UCITS vs Alternative Funds: Luxembourg's Tale of Two Asset Trends
New findings from the 29th edition of the Monterey Insight Luxembourg Fund Report, as compiled by Monterey Insight, the independent fund research company, reveal the market shares of all service providers in Luxembourg’s funds industry.
Please note all findings below include regulated funds (SIFs, UCITS/UCIs and SICARs) unless indicated otherwise, as of 31st December 2022.
The total net assets for regulated collective investment funds domiciled in Luxembourg decreased from US$6,685.3bn in 2021 to US$5,395.0bn in 2022. This represents a decrease of 19.3% in US Dollar or equates to a Euro decrease of 14.0%, from €5,879.0bn in 2021 to €5,055.1bn in 2022. The total assets combining Luxembourg and serviced funds decreased of 11.0% to US$7,308.7bn in 2022, compared to the market value of US$8,241.7bn in 2021. The value of assets for UCITS dropped by 22.2%, which was the largest decline among the fund types. SIFs also saw a 4.3% reduction in their asset value. On the other hand, SICARs had fewer funds and sub-funds, but their asset value went up by 12.6%.
For unregulated funds, the RAIFs have the greatest increase totalling US$458.4bn of assets representing a 38.6% increase compared to US$330.8bn in 2021. During the same time, LuxLPs & SOPARFIs reached US$681.4bn (US$470.0bn in 2021), a 45.0% increase of assets.
The overall number of regulated funds and sub-funds reached 14,224 in 2022, showing a small decrease compared to the previous year with 14,404. However, the unregulated funds show some of the best performance with an increase of 30.2% coming to 5,436 funds and sub-funds (from 4,175 in 2021). In more detail, RAIFs registered an increase of 30.4% in the number of sub-funds active during the year, reaching 2,666 funds and sub-funds. LuxLPs and SOPARFI combined numbers of funds and sub-funds reached 2,770 which represents a 30.0% increase compared to 2021.
Non-domiciled funds increased to US$773.9bn with over 1,760 sub-funds.
In terms of products, as was the case in the previous year, for regulated funds, equity fund products are once again the most popular by AUM (US$1,807.7bn) exceeding bond funds which have assets of US$1,278.9bn. When looking at the complete market including unregulated funds, Private Equity/Venture Capital rise to third position with US$944.9bn and circa 4,220 funds and sub-funds.
The funds and sub-funds newly launched as of 31st December 2022 reached US$69.9bn with 717 regulated funds and sub-funds. Looking at the overall numbers and including unregulated products, new business reached US$108.3bn with 1,291 funds and sub-funds.
Turning to EU SFDR data, as of 31st December 2022, across all types of Luxembourg funds (regulated and unregulated), 773 were listed under Article 9 accounting for US$273.3bn. Funds and sub-funds listed under Article 8 were 4,906 totalling US$2,686.1bn. Out of the newly launched funds (including unregulated products), 29.8% were launched under article 8 and 8.7% under Article 9; an increase from last year of 28% and 5.8% respectively. The figures when looking at newly launched regulated Luxembourg funds only, reach 40.7% under Article 8 and 12.3% under Article 9. Again, this represents an increase of 38.5% and 8.7% for Article 8 and Article 9 respectively.
Turning to the service providers, for fund manager companies, the top two positions remain unchanged with the largest promoter/initiator of Luxembourg regulated schemes being J.P. Morgan (US$392.6bn) and Amundi in second position (US$299.9bn). DWS International regain its third position (US$202.8) and BlackRock Financial Management fall to fourth position (US$185.7bn).
Amongst the Luxembourg located ManCo/AIFM rankings of regulated schemes, J.P. Morgan Asset Management (Europe), as has been the case for several years, retain their top position with total net assets of US$390.6bn. Amundi rise to second place (US$207.0bn). DWS Investment maintain their third position with US$202.8bn and as last year UBS Fund Management (Luxembourg) follow closely in fourth position with US$190.6bn.
Philippe Ringard, Managing Director and CEO of JPMorgan Asset Management Europe S.à r.l. (JPMAME) in Luxembourg:
“The dedication of Luxembourg’s ecosystem, which has developed into a critical hub for excellence in cross-border UCITS investment solutions as well as the industry-leading provision of Alternative Investment Funds, remains notable. This year, which marks 35 years since J.P. Morgan Asset Management was established in Luxembourg, speaks to our strong heritage within the ecosystem. And we’re excited to build on this heritage, by continuing to support our institutional and retail clients – across Europe and internationally – with investment solutions that meet their needs in the years to come.” State Street maintain again their lead position for all the three rankings of fund administration, custody and, together with IFDS, transfer agent.
Riccardo Lamanna, Country Head of State Street in Luxembourg:
"Asset servicing stands as our stronghold at State Street, and we are proud to retain our market leadership position in Luxembourg's fund administration, custody, and transfer agency sectors. Our leading position in the market reflects our unwavering commitment to the Grand Duchy's asset services industry and our dedication to delivering world-class solutions to our clients across all asset classes. As we continue to fortify relationships with global and regional asset managers, we remain steadfast in our mission to elevate our capabilities and expand our reach with the ultimate goal of becoming the preferred front-to-back partner for our clients."
