Luxembourg’s Private Equity Growth Accelerates Alongside Interest in Tech

Luxembourg has cemented its role as a global private equity giant with record growth in funds, market share, and talent, and the following data shows why.

A report released by the Luxembourg Private Equity & Venture Capital Association (LPEA) and PwC Luxembourg highlights the Grand Duchy's outstanding performance across various metrics in the private equity market.

Luxembourg now hosts 18 of the world’s top 20 private equity fund managers and ranks as the second-largest investment fund center globally, managing a whopping €5.1 trillion in assets.

This positions Luxembourg as one of the elite destinations for private equity activity in Europe and hammers home its importance in the global financial sphere. Explore our boots on the ground article to find out more about doing business in Luxembourg and the importance of trust and tech.

So, let’s get into the latest private equity statistics reported by the Luxembourg Private Equity & Venture Capital Association and PwC to explore what trends are capturing the interest of financial services influencers and private equity firms.

​​Luxembourg’s Global Dominance and Private Equity Growth

Geographically, Luxembourg is not that big. It’s smaller than Yosemite National Park and if you wanted to, you could probably fit the entire population quite comfortably into New York's Central Park.

After all, more than 600,000 people once gathered there for Garth Brooks’ iconic 1997 concert. I’m not a massive Brooks fan or anything.

I just think that’s an interesting comparison. Anyway, the point is, Luxembourg may be small in size but it is mighty when it comes to investment management.

According to the LPEA’s latest data dashboard, Luxembourg hosts operations for 18 of the world’s 20 largest private equity fund managers.

Right now, it ranks as the world’s second-largest investment fund center, with assets under management totaling €5.1 trillion.

In 2023, the country reportedly experienced a 70% surge in private equity deal activity, highlighting just how fertile the investment landscape is there.

Meanwhile, the net asset value (NAV) of private equity and related funds in Luxembourg reached €865 billion, marking a 25% year-over-year increase.

Luxembourg’s share of European alternative assets has also grown quite significantly from 15.6% in 2010 to 61.8% in 2022, reinforcing its leadership in alternative investments.

The country now commands 51.5% of European private equity and venture capital funds and represents 8.2% of the global private equity NAV, up from 7.3% in 2023.

And with such growth come jobs. There are approximately 1,200 job vacancies in its private equity and venture capital sector. The demand for talent seems to be pretty high.

The Rise of Third Party ManCos

Luxembourg has really established itself as Europe’s leading location for investment management companies, with ManCos overseeing a significant portion of the continent’s assets under management.

According to PwC’s Observatory for Management Companies Barometer, Luxembourg-based ManCos manage approximately 30% of all assets under management in Europe.

Interestingly, Ireland is the next largest player in the European market, holding 23% of European AuM.

This market share highlights Luxembourg’s huge role in Europe’s fund industry, where it leads in both UCITS (Undertakings for Collective Investment in Transferable Securities) and Alternative Investment Funds (AIFs).

But as Luxembourg’s management companies deal with rising regulatory demands like DORA and cost pressures, many are deciding to work with specialized third-party companies, also known as third party ManCos.

This trend has accelerated mergers and acquisitions. According to PwC, these third-party ManCos make up 18% of the Luxembourg fund management market, collectively managing over €100 billion in AuM.

These third-party companies seem to be centered in areas of alternative investments like private equity, real estate, and hedge funds.

Digital Transformation and Other Trends in Luxembourg

Digital transformation has reportedly become more of a concern for investment management firms.

There seems to be a desire to futureproof fund management activities and keep up with compliance.

Regulatory compliance, outdated technology, and resource constraints remain the primary challenges to achieving full operational efficiency, cited by 55%, 51%, and 45% of respondents, respectively.

To address these challenges, ManCos are focusing on streamlining internal processes, enhancing automation and digitalization, and strengthening governance.

AI-driven tools are now crucial for real-time risk management, compliance, and reporting, positioning Luxembourg’s ManCos to align with the upcoming Digital Operational Resilience Act (DORA) and to lead in operational resilience and technological innovation.

