Luxembourg private debt AUM surges to €510bn
Private debt funds based in Luxembourg grew their assets under management (AUM) by 21.5 per cent between June and December 2023, to reach €510bn (£426.13bn).
According to the annual KPMG Private Debt Fund Survey 2024, commissioned by the Association of the Luxembourg Fund Industry (ALFI), unregulated but industry-supervised fund vehicles have “significantly surpassed” regulated fund vehicles in Luxembourg this year, having increased their market share by 22 per cent since June 2023.
These unregulated fund vehicles include the SCSp, which is used by 86 per cent of the funds covered in the survey.
Speaking at the ALFI Private Assets Conference in Luxembourg, Julien Bieber, tax and alternative investments partner and co-head of private debt at KPMG in Luxembourg, said that the rising value of these funds reflects the maturity of the Luxembourg private debt fund market.
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“Luxembourg is now recognised as one of the most attractive domiciles for private debt funds, reflected in the impressive growth of assets under management,” said Bieber.
“In the future, the AIFMD II will offer a more robust and aligned framework for loan origination, which is poised to harmonise regulations across Europe.
“Additionally, a confluence of favourable factors such as high interest rates, growing appeal among investors, demand for tailored solutions by borrowers, and a shift away from traditional bank lending has shaped a dynamic landscape.
“We believe Luxembourg’s leading position will be sustained through its strategic use of data and technology, access to a highly skilled and diverse workforce, expansion through retailisation, and a supportive regulatory framework.”
The majority (62 per cent) of Luxembourg private debt funds follow direct lending strategies – a two per cent decrease on last year.
Mezzanine funds replaced distressed debt as the second most popular strategy last year, representing 16 per cent of Luxembourg private debt funds, a year-on-year increase of three per cent.
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The KPMG survey found that the demand for private credit remains high and the asset class is becoming more widespread worldwide.
“The private debt market has shown remarkable resilience and consistent growth amid several years of global market challenges,” said Serge Weyland, chief executive at ALFI.
“This survey highlights the sustained appetite for private debt, with Luxembourg emerging as the domicile of choice, supported by its robust regulatory environment, political stability, and highly skilled workforce. Looking ahead, we expect the growing momentum for retailisation to bring further sophistication and opportunities to the Luxembourg private debt market.”
The average rise of AUM is based on data from 13 depository banks based in Luxembourg.
Read more: Luxembourg’s private debt funds grew AUM by 51pc this year
