Luxembourg’s Management Companies, the firms that handle a substantial portion of investments serviced in the Grand Duchy, employed a record 7,700 people at the end of last year, up 11 percent from the previous year. This figure is reported in PwC’s 2024 Barometer for the ManCo sector.
The report is based on a survey of 91 participants that cover 86 percent of regulated assets under management and 50 percent of the workforce, providing a comprehensive overview of the sector. This includes ManCos of plain vanilla Ucits funds, Alternative Investment Fund Managers (AIFMs), and Super ManCos, which hold both Ucits and AIFM licences.
The growth in the total number of employees in the sector reflects its expansion in recent years and its growing importance to the Luxembourg economy. The barometer attributes this rise to the ongoing regulatory and cost pressures that are prompting market consolidation. Despite a decline in the total number of ManCos, the sector remains dynamic, bolstered by new entrants and the increasing prominence of third-party ManCos, according to PwC.
“The regulatory landscape remains on top of ManCos’ agenda, with regulations and cost pressure catalysing market consolidation. As ManCos grapple with these complexities, the shift towards specialised third-party ManCos becomes increasingly pronounced,” said Pierre-Marie Bochereau, Audit Director for Management Companies at PwC Luxembourg, in a statement.
Eight new AIFMs
Eight new authorised AIFMs entered the market last year, indicating a strategic shift towards real asset domicile. These new entrants further contribute to Luxembourg’s position as a leading hub for both regulated and unregulated investments.
Luxembourg continues to dominate the European ManCo market, with over 5,000 billion euro in assets under management as of 2023, accounting for 30 percent of the continent’s total. This positions Luxembourg ahead of Ireland, Germany, and France. The top three ManCos – JPMorgan, DWS, and Amundi – alone manage more than 1,000 billion euro, an 18 percent increase compared to the previous year.
The report also highlights the substantial growth in alternative investments, particularly non-regulated assets, which have seen a 57 percent compound annual growth rate over the past five years. These now constitute a significant portion of the Luxembourg ManCo market, reinforcing the country’s attractiveness as a domicile for such assets.
Top 10 Luxembourg AIFMs
Furthermore, the integration of Environmental, Social, and Governance (ESG) criteria into investment strategies is becoming increasingly prominent. The sector is also focusing on digitalisation, automation, and streamlining internal processes to enhance operational efficiency and navigate cost and margin pressures.
ESG as ‘politically inflicted’
PwC noted that Luxembourg assets are becoming increasingly “ESG-ised” thanks to a change in the investment focus that is “driven by politically inflicted development in distribution patterns” in the EU and sustainability criteria becoming more mainstream “and core to an investment decision taken”.
With 353 billion euro classified as Article 8 and Article 9 assets as of December 2023, JPMorgan stood out as the largest ManCo on PwC’s ESG table, ahead of Amundi Luxembourg, with 136 billion euro, and BNP Paribas, with 131 billion euro. Article 8 funds, also known as “light green” funds, promote environmental or social characteristics, while Article 9 funds, known as “dark green” funds, have sustainable investment as their objective. A mere 1 percent of JPMorgan’s assets managed were held in Article 9 products, and 0 percent at Amundi. BNP Paribas held 11 percent Article 9 funds. Pictet Asset Management, with total ESG assets of 110 billion euro, held 23 percent of this in Article 9 funds.