Non-public debt funds based mostly in Luxembourg grew their belongings underneath administration (AUM) by 21.5 per cent between June and December 2023, to succeed in €510bn (£426.13bn).
In keeping with the annual KPMG Non-public Debt Fund Survey 2024, commissioned by the Affiliation of the Luxembourg Fund Business (ALFI), unregulated however industry-supervised fund automobiles have “considerably surpassed” regulated fund automobiles in Luxembourg this 12 months, having elevated their market share by 22 per cent since June 2023.
These unregulated fund automobiles embody the SCSp, which is utilized by 86 per cent of the funds coated within the survey.
Talking on the ALFI Non-public Property Convention in Luxembourg, Julien Bieber, tax and various investments companion and co-head of personal debt at KPMG in Luxembourg, mentioned that the rising worth of those funds displays the maturity of the Luxembourg non-public debt fund market.
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“Luxembourg is now recognised as one of the engaging domiciles for personal debt funds, mirrored within the spectacular development of belongings underneath administration,” mentioned Bieber.
“Sooner or later, the AIFMD II will supply a extra sturdy and aligned framework for mortgage origination, which is poised to harmonise rules throughout Europe.
“Moreover, a confluence of beneficial components corresponding to excessive rates of interest, rising attraction amongst traders, demand for tailor-made options by debtors, and a shift away from conventional financial institution lending has formed a dynamic panorama.
“We consider Luxembourg’s main place might be sustained via its strategic use of knowledge and expertise, entry to a extremely expert and numerous workforce, growth via retailisation, and a supportive regulatory framework.”
The bulk (62 per cent) of Luxembourg non-public debt funds observe direct lending methods – a two per cent lower on final 12 months.
Mezzanine funds changed distressed debt because the second hottest technique final 12 months, representing 16 per cent of Luxembourg non-public debt funds, a year-on-year enhance of three per cent.
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The KPMG survey discovered that the demand for personal credit score stays excessive and the asset class is changing into extra widespread worldwide.
“The non-public debt market has proven exceptional resilience and constant development amid a number of years of world market challenges,” mentioned Serge Weyland, chief govt at ALFI.
“This survey highlights the sustained urge for food for personal debt, with Luxembourg rising because the domicile of selection, supported by its sturdy regulatory atmosphere, political stability, and extremely expert workforce. Trying forward, we count on the rising momentum for retailisation to carry additional sophistication and alternatives to the Luxembourg non-public debt market.”
The common rise of AUM relies on information from 13 depository banks based mostly in Luxembourg.
Learn extra: Luxembourg’s non-public debt funds grew AUM by 51pc this 12 months