M leading the way as the first authorised AIFM for crypto funds, institutional investors and asset managers are likely to gain confidence in exploring this new asset class. This growth trajectory is supported by optimistic projections, indicating substantial increases in assets under management (AUM) within the next three to five years. As a result, Luxembourg is poised to become a prominent center for crypto investment, leveraging its established fund industry ecosystem and regulatory expertise.
