KPMG and ALFI launch Private Debt Funds Survey 2024

23 October 2024 | Press Releases  


Luxembourg Private Debt Fund Market surpasses EUR 500 billion, KPMG/ALFI survey finds.

  • AuM of private debt funds increased by 21.5% from June to December 2023 to €510 billion
  • 86% of indirectly supervised AIF private debt fund vehicles are Special Limited Partnerships (SCSp)
  • Where a specific regulatory regime is opted for, 62% are structured as Reserved Alternative Investment Funds (RAIFs), up 9% since June 2023

 

The annual KPMG Private Debt Fund Survey 2024, commissioned by the Association of the Luxembourg Fund Industry (ALFI), once again shows substantial growth in the Luxembourg private debt industry. Despite global market challenges, AuM increased by 21% to €510 billion from June 2023 to December 2023. This compounds on last year’s AuM growth of 51%, highlighting the ongoing appetite for private debt funds domiciled in Luxembourg.

 

Julien Bieber, Partner Tax, Alternative Investments and Co-Head of Private Debt at KPMG in Luxembourg said: “With greater recognition from the industry, the Luxembourg private debt fund market has become increasingly mature. Luxembourg is now recognised as one of the most attractive domiciles for private debt funds, reflected in the impressive growth of assets under management. In the future, the AIFMD II will offer a more robust and aligned framework for loan origination, which is poised to harmonise regulations across Europe. Additionally, a confluence of favourable factors such as high interest rates, growing appeal among investors, demand for tailored solutions by borrowers, and a shift away from traditional bank lending has shaped a dynamic landscape.

“Lastly, we believe Luxembourg's leading position will be sustained through its strategic use of data and technology, access to a highly skilled and diverse workforce, expansion through retailisation, and a supportive regulatory framework.”

 

Serge Weyland, CEO at ALFI, commented: “The private debt market has shown remarkable resilience and consistent growth amid several years of global market challenges. This survey highlights the sustained appetite for private debt, with Luxembourg emerging as the domicile of choice, supported by its robust regulatory environment, political stability, and highly skilled workforce. Looking ahead, we expect the growing momentum for retailisation to bring further sophistication and opportunities to the Luxembourg private debt market.”

 
Highlights of the study

Key findings of the survey include:

  • Strong growth in AUM: The Luxembourg private debt market has grown by 21.5%, reaching €510 billion across 13 depository banks.
  • European dominance: While North America continues to be an area of strong investment focus (16%), investments in Europe continue to dominate, with EU member states accounting for 35% of investments, and the rest of Europe 25%. Asia-Pacific makes up 3% while the Middle East accounts for 4%.
  • Sector diversity: the top four sectors invested in are: Chemicals, IT, Telecoms, Media & Communications (18%), Infrastructure & Transportation (17%), Energy & Environment (16%) and Healthcare & Life Science (16%).
  • Fund structure division: The survey found that the gap has narrowed between debt-originating funds (49.3%) and debt-participating funds (49.5%), a notable difference from last year’s division (42% and 57%, respectively). Meanwhile, the share of open-ended funds has nearly doubled, from 14% to 26%. Closed-ended funds continue to dominate, however, representing 74% of all funds.
  • Indirectly supervised fund vehicles and RAIFs’ popularity: For indirectly supervised AIF fund vehicles (other than RAIF), the Luxembourg SCSp represent 86% of the market. Where a regulatory regime is opted for (e.g., RAIF or SIF) Luxembourg RAIF has strengthened its position, accounting for 62% of private debt funds, marking a 9% increase from last year. Conversely, the number of SIFs has fallen from 38% to 32% this year.
  • Direct lending leads strategies: The majority of Luxembourg private debt funds (62%) have direct lending strategies, a 2% decrease from last year. Mezzanine accounts for 16% of strategies, an increase of 3%, supplanting distressed debt (8%) as the second most popular strategy.
  • Institutional investor base: Similar to last year, the majority of investors in private debt funds are institutional investors (80%), followed by retail investors (6%), sovereign wealth funds (5%) and private banks (4%). 68% of these investors are from EU countries.
  • Cautious ESG integration: Most funds (76%) continue to be classified under Article 6 of SFDR, compared to 21% under Article 8 (an increase of 3% from last year). In particular, the survey found that the number of Article 9 classified funds has fallen by 2% to only 3.5% of funds. reflecting a more cautious approach to ESG integration.
  • AIFMD II impact: The introduction of AIFMD II has provided clearer guidelines on loan origination, positioning Luxembourg as a top destination for complex fund structures and investment strategies.

 

Download the KPMG/ALFI Private Debt Fund Survey 2024.

Download the press release in pdf.

 
ENDS

For more information, please contact:

Peregrine Communications

ALFI@peregrinecommunications.com

 

ALFI

Luis Salerno

ALFI Head of Communications Luis.Salerno@alfi.lu

 

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Notes to editors:

About ALFI

The Association of the Luxembourg Fund Industry (ALFI) represents the face and voice of the Luxembourg asset management and investment fund community, championing mainstream, private assets and sustainable investing. ALFI seeks to promote Luxembourg’s fund sector internationally, and to cultivate for the benefit of its members a collaborative, dynamic and innovative ecosystem underpinned by the most robust regulatory framework. ALFI’s ambition is to empower investors to meet their life goals.

The Association today represents over 1,4400 Luxembourg domiciled investment funds, asset management companies and a wide range of business that serve the sector. Our members are investment funds, management companies, asset managers, alternative investment fund managers (AIFMs), depositary banks, legal and consultancy firms, tax advisory firms, auditors and accountants, specialised IT and communication companies and individual members.

To keep up with all the news from ALFI and the fund industry in Luxembourg, follow us on LinkedIn, (@ALFIfunds), YouTube and Flickr.

For more information please visit www.alfi.lu.

 

About KPMG

As a member of KPMG International, a network of independent firms operating in 143 countries, KPMG in Luxembourg provides a full range of audit, tax and advisory services to major national and international clients active in the financial, insurance, commercial and industrial sectors.

With more than 2,000 people, KPMG in Luxembourg is one of the country’s leading audit, tax and advisory firms. Our approach to relationships and service delivery is designed to help clients exploit new opportunities, improve performance and manage risk.

We also participate in/or chair various industry groups in Luxembourg, including the “Haut Comité de la Place financière”, the Commission de Surveillance du Secteur Financier (CSSF), the Bankers’ Association (ABBL), the Association of the Luxembourg Fund Industry (Alfi) or the Luxembourg Institute of Directors (ILA).