In a PwC ManCo survey in 2024, 60% of respondents said digitalisation was their top priority. Sustainability or ESG was the next top trend followed by regulatory compliance, alternative investment accessibility, and AI. 

Key Players in Luxembourg

Want to know more about the movers and shakers in the top financial institutions working in Luxembourg? Well, in the latest Monterey Insight Luxembourg Fund Report, the rankings really spotlight who’s leading the charge in Luxembourg’s fund market.

For anyone looking to get a sense of the industry, the report tells a clear story about where the market stands, who the big players are, and why Luxembourg is thriving. Allow me to break down the top rankings into categories and give a simple explanation.

1. Promoters/Initiators of Serviced Funds

• Top Ranked: J.P. Morgan, Amundi, DWS International, and Pictet.
• Explain It to Me Like I’m Five: These firms are the largest promoters or initiators of funds in Luxembourg. Promoters play a critical role in launching and marketing funds.

2. Management Company (ManCo) and Alternative Investment Fund Manager (AIFM)

• Top Ranked: J.P. Morgan Asset Management (Europe), DWS Investment, Amundi, and UBS Fund Management.
• ELI5: ManCo and AIFM companies oversee fund management to make sure regulatory compliance and strategic alignment for their funds. Their ranking reflects their trustworthiness and the volume of funds they handle.

3. Fund Administrators

• Top Ranked: State Street, J.P. Morgan Bank, CACEIS, and BNY Mellon.
• ELI5: Fund administrators handle back-office operations such as accounting, reporting, and regulatory compliance. The top companies have been chosen for their reliability and efficiency in these services, with State Street being the leader.

4. Custodians/Depositaries

• Top Rank: State Street, J.P. Morgan Bank, CACEIS, and BNP Paribas.
• ELI5: Custodians safeguard a fund's assets, while depositaries oversee compliance with asset ownership rules.

5. Transfer Agents

• Top Ranked: IFDS/State Street, CACEIS, J.P. Morgan Bank, BNP Paribas.
• ELI5: Transfer agents maintain shareholder records and handle subscriptions/redemptions.

6. Audit Firms

• Top Rank: PwC, EY, Deloitte, and KPMG.
• ELI5: These auditors verify fund financials, with PwC at the top due to its experience in fund auditing and asset management. Auditors are essential for ensuring transparency and investor confidence in the fund industry.

7. Legal Advisors

• Top Ranked: Arendt & Medernach, Elvinger Hoss Prussen, Allen & Overy, and Loyens & Loeff.
• ELI5: Legal advisors offer expertise in regulatory compliance, fund structuring, and transactions. Arendt & Medernach’s lead role reflects their legal knowledge in fund management, aiding funds in navigating complex regulations. They may be particularly skilled in setting up reserved alternative investment funds (RAIFs), SICARs, and special limited partnerships, which have become popular structures in recent years for private capital investments in Luxembourg.

Join the Future of Fund Management

Well, I hope you’ve enjoyed the journey through the facts and figures of private equity and fund management in Luxembourg. It’s a really exciting scene and the future looks bright for the industry. If you’d like to see how we apply our knowledge of fund management into the Vestlane platform, don’t hesitate to reach out to me.

I’m always game for a chat about what we can do for the likes of general partners, asset managers, fund admins, LPs, and even law firms.

As a taster of what Vestlane does, here’s a quick rundown. Vestlane is all about simplifying life for those managing private equity. Our solution handles investor onboarding and fund operations, automating the heavy lifting around things like compliance, think KYC (Know Your Customer) and AML (Anti-Money Laundering) checks.

With compliance built into the process for over 100 jurisdictions, we help keep everything in line with the latest regulations, saving teams tons of time and hassle. Plus, Vestlane acts as a central hub for investor data, so managers get a real-time, transparent view of everything they need, all in one place. For a free demo, contact me here.