Market consolidation, pressure on cost and the weight of regulation have reduced the total number of Management Companies in Luxembourg by four last year. The latest edition of PwC’s annual Manco Observatory nevertheless sees this industry as “very dynamic”, with 11 new Manco’s having been set up in the last year.
The majority of the new entrants are Alternative Investment Fund Managers, known as AIFMs. Luxembourg is home to around 260 fund management companies, often referred to as ManCos, firms that manage the thousands of regular and alternative investment funds domiciled here under the EU’s Ucits and AIFMD regulations. The latest edition of PwC’s observatory also makes clear that the traditional Ucits no longer are the dominant type of fund in Luxembourg. Several AIFMs now manage more than 100 billion in assets for the first time.
Looking ahead at 2023, PwC said it expects to see more specialised ManCos in niche segments, particularly non-regulated alternatives, while the significant expansion of managed services offering will continue and new technology will have to be adopted more broadly, given for example the broadening access to private markets by retail investors. Tokenisation, distributed ledger technology and digital assets management will have to be introduced, it said.
Insourcing and outsourcing
“Management Companies are redesigning their operating models with either insourcing some activities or outsourcing some of them,” said Pierre-Marie Bochereau, director and management company coordinator at PwC Luxembourg, in a statement. “The past two years have set the record straight: pressure on fees, scarcity of talent, and increased regulatory environment urge players to make choices. Outsourcing of non-core functions has been used for several years; but we also started to observe Asset Managers or ManCos increasingly delegating the management of certain asset classes.”
The latest ManCo ranking by PwC shows little movement at the top, with JP Morgan (381.7 billion euro in assets managed via Luxembourg), DWS (273.3 billion) and UBS (212.8 billion) retaining the top three positions. Amundi, Europe’s biggest asset manager with 200 billion in assets), now occupies the fourth position, as it managed to limit the decrease in assets to 7 percent last year. With 169.9 billion, BlackRock now is fifth.
More movement took place in the bottom half of the top 20. Stockholm-headquartered fund manager EQT, who uses Luxembourg as the legal domicile for most of its funds, entered 10th place in the ranking as a newcomer, forcing AllianceBernstein out of the top 20. Germany’s Hauck & Aufhäuser and Swiss Carne Global respectively gained six and three places in the top 20, at the expense of Nordea and Franklin Templeton.
Top 20 Management Companies in Luxembourg:
Ucits no longer dominant
The significance of the Ucits regular investment for Luxembourg remained high but continued to erode last year. Ucits funds now account for 66 percent of total assets under management in Luxembourg, down from 75 percent at the end of 2021.
At the same time, alternative investments gain in importance, now accounting for a third of the total, as opposed to a quarter in 2021. Alternative investment funds accounted for 1,672 billion euros, up 24 percent from a year earlier, boosted by a 45 percent increase in non-regulated funds, which accounted for just over one trillion euro at the end of last year.
EQT overtook Frankfurt-headquarter Universal Investment as Luxembourg’s top Alternative Investment Fund Manager, thanks to a gain of 65 percent in assets under management. Alter Domus jumped four spots to seventh, having gained 53% in assets under management.
The AIFM Top 10 is completed by Sanne Lis, FundRock and LRI Invest, all of whom are part of the Bermuda-headquartered Apex Group. Collectively, these three AIFMs managed 95.8 billion in assets via Luxembourg, which would entitle Apex to the third place in the top 10, just above Hauck & Aufhäuser.
Out of around 260 Mancos in Luxembourg, 80 participated in the latest PwC survey. Together they represented 72 percent of total assets under management and 58 percent of the total number of ManCo employees in Luxembourg.
At the end of last year, Luxembourg-based Mancos had 251 branches in other European countries, notably France, Germany, Italy and Spain. These branches are mostly active in distribution, sales and marketing of funds. Funds domiciled in Luxembourg can be sold in all 30 countries of the European Economic Area under a single passport.