Private Debt Fund Survey 2024
The annual KPMG Private Debt Fund Survey 2024 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.
This significant increase showcases the ongoing appetite for private debt as a key asset class, with Luxembourg maintaining its status as the leading domicile for these funds. Our country has in fact become a leading hub for private debt funds, offering a robust regulatory framework, political stability, and a skilled, multicultural workforce within a well-established financial services sector.
Introduced in 2013 and 2016 respectively, the SCSp and the RAIF have experienced tremendous growth and now represent the vast majority of debt fund vehicles. The market has also expanded geographically, with investors looking beyond the initial US focus. Europe and Asia-Pacific have emerged as key growth regions, and 35% of investments now target EU member states. While interest in Europe is increasing, there remains significant and growing attention on North America as well as other European countries. Furthermore, the rise of technology integration and AI tools is helping managers process larger portfolios more efficiently, while enhancing transparency and operational robustness. We also witness that Luxembourg domiciled structures are now increasingly used by GPs a single vehicle solution accommodating a global investor base.
Other takeways
- 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.
Regulatory challenges
The evolving regulatory landscape poses new challenges. While sustainability remains a vital aspect of investment strategies, there has been a notable shift, with 76% of funds classified under Article 6 of SFDR, compared to 21% under Article 8, reflecting a more cautious approach to ESG integration. As policymakers help to drive transparency and investor protection, private debt managers must adapt to new demands for clearer reporting, governance, and AI-driven processes.
Looking ahead
The private debt market is poised to expand, with retailisation becoming an emerging trend. ELTIFs and other initiatives aimed at attracting retail investors are gaining traction, adding further complexity but also opportunity to the market. With interest rate cuts on the horizon and a stabilising economic outlook, private debt funds are well-positioned for sustained growth in the coming years.
Survey details
Objectives
This study has two main objectives:
- Interpret current behaviours and structuring trends related to private debt funds in Luxembourg and predict their trajectory
- Provide qualitative insights based on numerical data.
Methodology
We received data from 13 active depositaries representing 1,300+ funds (or sub-funds) investing in private debt.
We sent a predefined questionnaire to each depositary surveyed to gather data on the various debt funds that they oversee.
This questionnaire of 38 closed-ended questions covered a range of topics, such as fund category, regulatory regimes, legal forms, geographical investment targets, investor origin and financial statement data.
Content
The survey’s key findings are disclosed in this report on a no-name basis.
Research for this survey began in December 2023.