In more detail, the top positions remain unchanged for fund administration ranking: State Street is first by total net assets (US$1,079.3bn) followed by J.P. Morgan Bank in second position (US$826.2bn) and BNY Mellon (US$363.9bn) ranked third ahead of CACEIS (US$357.4bn) in fourth. Amongst custodians/depositaries, State Street again secure the top position with the largest proportion of assets under custody totalling US$1,082.8bn,followed by J.P. Morgan Bank with US$959.7bn. BNP Paribas create the surprise and rise to third position with US$427.7bn ahead of CACEIS in fourth position US$411.1bn.
Looking at transfer agents ranking, IFDS / State Street top the rankings with US$1,047.9bn of assets followed in second position by J.P. Morgan Bank US$556.6bn taking the second position from RBC Investor Services Bank. RBC take the third position this year with US$455.8bn, ahead of CACEIS with US$438.4bn.
Amongst audit firms, as has been the case for several years, PwC maintain their lead in auditing with a total of 6,264 sub-funds. This year EY create the surprise and pass second position with 2,771, ahead of KPMG with 2,313 sub-funds. Deloitte keep their fourth position with 2,249 sub-funds.
Mike Delano, Partner and Asset and Wealth Management Leader at PwC Luxembourg, says:
“2023 will be a better year for economies than we expected, but we still believe a recession is more likely than not.
We are growing in a challenging environment, but the Luxembourg financial center has further strengthened its position as a hub for asset management, with total net assets under management in Luxembourg funds of EUR 5162,6 billion as of May 2023*
“Traditional” asset managers continue to launch private asset products and private equity is the fastest growing asset class with 29.9% growth, followed by equities and funds of funds with 29.8% and 25% asset growth respectively*. ESG continues to be a key topic for the asset management industry: as climate change becomes a growing concern, ESG funds are better positioned for the future. Luxembourg's business and regulatory environment has demonstrated its ability to deal with rapidly changing stakeholder demands and has helped existing players expand their presence and new players enter the market. We are pleased to be able to support our clients in this way and have invested in numerous audit transformation initiatives to redefine the client experience. As the largest services firm for the asset and wealth management industry globally and in Luxembourg, our PwC team is ready to support our clients on critical issues and help them remain competitive in this challenging environment. We guide our clients throughout the lifecycle of their activities, advising them on how to overcome challenges and introducing new services to help them expand their business, distribute globally and launch new products." *Source ALFI For legal advisers, Arendt & Medernach maintain their lead by number of funds with 4,488 sub-funds) followed by Elvinger Hoss Prussen with 3,560 sub-funds. For the first time by total assets, Arendt & Medernach also take the top position with US$1,700.4bn and pass Elvinger Hoss Prussen in second position with a total amount of net assets of US$1,694.1bn.
Gilles Dusemon, Partner, Investment Management at Arendt & Medernach:
“The Luxembourg fund market continues to be an attractive proposition for investment managers and we have seen a growth in the number of clients seeking Arendt for advice and guidance as they adapt their strategies to changing market conditions. Our position as market leaders enables Arendt to work with a diverse range of asset classes and support an increasing number of cross border clients, where we are grateful to be able to share our experience and insight for all their legal, tax, regulatory and fund services needs”
Karine Pacary, Managing Director, Monterey Insight, commented:
“In our 29th edition, we are pleased to share the new results of the Luxembourg fund industry in our Monterey Luxembourg Fund Report 2023.
The market turmoil and instability in 2022 have also affected Luxembourg, where the assets under management have declined. This trend was also seen in other jurisdictions that Monterey Insight covers (Ireland, Jersey and Guernsey), which we reported last year and will report soon for the UK.
Unregulated funds have attracted more interest and increased their asset value by 40%, while regulated funds have declined by 19% (this includes organic growth, new business and the shift from regulated to unregulated funds like RAIFs, which has been common in recent years). The best performers are Private Debt, Private Equity/Venture Capital and Property/Real Estate. The table below compares the top performance of regulated and unregulated funds.”
Please note the figures listed above include UCITS, SICARs and SIFs unless indicated otherwise.
For more information, please contact:
Managing Director, Monterey Insight
Tel. +44 (0)845 625 3863
Notes to Editors
^ For LuxLPs and SOPARFI, we have included schemes which we believe are classified as an investment fund product, especially focusing on those with an appointed AIFM. However, RAIFs and unregulated Luxembourg Limited Partnerships are excluded from the table rankings below.
Monterey Insight is an independent fund research company that provides comprehensive statistical analysis of the Luxembourg, Ireland, Guernsey, Jersey and UK fund industries: the only complete reference of service providers for all funds serviced in these jurisdictions.
As at 31st December 2022, leading service providers for Luxembourg funds were as follows (the below ranking includes SIFs, UCITS/UCIs and SICARs):
Source: Monterey Insight, Luxembourg Fund Report 2023