Robust growth for alternative investment funds in Luxembourg

28 Nov 2019 | Press Releases  


The results of three surveys published on the occasion of the ALFI PE & RE Conference 2019 in Luxembourg on 26 and 27 November reveal continued solid growth in alternative investment funds in the Grand Duchy.

 

  • Number of €1 billion+ private equity funds double
  • Debt funds AuM grow 40% in two years
  • Number of real estate RAIFs launched up by 133% in one year

 

The ALFI/Deloitte Private Equity and Venture Capital Investment Fund Survey 2019 found that the size of the average private equity fund domiciled in Luxembourg has increased by 50% since 2018, with the number of PE funds holding assets worth more than €1 billion doubling over the same 12-month period. Luxembourg now accounts for 4.3% of the global private equity fund industry. The survey also shows unregulated investment vehicles such as RAIFs and limited partnerships saw a 20-point increase up to Q3 2019, following a similar 20-point increase a year earlier, these fund structures now represent 51% of all Luxembourg PE funds.

Luxembourg has now been embraced by large PE houses, especially North American funds who represent 8% of the Luxembourg private equity population, the percentage of non-EU initiators in the market has gone up from 9% to 13%.

The ALFI/KPMG Private Debt Fund Survey 2019 showed a 14.5% climb in assets under management (AuM) in Luxembourg private debt funds, to a total of over €56 billion, representing an impressive 40% increase in the last two years. This builds on the 23.5% growth in AuM seen from 2017. The number of private debt funds using a RAIF structure rose from 13% to 20% of total funds in 2019.

Direct lending strategies almost doubled to 32% of the private loan market, up from 18%. High yield bond strategies remained stable at 22% whilst senior loans dropped from 35% in 2018 to 22% in 2019.

The survey also discusses the rise of sustainable finance and green loans as it relates to the industry. The adoption of the European Parliament’s new environmental regulations will oblige firms to release environmental impact assessments making high-carbon investments an increasingly unattractive option moving forward. Green loans are becoming more attractive as their issuance rose up to $60 bn globally in 2018, up more than 30% from 2017.

The ALFI REIF Survey 2019 found a flourishing sector, with asset managers seeing increased interest from non-EU countries and in particular North America; US investments were at 18% of the total in 2019 compared to 11% the year prior. Fewer of these funds are being invested in European countries, with the percentage leaving the EU rising from 23% to 29%. The multi-sector strategy is slightly less prevailing, with only 33% of funds investing in real estate from a variety of sectors, 67% choose to focus on single sector e.g. with an office, retail or industrial strategy.

The number of launches of Reserved Alternative Investment Funds (RAIFs) focused on property grew from 27 in 2018 to 63 in 2019, an increase of 133%. The number of Alternative Investment Funds has also seen a marked expansion, from 27 manager-regulated AIFs in 2018, to 41 in 2019 – an increase of 51.9%. The increase in the number of fund launches corresponds with a rise in net AuM of Luxembourg real estate funds. As of Q3 2019, it stands at €79.93 billion; up by 7.44 billion from €70.49 billion at the end of 2018. This represents an increase of 13.4%.

Commenting on the survey results, Corinne Lamesch, Chairperson of ALFI, said: “These reports highlight robust growth across all three asset classes for Luxembourg-domiciled funds as they become increasingly attractive outside the EU, both in terms of new AIFs set up in Luxembourg and the breadth of non-European institutional investment into these funds.

“From a global perspective the next few years should represent an era of significant continued growth for alternative investment funds, having witnessed global AuM tripling to nearly $9 trillion in the decade up to 2017. With the global AIF industry set to more than double in size over the next five years and over three quarters of investors expecting to increase their allocation to alternatives, we believe Luxembourg-domiciled AIFs are in a strong position to capitalise on this growth in interest and investment.”

 

For more information, please contact:

Alena Schluenz
Senior Communications and Industry Affairs Advisor, ALFI
Tel: +352 22 30 26 – 1
communications@alfi.lu 

 

Notes to editors:

The Association of the Luxembourg Fund Industry (ALFI) represents the face and voice of the Luxembourg asset management and investment fund community. The Association is committed to the development of the Luxembourg fund industry by striving to create new business opportunities, and through the exchange of information and knowledge.

Created in 1988, the Association today represents over 1,500 Luxembourg-domiciled investment funds, asset management companies and a wide range of businesses that serve the sector. These include depositary banks, fund administrators, transfer agents, distributors, legal firms, consultants, tax advisory firms, auditors and accountants, specialist IT and communication companies. Luxembourg is the largest fund domicile in Europe and a worldwide leader in cross-border distribution of funds. Luxembourg-domiciled investment funds are distributed in more than 70 countries around the world.

For further information, do not hesitate to consult www.alfi.lu. To keep up with all the news from ALFI and the fund industry in Luxembourg, join us on LinkedIn (The Luxembourg Fund Industry Group by ALFI), Twitter (@ALFIfunds), Youtube and Vimeo.