Monterey Insight

ESG fund assets double in one year

Once again in 2020, the Luxembourg fund industry has seen its assets grow and its players multiply,  trend that will continue in the coming months. (Photo: Shutterstock)

Once again in 2020, the Luxembourg fund industry has seen its assets grow and its players multiply,  trend that will continue in the coming months. (Photo: Shutterstock)

Monterey Insight, the independent fund research company, has published the 27th edition of its Monterey Insight Luxembourg Fund Report, which looks at the market share of all service providers in the Luxembourg fund industry.

2020 was a good year for the Luxembourg fund industry despite the pandemic. Total net assets grew by 5.1% over the year, from €4,777.3bn at the end of 2019 to €5,022.5bn at the end of 2020. This growth has not weakened despite the Delta variant seeing as the industry's net assets reach €5,487bn at the end of the first half of the year, according to the CSSF.

"Among regulated funds, the strongest growth in assets during the year went to Ucits with +15.7%, followed by SIFs with +11.7%," the report says. "The overall number of regulated sub-funds reached 14,651, a negligible decrease of 2.3% compared to the 14,991 of the previous year. This slight decrease most likely benefitted unregulated vehicles such as RAIFs, which saw their number increase by 46% to 1,530 active funds and sub-funds compared to 1,048 last year."

The appeal of unregulated structures was confirmed in 2020. RAIFs saw their assets grow by 58% to $193.1bn while limited partnership structures saw their assets grow by 73% from $167.8bn to $291bn. Limited partnerships also grew in number, from 1,303 to 1,740 over the year.

For regulated funds, equity products remained the most popular in terms of assets with $2,008.2bn overtaking bond funds, which sunk to $1,703.6bn in assets. This represents increases of 22% and 15%, respectively. The study also notes the "considerable" growth of ESG funds: over one year, the increase in assets reached 117% for $350.3bn distributed among more than 884 funds and sub-funds.

Industry who’s who

The study also looked at the market shares of the industry's leading providers.

The largest promoter/initiator of Luxembourg-domiciled schemes was J.P. Morgan, with $435.5bn in assets. This was followed by Amundi ($246.5bn) and DWS International ($226.7bn).

In the AIFM segment, J.P. Morgan Asset Management (Europe) led with total net assets of $435.1bn, followed by DWS Investment ($225.2bn) and UBS ($224.2bn).

Among fund administration professionals, State Street led with total net assets of $1,210.2bn, followed by J.P. Morgan Bank ($938.5bn) and BNY Mellon ($419.3bn).

In terms of custodians/depositories, State Street was in first place with $1,214bn in assets under custody, followed by J.P. Morgan Bank ($1,175.4bn) and Brown Brothers Harriman (BBH) with $484.6bn.

In the transfer agent rankings, FDS/State Street continued to lead by surpassing the $1trn asset mark at $1,195.3bn, followed by RBC Investor Services Bank ($766.4bn) and CACEIS ($466.7bn)

"This year, State Street again maintains its leadership position in all three rankings of fund administration, custody and, along with IFDS, transfer agent," Monterey Insight said.

PwC remained the audit leader with 5,949 compartments, ahead of KPMG (2,927 compartments), EY (2,757 compartments) and Deloitte (2,517 compartments).

Finally, among legal advisers, Arendt & Medernach was ahead of Elvinger Hoss Prussen in terms of the number of sub-funds (4,412 vs. 3,567), but it is Elvinger Hoss Prussen that is ahead of Arendt & Medernach in terms of net assets, with $1,971.5bn compared to $1,883.4bn.

The Luxembourg fund industry has proven its resilience and has once again demonstrated notable growth.
Karine Pacary

Karine PacaryManaging DirectorMonterey Insight

Karine Pacary, Managing Director of Monterey Insight, commented: "In the current climate, and with the unprecedented situation of COVID-19, the Luxembourg fund industry has proven its resilience and has once again demonstrated notable growth. This latest edition demonstrates the ever-increasing appetite for alternative products across all categories, as illustrated by the sustained growth in asset classes such as Private Equity/Venture Capital, Private Debt, Real Estate, Hedge Funds and Infrastructure. RAIFs, as well as unregulated limited partnerships, are once again in the spotlight, with the number of funds and assets continuing to rise--up almost 60% on last year. Their contribution to overall asset growth is increasingly important and their adoption is helping to reshape the future fund landscape in Luxembourg. It is not surprising that ESG vehicles are gaining in popularity, particularly with the various regulatory developments that are helping to provide greater transparency for these funds. The growing demand for an ESG investment element in funds ensures that it will quickly become a must-have element and a future attribute in the composition of investment products."

The study is based on data as of 31 December and covers regulated funds (SIFs, UCITS/UCIs and SICARs).

This story was first published in French on Paperjam. It has been translated and edited for Delano.