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Christophe Diricks of KPMG reckons that recent survey results indicate “that Luxembourg is now the location of choice for alternative investments.” Library picture: Christophe Diricks is seen speaking during a training workshop, 11 December 2019. Photo credit: Jan Hanrion 

That is because the number of them holding a Luxembourg alternative investment fund manager (AIFM) license nearly doubled between 2019 and 2019, per a recent report from the consultancy KPMG. Nearly two-thirds of these firms said they planned to beef up staff levels over the next two quarters.

Substance rules require financial firms to show that critical business functions are carried out in Luxembourg and that local branches are not simply a letterbox outpost. Outfits that comply with the regulations can distribute their financial products across the entire EU. Brexit induced many investment companies to move their European hubs from London to Luxembourg, Dublin and other EU financial centres.

Job evolution

From the KPMG report:

“Since the last survey [in 2019], asset managers have increased both team size and number of entities managed. Team size has grown 17% over the past year while the number of entities is up by 6%. This growth in team size is impressive, but it’s not going to stop there. The majority of firms--65%--say they plan to continue to hire in the next six months.”

KPMG reported that the biggest gains were in AIFM conducting officers and in asset and portfolio managers, while the number of tax and paralegal experts decreased year-on-year.

AIFM license growth

The number of asset managers surveyed with Luxembourg AIFM authorisation essentially doubled between 2019 and 2020.

Sectoral gap

According to KPMG:

“Luxembourg regulated AIFMs are more popular with real estate, infrastructure and multi-asset managers than with pure private equity and debt asset managers. While this was already true in 2019, the gap between these fund types has widened since 2019.”

Satisfied with substance standing

“Luxembourg asset managers gained significant confidence in their level of substance,” the consulting firm found. Christophe Diricks, head of alternative investments, stated in a press release:

“An AIFM license and increased substance levels go hand in hand: there are strict obligations in terms of regulatory substance to obtain and maintain an AIFM license. Fund houses with an AIFM license therefore feel confident about their levels of substance, and rightly so--their presence in Luxembourg is stronger than ever before.”

KPMG’s “Private Equity and Real Estate Substance Survey 2020” was released on 6 November. The paper was based on a survey of 60 fund industry professionals, representing a collective €500bn in assets under management in Luxembourg.