The global alternatives markets, including hedge funds, are , Preqin’s Alex Murray said during a press presentation at the Association of the Luxembourg Fund Industry’s private assets conference in September 2024, referring to the data firm’s Future of Alternatives 2029 report.
57% market share for Luxembourg
“Luxembourg is dominating the domiciliary of funds,” he said, showing particularly strong growth in private debt. Indeed, an Alfi-KPMG survey presented at the conference found that Luxembourg private debt funds saw in six months. “In 2022, just over 50% of capital raised was domiciled in funds in Luxembourg,” said Murray, pointing to data from Preqin’s “” report, published in June. That figure has climbed from 8% in 2011 to 57% in 2022.
Looking at the breakdown by asset class, private debt has “clearly taken a growing importance in recent years.”
But the start of the rise of Luxembourg’s domination of private debt goes back to 2011-2012, noted Murray.
PE fundraising speeds up to €118bn
“In the recent higher interest rate environment, private models have been tested,” said Murray. “While many anticipated the leveraged buyout model would not work in a higher rate environment, investors have been clear in their belief in this model. Despite this negative sentiment, private equity raised more capital in 2023 than in 2022.” Europe-based private equity fundraising in the first half of 2024 rose to €118bn. “If this pace were to continue, it would be a record year. However, Preqin data on funds in markets suggests a significant drop in capital targeted, suggesting the second half of the year will slow.”
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On the other hand, “the venture capital and infrastructure asset classes have seen particularly slow fundraising environments in 2023,” he continued. “Despite a challenging exit environment, investors remain committed to the growing role of private markets, as companies stay private for longer. This trend underpins the most consistent driver--LPs [limited partners] tell us--why they commit to private markets: that of diversification. Diversification in the parts of the economy that public markets cannot deliver.”
Fundraising by ESG funds has also picked up, said Murray, “returning to a pace seen in the record year of 2022.”
Increased access to alternatives
And when it comes to European long-term investment funds (Eltifs), Preqin data from its published in October shows that Luxembourg dominates Eltif domiciliation, accounting for roughly two-thirds of market share. “The trend of enhancing alternatives access to high-net-worth investors underpins strong growth in European long-term investment fund (Eltif) and UK-specific long-term asset fund (Ltaf) structures,” said the report.
With the increased participation of non-institutional investors in private markets comes increased regulatory scrutiny, along with the need to ensure investor protection, said Murray. “Education of retail investors is also crucial, given the differences between public and private markets.” Preqin expects the market for education to grow, he said, highlighting major partnerships to facilitate access to private markets. State Street Global Advisors and Apollo Global Management in September announced that they were working together to increase accessibility to private markets. Blackrock and Partners Group made a similar announcement, also in September. Capital Group and KKR in May 2024 announced a partnership that aims to make make hybrid public-private markets investment solutions available to investors.