KPMG Third-Party ManCo Survey 2022

We would like to thank the 17 third-party ManCos that shared the features of their business models, as well as their key strategic priorities.

The results of this survey provide a fair representation of the third-party management company market.

The third-party management company consists of many players who combine different strategies: 47% of third-party ManCos are managing 7 or more different investment strategies at the same time. Historically, these ManCos are oriented toward private equity (94%), private debt (88%) and real estate (82%).

In comparison: only 45% of internal ManCos manage private equity strategies and 55% for real estate strategies. If you’re interested to learn more about Internal ManCos, read our Large-Scale ManCo Survey.

One finding of our survey is that third-party ManCos are eager to develop their range of capabilities even further: 47% of participants are looking (or are in the process) of acquiring an additional CSSF license in the short term. The most requested licenses can be broken down as follows: 31% of license requests are for the Infrastructure license, 23% accounts for the Virtual Assets license, and 15% for the private debt license.

These are the various licenses that respondents have purchased:

29% of participants believe that the Luxembourg market will consist of only a few established players in 3-5 years, reflecting the emerging consolidation of the management company market. In addition, third-party ManCos are facing issues to staff their teams, especially in internal control functions. This dimension also needs to be put into perspective: The average team size of a risk management / compliance function has increased by 19% in 2021.There has been a migration of talent from third-party ManCos to internal ManCos.

While trying to be competitive with their peers, third-party management companies are suffering from a lot of pressure from ManCo fees: new regulatory requirements (e.g. AML, ESG, etc.), new expertise that needs to be developed, more full time positions, the recent decline in AuM base etc. As a result, third-party management companies are also looking for “digitalization” solutions to help them streamline their operations. 38% of survey participants sell technology services to their clients.

We asked our participants to define the top 3 of opportunities or their ManCo. Here are the results:

Compared to internal ManCos, third-party ManCos generally kept the functions internally, using outsourcing arrangements rather than pure delegation. However, internal control functions are almost always (82%) kept entirely internalized (e.g. without outsourcing).

60% and 65% of the portfolio management and valuation functions were held internally, respectively, via internal committees leveraging on external experts. This outsourcing model requires oversight of a significant number of delegates: a third-party ManCo oversees nearly 90 different delegates (median). The allocation of these providers is shown below:

When it comes to the internal organization, nearly ¾ of participants have implemented a centralized oversight team in charge of the core delegates supervision.

Are you interested in knowing more? The above information is only a sneak peek of the KPMG third-party ManCo Survey 2022 results. KPMG has also collected insightful trends on:

• The implementation of technology solutions to serve clients
• The integration of Sustainability components into their business model
• The CSSF inspection activities and commonly scrutinized areas
• The construction of the service offering including revenue generation insights.

Do not hesitate to contact us if you would like access to more detailed no-name information about the industry and your peers.