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Rising number of Luxembourg PE funds holding €1bn+

As average private equity fund size hits €200m


Kirsten Hastings

The 19% year-on-year growth in assets under management recorded in Luxembourg’s private equity market outpaced the rise in the money channelled into regulated vehicles (13%).

A Deloitte investment report into private equity and venture capital funds in the duchy, conducted on behalf of the Association of the Luxembourg Fund Industry (Alfi), found that the total PE fund market is estimated to be worth €148bn.

Fund size

There are now 36 funds holding assets worth more than €1bn, double the number in 2018.

There was also a 50% jump in the average size of PE funds in 2019 to €200.6m.

Concurrently, the proportion of all funds holding assets worth €100m or less decreased to 69% from 80% a year ago.

Room to grow

Benjamin Collette, partner at Deloitte Luxembourg commented that “the appetite for the Luxembourg fund structuring toolbox has increased beyond expectations”.

But research from McKinsey states that, globally, Luxembourg accounts for 4.3% of the private equity fund industry; suggesting that, while interest is growing, there is still some way to go.

Develop into a brand

Collette added: “In a fast-changing environment; Beps, AIFMD and Brexit have forced fund managers to seek new long-term stable operating solutions and Luxembourg has more often than not been the solution of choice.”

He cited the “diverse range of vehicles, from unregulated to regulated products, together with the asset class expertise developed over the years within the professional community and [local regulator] as key factors behind this collective success”.

Camille Thommes, director general of Alfi, commented: “Over the last decade many large international houses with considerable and growing local presence have set up shop and conducted business out of Luxembourg.

“The AIFMD introduced new organisational requirements and specific disclosure rules regarding AIFMs managing AIFs, which acquire control of non-listed companies and issuers.

“The alternative investment industry has accepted the challenge and is today governed by a framework that has the potential to develop into a brand, just like the Ucits Directive.”

Beyond Luxembourg

According to the latest research from Last Word, 53% of European fund selectors intend to increase their weighting towards private equity over the next 12 months.

Just 1% intend to reduce.

Among all private assets, equity is the clearest winner when it comes to increasing exposure; followed by debt (39%) and direct infrastructure (36%).

But the biggest concerns are limited liquidity (70%), high fees (40%) and a lack of transparency in underlying holdings.