Pierre-Marie Bochereau, Director, Management Company Coordinator, PwC Luxembourg says: “2021 marked another successful year for ManCos. While the challenges are numerous and the sector is evolving quickly, the ManCos have demonstrated an incredible ability to adapt by developing their business models and transforming regulatory evolution into business opportunities. 2021 ended again with a series of records. ManCos were managing 5,314 billion EUR, which marks an increase of 22% year-over-year (YOY ). Both traditional (UCITS) and alternative assets (regulated and unregulated assets) reported double digit increases, 16% for UCITS but even more impressive for AIFs with 41% YOY!”
Bertrand Jaboulay, Partner, Management Company Leader, PwC Luxembourg says: “The increase of alternative assets has been mainly driven by the continuous success of unregulated assets since 2016 with the modernisation of the products offering by (i) creating an unregulated AIF regime – the RAIF – in 2016 and (ii) creating the Limited Partnership regime (SCSp) in 2017. Those structures are by far the most successful products used by AIFMs. The dynamism of alternative investments has been characterised by a wide range of investment strategies deployed in 2021, mainly Private Equity, Real Estate, Fund of Funds and Private Debt.”
The development of alternative funds in Luxembourg accentuates a challenge which is not new for ManCos in Luxembourg – the availability of talent. Employees in ManCos reached 6,581, +7% YOY increase, boosted by a 16% increase in AIFMs. This is combined with a continuous need for ManCos to maintain adequate substance. Lack of a skilled workforce is one of the main concerns for ManCos, as illustrated in our publication.
ESG being an important topic in the financial sector, ManCos have an important role to play to ensure compliance. However, due to some lack of clarity, they are facing challenges in relation to Sustainable Finance in their operation. The three main challenges are: the risks associated with data (inaccuracy, non alignment or unavailability), the non-harmonised Sustainable Finance framework and the impact of the costs associated with data research, collection and reporting.
Another challenge at the top of the agenda for ManCos remains their digital transformation, aiming at increasing the efficiency of their operations and providing better and qualitative information to their clients. 40% of ManCos intend to significantly increase (at least by +10%) their long term investments in this area. ManCos aim at benefiting from data management, data exchange and ultimately at providing accurate and a real time basis information to investors, brought via technologies.
Digital transformation remains a key area for ManCos to increase the efficiency of the operations and to provide better and qualitative information to their clients. Almost 40% intend to significantly increase (+10%) their long term investments in this area accompanied by significant increase in their ESG/Sustainable Finance strategy for most of them (around 70%).”
Bertrand Jaboulay, Partner, Management Company Leader, PwC Luxembourg says: “ManCos in Luxembourg are here to stay, thanks to the country being an attractive fund hub, having a sound ecosystem (proximity with stakeholders and regulators, political stability, a good business environment, etc.) and taking on the role as a robust governance centre and a first mover for substance requirements in Luxembourg.”
Discover the 7th edition of the Management Company Observatory Barometer on the PwC Luxembourg website.