The fund services provider SEI is expanding its Luxembourg operations amid a period of rapid transformation in private markets. In January 2025, the firm its global reach with the launch of depositary services in Luxembourg. Ian MacWilliams, managing director of SEI Luxembourg, discusses the company’s strategy, the rising demand for private markets and Luxembourg’s pivotal role in financial innovation. From navigating regulatory challenges to embracing technological advancements, he shares his insights into the industry’s evolving landscape.
Kangkan Halder: Can you introduce SEI briefly, its key products and the types of clients you work with in Luxembourg?
Ian MacWilliams: SEI is a global financial service provider offering a range of services, including technology, investment operations and asset management. We provide solutions and platforms that allow clients to focus their energy on creating investment products, generating alpha for those products and raising capital. SEI invests in technology and operational services so that our clients do not have to.
In Luxembourg, SEI partners with investment managers to provide expertise in fund administration and depositary services. In that space we have a healthy mix of US and Europe, the Middle East and Africa clients that utilise open, closed and hybrid fund structures focusing on private assets, including private credit, private equity, fund of funds, real estate and infrastructure strategies.
SEI has been growing its presence in Luxembourg. What’s driving this expansion, and where do you see it heading in the next five years?
It is no secret that Luxembourg is the largest financial center for investment funds in Europe and the second largest in the world. SEI is well known in the US with 40 years of experience in administration services, and SEI has been servicing Luxembourg-domiciled investment funds for more than 10 years. We have seen our clients grow organically in this market, which has really driven SEI to provide a localised service touch.
Since 2018, the private market asset class has grown by 10.5% in assets under management. While forecasts show a slight slowing for the second half of the decade, it is still relatively strong at just under 10% with fundraising efforts to recover from the first half.
At the end of 2024, we launched our depositary services in Luxembourg to complement our fund administration offering. Over the next 5 years, we will continue to enhance services to address client needs, corporate services, reporting and European long-term investment funds (Eltifs). The democratisation of private assets will be a key focus area.
How does SEI keep up with the constant changes in regulations, particularly when it comes to business processes and data management?
The regulatory landscape is constantly evolving across all the jurisdictions where SEI provides services in. At SEI, we handle regulatory changes in several ways. Our production teams attend training on new and upcoming regulations annually. The team also participates in round table discussions with peers and conferences where regulators are providing feedback, and we also receive quarterly updates from our legal and compliance department. The teams then share this information internally and with our clients.
As a service provider, we are only one cog in the machine, and to ensure regulatory compliance, we need our strategic partners to understand and participate. This approach allows us to be proactive in meeting the needs of our clients and the regulator, as well as helping to ensure the success of the financial markets in which we participate.
How do you see private markets evolving and what are the key trends shaping their future?
The democratisation of private assets will shape how the average day-to-day investor can hedge their public portfolio allocation where the traditional bond to equity allocation hedge has reduced with higher inflation. Private markets can aid in hedging against this due to a lower correlation with the public market and the potential to offer higher returns.
The ability for retail investors to participate in private markets will support investment managers’ efforts in raising capital in the coming years. A recent McKinsey & Company survey found that they will allocate the same or more capital in the medium to long term.
Going hand in hand, digitisation and AI will become a bigger trend in private markets. It allows for greater reporting transparency for investors, creates operational efficiencies for investment managers to onboard investors and process trades, and it feeds data and compliance information directly into AI models to help investors assess and allocate their investments.
AI infrastructure is also forecast to increase with the demand for AI. Substantial investments in infrastructure will be necessary, as EY reported in their PE trends for 2025, “the last 3 years saw over $100bn in data centre projects.” The need for new energy power plants and new data chips to run AI models will require further infrastructure over the coming years.
How do you think alternative investments like private credit and private equity will shape the future of finance?
Private equity and credit will also be key market trends that continue to shape the future of finance. Both private equity and credit have higher risk-adjusted returns versus the public markets. Digging a little deeper, private credit continues to be an alternative source of capital for below-investment grade companies, enabling private credit managers to provide bespoke financing options.
This asset class has grown significantly since 2008, with private credit managers stepping in to fill the void left by banks. As regulatory constraints and internal restrictions tightened, banks’ ability to lend diminished, creating opportunities for private lenders to take on a more prominent role. The ability of private credit to provide diversification, relatively low correlation to other asset classes, and reliable steady income continue to make it attractive.
Similarly, private equity continues to be a strong allocation choice for investors due to its ability to create operational value, ultimately leading to higher risk-adjusted returns. It offers a broad range of strategies, including fund of funds, secondaries, buyout and growth investments, allowing investors to meet their diversification needs effectively.
Would you consider private markets a high-growth sector? What factors are contributing to this growth?
We would consider private markets a medium-growth sector that has the ability to be a high-growth sector beyond 2030. Coupled with the democratisation of private markets, digitisation has the potential to spurn further growth in private markets, making it easier for everyday investors to open their mobile investing app and fill out a subscription order in a matter of clicks. If done correctly with regulatory oversight, and with the largest generational wealth transfer occurring over the next decade, this has the potential to drive unprecedented levels of growth.
As a service provider, we have historically treated the public and private market segments separately. However, we are seeing a convergence among our client base, where investment managers, who previously specialised in either the private or public markets, are expanding their offerings to include both.
What’s your perspective on Eltifs and their role in increasing access to private markets?
We are seeing more alternative investment managers launching Eltifs and have already helped a client launch their first UCI part II Eltif entity. With the enhanced framework of Eltif 2.0, 2024 saw a record number of Eltif launches, with Luxembourg emerging as the preferred domicile.
The removal of minimum investment requirements for investors, a broader range of assets to invest into, loosening investment restrictions, and the ability to pair Eltif with different structures have increased Eltifs’ popularity. Alternative investment managers are keen to access retail capital alongside their historic investor base of institutional and high-net-worth investors, similar to what business development companies have offered in the US.
Eltifs will play an important role in driving digitisation of the alternative asset class, making it easier for individual investors to tap into a private asset just as they would for listed investments. This will allow retail investors to holistically see their public and private assets in a unified platform view.