More and more focus is being put on the alternative investment funds (AIF) industry, especially private equity and real estate investment funds. Asset servicers are moving towards a pan-European coverage via acquisitions or opening of new PE structures. This has long been recognised by Deloitte and accordingly the streamlining of advisory efforts towards AIF has led to the recognition of being “a leader in Alternative Investments Consulting to the Capital Management and Asset Management Industry based on capability” by Kennedy. The report stipulates that, “because the world of asset management currently so disproportionately favours global asset managers, Deloitte’s global resources are a natural strength.”

Private equity is categorised as one of the key area for the continued expansion of Luxembourg’s fund industry, which was one of the main themes of Deloitte Luxembourg’s Private Equity symposium earlier this year. The conference gave a detailed view on the market trends and economic outlook for 2015.

The excellent performance of the global Private Equity industry in 2014 led to an all-time high for assets under management of USD3.8 trillion in June 2014. Deloitte’s analysis of the sector predicts that the positive trend will continue in 2015. “Low interest rates and favorable credit conditions combined with a renewed investment appetite, also for longer-term investment funds and more stable yields, create an ideal setting for the continued development of the Private Equity industry in Europe”, explains Benjamin Lam, Partner and Private Equity Leader at Deloitte Luxembourg.

Main market trends
Asset prices are expected to stay high, due to a large amount of institutional investors and low cost debt. Furthermore, the main market trends for the coming months are likely to include longer holding periods, reaching from three to five years. The high asset prices and the record low interest charges on debt are expected to lead to fierce competition between the different players when it comes to attracting the inflow of capital in the market to new funds, while managing expectations of quick asset returns.

As for the role of LPs (Limited Partners) and GPs (General Partners), they are likely to turn away from the traditional investment model into new collaboration models, driven by the appetite for greater returns at a lower cost, more control of the investments, longer-term horizons and more flexibility when choosing investment vehicles.

Luxembourg a key location

With the recent implementation of the regulation on European Long-Term Investment Funds (ELTIF) in 2014, in response to growing investor interest in longer-term investment with more regular yields, Europe and Luxembourg have further opened up for inbound investments. In light of Luxembourg’s introduction of the new legal entity structure in 2014, the special limited partnership (SLP), Alexandre Prost-Gargoz, Tax Partner at Deloitte Luxembourg gave a positive view on the role Luxembourg will play on the PE investment scene in the course of the year: “Luxembourg is becoming a preferred platform for US-based inbound investments in Europe, thanks to its recent regulatory changes, specifically the SLP, allowing GPs to raise funds in a much more flexible regime which LPs are more familiar with. The special limited partnership will be very interesting for investors within private equity and real estate investment funds.”