The ALFI Private Assets Conference in Luxembourg brought together industry experts to discuss the latest trends and challenges in private assets. Greg McKenzie, Country Head of Luxembourg, and John Russell, Director, share some of their key takeaways from the event.
- Market trends:
The fundraising environment remains challenging, with asset managers tightening strategies as they navigate market uncertainty. Whether launching their seventh or first fund, asset managers are dealing with a more concentrated market and a global decline in IPO activity.
Europe remains cautious, particularly due to the potential impact of the upcoming U.S. elections. Despite these challenges, the CSSF continues to support a pro-business and pragmatic approach, modernising regulations to adapt to market needs. Luxembourg’s clear regulatory framework, combined with its strong interconnected funds ecosystem, continues to cement its position as a favoured jurisdiction, with practical tax structures like no VAT on management fees.
- NAV financing:
NAV (Net Asset Value) financing is gaining traction in the private equity space, providing flexibility for managers with the capacity to underwrite credit and assess underlying performance. NAV financing enables quicker access to liquidity at the fund level and is a useful tool for deleveraging portfolio companies and freeing up liquidity for operational and capital expenditures.
- Fundraising insights:
The fundraising landscape is undergoing several shifts:
- Secondaries and private debt are becoming more prominent, fuelled by rising interest rates and changing investor preferences.
- A shift toward retail investors is evident, albeit still quite slow, with products like ELTIFs and UCI Part IIs becoming more popular, though UCI Part II is restricted to semi-professional investors. Family offices are also very active in this space.
- Listings are increasingly important, enabling asset managers to target a broader investor base. This supports the movement toward “deretailisation,” focusing on high-net-worth individuals and institutional capital over retail investors.
Preqin’s “Alternative 2029” report predicts a slowdown in the growth of alternative assets under management (AUM) until 2029, but private equity, infrastructure, and private debt are expected to grow significantly. European private capital fundraising is also expected to rise by 2026.
- ESG and greenwashing:
The discussion around ESG evolved from greenwashing (overstating sustainability claims) to greenhushing (downplaying ESG initiatives to avoid scrutiny). This shift reflects a growing focus on delivering real accountability rather than ticking boxes. According to a 2022 report by PwC, nearly 90% of investors believe that corporate sustainability reports contain greenwashing.
Greenwashing concerns have been a focus of regulatory action, with firms like Deutsche Bank’s DWS agreeing to pay the SEC $19million to settle charges of greenwashing. As a result, sustainable assessments need to be embedded from the outset, capturing the right data to meet material risk requirements.
The biggest challenge lies in collecting and integrating reliable, complete data to support ESG initiatives. Private markets have a key advantage over public markets in this area, as private investors can directly influence data requirements by sitting on boards and defining the parameters for sustainability reporting.
- The role of technology and data in private assets:
Technology is playing an ever-larger role in asset management. The rise of Artificial Intelligence (AI) in analysing data, alongside the global push for regulatory convergence, is expected to shape future developments. There is growing pressure on fund administrators to meet investor demands for transparency and scalability, with fund of funds investors particularly focused on look-through reporting.
- Digital assets and Luxembourg’s regulatory flexibility:
Luxembourg’s regulator has demonstrated flexibility and bravery in supporting digital assets, providing clear regulatory frameworks that allow this asset class to flourish. This proactiveness aligns with Luxembourg’s interconnected funds ecosystem, ensuring that digital assets can integrate into traditional financial structures with ease.
- Future outlook:
As the private markets sector continues to evolve, we can expect significant advancements in AI-driven data analysis and regulatory alignment on a global scale. Product innovations are likely to follow in the coming years, with enhanced tools for capturing and managing sustainable investments.
This year’s conference underscored the importance of adaptability, particularly in navigating a challenging fundraising landscape, leveraging technology for growth, and integrating ESG considerations into long-term strategies. Asset managers will need to embrace innovation and remain proactive in meeting evolving investor demands.
Belasko in Luxembourg provides tailored, personalised fund services and our team has extensive experience in servicing global private capital firms. We excel in managing complex AIFs and holding structures, offering comprehensive end-to-end fund administration and corporate services.
With a deep understanding of the Luxembourg regulatory landscape, we offer a reliable and proactive service, underpinned by leading technology, to help clients navigate the complexities of private capital investments with confidence.
Get in touch with Greg McKenzie ([email protected]) or John Russell ([email protected]) to discuss how we can support setting up your next fund in Luxembourg.
