Luxembourg alternative investment funds record another year of robust growth (50% increase since 2018)

The 2019 fund survey by venture Capital Investment Fund and% ALFI/Deloitte Private Equity found that the size of average private equity fund domiciled in Luxembourg had increased by 50% since 2018.

The number of PE funds held assets worth more than the EUR1 billion doubling over the same 12-month period. 

Now, Luxembourg 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, the fund structures now represent 51% of all Luxembourg PE funds.

Now, large PE houses, especially North American funds which represent 8% of the Luxembourg private equity population, have embraced Luxembourg.

The percentage of non-EU initiators in the markets rose 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 EUR56 billion.

It represents an impressive 40% increase in the last two years and builds on the 23.5% growth in AuM seen from 2017.

The number of private debt funds suing the 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 were stable at 22%, while senior debts dropped from 35% in 2018 to 22% in 2019.

The survey did not leave out the rise of sustainable finance and green loans as it relates to the industry.

New environmental regulations 

Adoption of the European Parliament’s new regulations on environmental impact will oblige firms to release environmental impact assessment. The regulations make high-carbon investments an increasingly unattractive option going forward.

Green loans have become more attractive as their issuance rose up to $60 billion globally in 2018, up more than 30% from 2017.

The 2019 Survey by ALFI REIF found a flourishing sector, with asset managers seeing increased interest from non-EU countries, particularly North America.

The US investments were at 18% of the total in 2019 compared to 11% in 2018.

Fewer of these funds are investing in the European countries, with the percentage leaving the EU rising from 23% to 29%.

The multiple-sector strategy is slightly less prevailing, with only 33% of funds investing in real estate among other sectors. 67% chose to focus on the single industry, such as office retail or industrial strategy.

The number of Reserved Alternative Investment Funds (RAIF) launches focused on property grew from 27 in 2018 to 60 in 2019-an increase of 133%.

The number of Alternative Investment Funds (AIF) has also expanded from 27 manager-regulated AIF in 2018, to 41 in 2019- an increase of 51.6%.

An increase in the number of fund launches corresponds with the rise in net AUM of Luxembourg real estate funds.

As of Q3 2019, it rose by 7.44 billion from EUR70.49 billion to stand at EUR79.93 billion at the end of 2018- representing an increase of 13.4%.

Corinne Lamesch, Chairperson of ALFI, says: “These reports highlight robust growth across all three asset classes for Luxembourg-domiciled funds. They have 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 USD9 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 capitalize on this growth in interest and investment.“