Although growth in Luxembourg’s alternative investment funds market slowed in 2020, it remained significant, bringing the total of alternative assets managed in the Grand Duchy above the 1000-billion-euro mark for a first time, according to new data released by financial regulator CSSF.
Alternative investment funds, or AIFs, in Luxembourg collectively held some 1,042 billion euro at the end of 2020, up 15 percent from 904 billion euro a year earlier, which was up 38 percent from the 653 billion at the end of 2018, the CSSF said in its latest (2020) AIFM Reporting Dashboard.
With these numbers, Luxembourg accounts for approximately 18 percent of the 30-country European market for alternative investment funds, which, according to data presented by the European Securities and Markets Authority, ESMA, held about 5.900 billion euro in total net assets at the end of 2020, as measured by data from member countries of the European Economic Area.
For comparison, the global market for alternative investment funds was seen at approximately 10.7 billion dollars, according to data firm Preqin, which expects further growth of about 9.8 percent per year between 2021 and 2025.
Evolution of Alternative Investment Funds in Luxembourg:
Some 89 percent of alternative investment funds, or 925 billion euro, was directly managed by alternative investment fund managers, known as AIFMs, based in Luxembourg. A total of 117 billion euro, or 11 percent, was managed by AIFMs based elsewhere in the EU or outside the EU. Of these 5 percent was managed by Irish AIFMs, said CSSF. Ireland and Luxembourg both are significant hubs for alternative investments in Europe.
CSSF brought forward reporting AIF data
The financial regulator said its annual statistics on alternative investment funds are based on data reported by Luxembourg-based AIFMs. Its data excluded alternative funds distributed via Luxembourg by AIFMs supervised in other countries. CSSF has brought forward its comprehensive publication on alternative investments by several months. The 2019 AIFs data was only reported in November last year.
The Grand Duchy was home to a total of 6100 alternative investment funds at the end of 2020, said CSSF, compared to 5251 funds at the end of 2019 and 4287 funds at the end of 2018.
CSSF noted that the alternative investment funds market remains concentrated. Some 40 percent of the alternative assets are held through a mere 3 percent of the managers.
Hedge funds ‘marginal’ business in Luxembourg
The average size of an alternative investment fund was smaller than that of a Ucits fund. Some 69 percent of the funds had a net asset value of less than 100 million euro.
Traditional investment strategies such as fixed income or equity remained the main strategies on the Luxembourg alternative investment market. Private equity and fund-of-fund strategies represented the same market share as a year earlier. Real estate continued to grow, while hedge funds remained a “marginal” business in Luxembourg, said CSSF.
The main investors in alternative investment funds are other funds, banks, pension funds and financial institutions. Some 93 percent of AIF investors are professional investors, said CSSF. On average the top five investors in a fund account for 88 percent of its asset value.
Investment Strategies of Alternative Investment Funds:
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