Unregulated alternative investments continued to be dynamic and successful in Luxembourg last year thanks to the modernisation in recent years of the Grand Duchy’s regulatory regime for private markets, consultancy firm PWC Luxembourg noted when releasing the latest version of its Observatory for Management Companies.
Luxembourg kickstarted the development of alternative investment funds in 2016 by enabling Reserved Alternative Investment Funds, or Raifs, and by creating its “SCSp” limited partnership regime a year later. Such funds are available for professional investors only and are managed by Alternative Investment Fund Managers. These AIFM are subject to direct supervision by the CSSF.
“Those structures are by far the most successful products used by AIFMs,” PWC said in its Observatory. “The dynamism of alternative investments has been characterised by a wide range of investment strategies deployed in 2021, mainly private equity, real estate, fund of funds and private debt.”
The Grand Duchy’s ManCos were managing 5,314 billion euro at the end of 2021, up 22 percent from a year earlier, PWC said. The number of ManCos declined by 9 entities to 305, while staff levels rose 7 percent from 2020 to 6581 people.
JP Morgan, DWS and UBS retain their lead
JP Morgan Asset Management, DWS and UBS were the three largest management companies active in Luxembourg at the end of last year, PWC said. Universal-Investment and FundRock retained their leads as the biggest third-party management companies.
PWC reported double-digit growth rates for ManCo’s active in alternative assets, led higher by a 41 percent increase for Alternative Investment Funds, or AIFs. Growth for alternative investments based on Ucits was up 16 percent year-on-year.
“While the challenges are numerous and the sector is evolving quickly, the ManCos have demonstrated an incredible ability to adapt by developing their business models and transforming regulatory evolution into business opportunities,” said Pierre-Marie Bochereau, Director, Management Company Coordinator at PWC. “2021 ended again with a series of records.”
On average, the top 50 management companies in Luxembourg held 87.7 billion euro in assets at the end of 2021, up from 72.8 billion a year earlier. The average share of Luxembourg Ucits funds fell to 78 percent from 81 percent as foreign Ucits and alternative investment grew slightly.
Most ManCo’s are in-house service providers
The bulk, or 41 percent, of Luxembourg ManCo’s are in-house service providers, while about one third are third party ManCo’s. A quarter of them are in-house with third-party business.
Looking at the top 50, the average assets under management for a Luxembourg AIFM was 19.4 billion euro, up from 14.5 billion a year earlier. Per product, the average share for unregulated Luxembourg AIFs, such as Raifs and SCSp’s, rose to 36 percent last year from 20 percent a year earlier. The share of regulated AIFs fell to 51 percent from 69 percent.
Private equity and real estate were the main structures launched in 2021, followed by fund of funds and debt funds, according to PWC. A total of 1646 Raifs were registered at the end of last year, with 159 AIFMs actively managing Raids. The assets in an average Raif were 2.73 billion last year, up from 1.72 billion euro, according to PWC.
Some 6318 SCSp’s were registered. These limited partnerships held on average 4.59 billion euro in assets last year, compared to 2.83 billion euro in 2020.
Some 13 new ManCo emerged on the Luxembourg scene last year, 12 of which as authorised Alternative Investment Fund Manager, or AIFM, and one, Allfunds Investment Solutions, as Ucits manager. The list of newcomers’ names includes Pemira, Preasidium, Wendel, AManco, HCOB, IntReal, Lexington, Petricca, Sienna Capital, Emerald, fundcraft and GP Bullhound.
Top 5 Luxembourg Management Companies:
- JP Morgan Asset Management (Europe) SA
- DWS Investment SA
- UBS Fund Management (Luxembourg) SA
- BlackRock (Luxembourg) SA
- Amundi Luxembourg SA
Top 5 Luxembourg Alternative Investment Fund Managers:
- Universal-Investment-Luxembourg SA
- EQT Fund Management Sarl
- Hauck & Aufhäuser Fund Services SA
- Carne Global Fund Managers (Luxembourg) SA
- Blackstone Europe Fund Management Sarl
Top 5 Luxembourg Third Party ManCos:
- Universal-Investment-Luxembourg SA
- FundRock Management Company SA
- Carne Global Fund Managers (Luxembourg) SA
- Hauck & Aufhäuser Fund Services SA
- GAM (Luxembourg) SA
As based on assets under management by end 2021. Source: PWC ManCo Observatory 2022
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