The annual Luxembourg Private Equity Association (LPEA) Insights Conference drew over 1,000 professionals to the Grand Duchy this year, underscoring the nation’s status as the largest global private markets hub outside the United States.
In a time when private equity and alternative investment markets are navigating shifting economic conditions, regulatory changes, and the emergence of AI, the conference reflected growing optimism that the sector may be entering a new supercycle—a period of sustained outperformance in private markets.
«We may indeed be on the cusp of another phase where private equity outperforms.”
Claus Mansfeldt, Swancap
The idea of a supercycle dominated discussions at the event. Claude Mansfeldt, managing director of Swancap and chair of LPEA, set the tone early on. «If you focus on private equity, you’ll have noticed increasing talk about the next PE supercycle,» he said. «We may indeed be on the cusp of another phase where private equity outperforms. It’s suggested that PE returns will once again surpass those of public equity.»
This optimism is supported by data showing private equity is currently valued at about two and a half times less than public markets, a gap that Mansfeldt believes will soon close. «Distributions are expected to come back with a vengeance next year,» he added, pointing to a return of exit activity that could significantly boost investor returns.
In private equity, distributions refer to the returns or payouts made to investors, typically after a portfolio company is sold. These distributions represent the realisation of profits from the investments made by the fund.
Balancing act
Beyond the supercycle, much of the conference focused on operational excellence, with speakers underscoring the need for private equity firms to adapt to a fast-evolving landscape. Hind El-Gaidi, head of Luxembourg at Intermediate Capital Group, explained that both evolutionary and revolutionary changes are reshaping the industry, where the use of terms like GPs and LPs are commonly use to refer to investment managers and investors, respectively.
«GPs are growing in size, deploying capital, and diversifying their LP bases, while innovation is driving revolutionary changes,» El-Gaidi said. «Operational excellence is what marries these two forces together.»
El-Gaidi also emphasised the role of regulation in shaping the future of private equity. While regulatory requirements can be burdensome, they are also essential for fostering innovation and protecting investors. «The challenge lies in balancing the high costs of compliance with the rapid pace of deployment,» she noted.
Retailisation brings lower fee income
Retailisation—or the opening of private markets to individual investors, also referred to as democratisation—was another key theme of the conference. Fabrice Jeusette, managing director at Apollo, pointed out that retailisation, supported by new regulation that has removed investment thresholds in private markets, will likely lead to lower fee income due to intermediation costs, but it will also introduce new challenges, as retail investors demand more interaction and tailored services.
“Retail investors value more interaction with you, and they will demand different things.”
Fabrice Jeusette, Apollo
“You’re dealing with a different type of investor,” Jeusette said. “Retail investors value more interaction with you, and they will demand different things. You’ll have to manage that triangulation—higher costs and a lower focus on traditional institutional models. Efficiency will be key.”
Gautier Laurent, managing director at Cinven Luxembourg, agreed, noting that the entrance of retail investors represents «a different beast» for private equity firms. «It’s new territory, with an additional layer of services and fees. Increased competition signals a more mature market,» Laurent said.
Retailisation has been driven in part by the development of perpetual capital vehicles, or evergreen funds, which provide private equity firms with more flexible investment horizons. According to John Sharkey of Blackstone, the world’s biggest private equity firm, these vehicles are proving to be a powerful tool for expanding into the private wealth channel—a sector Blackstone has been growing eagerly. «There is great opportunity, particularly for private capital with a flexible horizon. We see continued potential in this ownership model,» Sharkey noted.
ESG no longer competitive
The integration of Environmental, Social, and Governance (ESG) factors in private markets is reaching a critical juncture, the conference discussions made clear. As El-Gaidi noted, the days when individual sponsors could leverage ESG innovation as a unique competitive advantage are fading.
When it comes to ESG “we’re at a tipping point in the market where individual sponsors can no longer claim innovation as a competitive advantage.”
Hind El-Gaidi, ICG
“We’re at a tipping point in the market where individual sponsors can no longer claim innovation as a competitive advantage,” she said. ”The entire ecosystem needs to align, with all the key parameters connected. None of us can create a competitive edge from this alone—there’s real advantage in moving forward in lockstep, together.”
Experimental mindset
The rise of artificial intelligence (AI) was another focal point, with many industry leaders seeing it as both a challenge and an opportunity. Sharkey pointed out that Blackstone has adopted an experimental mindset toward AI, particularly in leveraging data for decision-making. «We’ve challenged our portfolio companies not to fall behind, because leadership positions can be eroded over time,» he said.
While AI offers significant potential for improving operational efficiency, private equity firms are cautious about the high costs of implementation. «The problem is that investing in your own operations doesn’t always deliver a clear return on investment,» Laurent observed, reflecting a broader industry concern.
Consolidating landscape
Consolidation in the private equity sector was another trend discussed at the conference. David Layton, chief executive of Partners Group, last year predicted that the number of private equity managers could shrink dramatically over the next decade, driven by higher interest rates, fundraising difficulties, and increased regulatory costs. The top 25 largest competitors have already captured more than a third of the 506 billion of new capital allocated to private equity in 2024.
As the industry consolidates, larger firms are likely to dominate, leaving smaller players struggling to compete. Yet, despite these pressures, speakers at the conference remained optimistic about the future. «While these challenges are substantial, they also present a lot of opportunities for large and mid-market players like us,» said Richard Reis, partner at Argos Wityu.
As the LPEA event concluded, the mood was one of cautious optimism. Whether or not a supercycle truly materialises, it is clear that private equity remains a dynamic asset class with promising long-term returns for investors who know how to navigate here. Luxembourg, with its conducive regulatory environment and growing expertise, could be well-positioned to ride the next wave of private market growth. As Mansfeldt put it: «The game is on. Go out, find the best ideas, and enjoy the race.»
Further reading on Investment Officer Luxembourg:
- European fund houses rush to acquire PE firms in ‘existential battle’
- Private markets: Focusing on value over costs in an overcrowded market
- ‘Facebook Effect’ in Luxembourg reshapes private equity in EU