The combined assets under management of European alternative assets stood at €2.95trn as of September 2022, with the UK and western Europe--which includes Luxembourg--both surpassing €1trn of private capital assets under management last year, said Preqin in a press release published on 6 September, announcing their Alternatives in Europe 2023 report.
“Alternatives have become crucial for financing companies and investing in the built environment in Europe,” said Alex Murray, VP, head of real assets, research insights at Preqin. “Practices that emerged in the North America market have been embraced and adapted to suit the diverse requirements of European economies and institutional investors. The adaptability of alternatives will be no less crucial in the coming years, as risks emerge for Europe’s continued economic prosperity.”
Luxembourg, noted Preqin’s report, has seen a remarkable “ascent” in the past decade, becoming “the largest single domicile for alternatives funds in Europe.” This is thanks to the grand duchy’s “pragmatic and efficient regulator,” the financial sector supervisory commission (CSSF), said Preqin, as well as its vehicle structures, such as the special limited partnership, or SCSp.
Here are a few Luxembourg-focused takeaways from the report.
Luxembourg’s market share up to 61.8%
Luxembourg’s share of European assets has grown from 15.6% in 2010 to 61.8% in 2022, said Preqin data.
On the other hand, the market share of domiciles such as the United Kingdom, Guernsey, Jersey, the Cayman Islands or France has decreased.
Largest single domicile if funds are weighted equally
The grand duchy is the largest single domicile for Europe-focused funds, if funds are weighted equally, said Preqin’s alternatives report. It took in 26.3% of capital raised in 2022, a figure that has been relatively stable over the past few years.
The United Kingdom is the domicile of the next largest share of Europe-focused funds (17.1%).
Differing trends in private equity, venture capital
Luxembourg’s share of private equity rose from 7.4% in 2010 to 51.5% in 2022, said Preqin. The UK is in second place, with a share of 22.3%.
The opposite is the case when looking at venture capital: the UK and Crown Dependencies together are the domicile of 33.1% of Europe-focused capital, while Luxembourg’s share stood at 15.3% in 2022.
Share of real asset funds up to 71%
Over one year, Luxembourg’s share of real asset funds has increased significantly. Its share has jumped from 48.6% in 2021 to 71.2% in 2022, said Preqin, most of which comes from “other domiciles.”
Preqin’s report said that this is “consistent with investors focusing on pan-European funds rather than country-specific ones due to a tougher fundraising environment for the asset class.”
Luxembourg dominates private debt
The grand duchy is the fund domicile of almost all Europe-focused private debt aggregate capital raised, said Preqin. Its share has been rapidly increasing over the past few years, climbing from 11.8% in 2014 to 57.4% in 2019, 77.4% in 2021 and 93.6% in 2022.
“We think the increased appeal of Luxembourg as a domicile of choice can be explained by credit investors focusing on yield,” added Preqin in its report.
Find Preqin’s full “Alternatives in Europe 2023” report here.