Dedicated to providing an in-depth analysis of Luxembourg's Management Companies (ManCos) market, this year's barometer offers a comprehensive overview encompassing UCITS ManCos, Alternative Investment Fund Managers (AIFMs), and "Super ManCos."

Key highlights:

Representative sample: The Barometer draws from a robust sample of 91 participants, representing an impressive 86% of regulated Assets under Management (AuM) and 50% of the ManCos' workforce in Luxembourg. This diverse sample encompasses a variety of ManCos, including UCITS ManCos, AIFMs, and the notable "Super ManCos", ensuring a strong and representative snapshot of the sector.

Diverse ManCo landscape: The survey reveals a diverse array of ManCos, with origins spanning Asset Managers, fund services providers, privately-owned entities, and those affiliated with banking groups, ensuring a comprehensive sectoral overview.

Operational focus: Analysis further breaks down ManCos by their operational focus, with insights into in-house ManCos, Mixed ManCos, and Third-Party ManCos, elucidating the varying strategies employed within the market.

Luxembourg leads the ManCo market: Luxembourg stands out as the foremost ManCo market in Europe, boasting over EUR5 trillion in AuM in 2023, accounting for 30% of the continent's total AuM. By comparison, Ireland holds 23%, Germany 15%, and France 13% of European Union AuM, underlining Luxembourg's dominant position in the region.

Top 20 Management Companies: ManCos in Luxembourg collectively manage an average of EUR150 billion in AuM, marking a 4% increase compared to the previous year. Among them, the top three ManCos manage more than EUR1 trillion AuM as of December 2023, reflecting an impressive 18% growth compared to the previous year.

Market dynamics, growth trends, substance and governance framework: The report delves into evolving market dynamics, including the declining total number of ManCos. The global geopolitical situation generating a difficult financial and economic situation combined with the continuous regulatory and cost pressure resulted in an acceleration in the consolidation of the market. Even if we note a small decrease in the number of ManCos, the market remains dynamic with all the new players who applied for an AIFM licence. It demonstrated the shift operated by the industry in Luxembourg with an increasingly real asset domicile on top of the UCITS existing brand. The growth in employment, with over 7,700 employees in the sector, underscores the importance of the substance and governance within the Luxembourg ManCos sector.

Growing importance of Third-Party ManCos: Over the past few years, we have observed a continuous increase in the AuM managed by third-party ManCos, with a proportion managed by those ManCos on total AuM rising from 6% in 2018 to 18% in 2023. The third-party ManCo sector remains also very dynamic in terms of M&A transactions and is used by every kind of asset manager.

Asset growth and market evolution: A comprehensive examination of AuM trends reveals a resilient market recovery in 2023, primarily driven by Alternative Investments. Additionally, stable UCITS performance and robust growth in alternative investments highlight Luxembourg's prowess as a leading hub for fund management.

ESG integration: The report underscores the increasing integration of Environmental, Social, and Governance (ESG) criteria into investment decisions, reflecting a broader industry trend towards sustainability-driven strategies.

Challenges and drivers: Streamlining internal processes, digitalisation, and automation remain top priorities for ManCos, amid increasing cost and margin pressures. Third-Party ManCos, in particular, are urged to diversify revenue streams and implement stringent client acceptance processes to navigate these challenges successfully.

PwC Luxembourg quotes:

Bertrand Jaboulay - AWM Clients & Markets Leader and Management Company Leader: “The ManCo market showed a nice bounce in 2023 with a significant increase of the AuM managed by ManCos compared to last year (+5.5%). This growth is mainly (but not only) explained by the new real assets AuM confirming Luxembourg as the domicile of choice for AIFMs and real assets products. In this context, even if we have seen a number of transactions, the sector remains very dynamic with the entrance of eight new AIFMs in Luxembourg.”

Pierre-Marie Bochereau - Audit Director, Management Company: “The regulatory landscape remains on top of ManCos' agenda, with regulations and cost pressure catalysing market consolidation. As ManCos grapple with these complexities, the shift towards specialised third-party ManCos becomes increasingly pronounced. This year’s responses underscore a growing preference for this model, which not only provides regulatory expertise but also operational efficiencies that are critical in today’s fast-paced market environment.”
 
Laurent Butticè - Audit Partner, Management Company: “Luxembourg’s ManCos continue to demonstrate a strong resilience, especially in a year marked by macroeconomic volatility. Luxembourg’s stability and expertise have remained key draws for the ManCo sector, reinforcing Luxembourg’s position as funds’ hub with 30% of the European Union total net assets of regulated funds domiciled in the country. ManCos have seen a notable increase in non-regulated assets, crossing EUR1 trillion and confirming Luxembourg as the domicile of choice for regulated and unregulated products and for their AIFM.”

Looking to the future, the barometer anticipates continued market consolidation as ManCos seek strategic responses to expanding market shares and reducing competition.

For more information go to the 2024 Barometer: Observatory for Management Companies.