Welcome to the 4th edition of the KPMG Large-scale Management Companies & Alternative Investment Fund Managers Survey
In comparison to last year, the survey population has been extended to a wider sample. Covering 22 Management Companies (ManCos) and 19 Alternative Investment Fund Managers (AIFMs), we have further expanded our survey universe and deep dived into the essential aspects of operating models in the market.
This year’s exercise has allowed us to see that in the changing environment of ManCos and AIFMs, there continues to be traction towards evolution, though at a slower rate.
We would like to thank all our participants, both those that year-on-year share their valuable insights and those who are new to the survey.
A message from our Head of Consulting, Asset Management & Alternatives
Within the evolving landscape of ManCos and AIFMs, evolution and transformation of operating models persists, albeit at a measured pace.
ManCo operating models have undergone a cultural shift, which is fueled by the Manco’s appetite to reposition itself within the broader Group context. In this vein, the pursuit of efficiency and streamlined processes becomes intrinsic to the DNA of operating models, reflecting an organic quest for optimization and adaptability.
Alan Picone, Head of Consulting, Asset Management & Alternatives
Survey participants
41 Participants
22 ManCos
18 out of the 20 Largest ManCos in LuxembourgMore than € 3000 Bn of total AuM
+1800 full time employees
Representing 65 % of the Luxembourg market
Key takeaways
- Strategy
- Products
- Operations
The ManCo operating model evolution continues…
From last year’s KPMG ManCo Survey we concluded that the transformation of ManCo and AIFM operating models was in full swing.
This year, our Survey shows the transformation strategy has evolved, shifting its focus from the definition of operating model design principles to the refinement and consolidation of processes and workflows.
Over 80% of market players consider that their operating model is currently evolving, which shows that the transformation agenda is not stopping any time soon.
Drivers of the operating model evolution and/or transformation
Cultural Shift: the new Service Provider Mindset
We see strong market movement towards the repositioning of the Luxembourg ManCo vis-à-vis the Group.
Market players recognize the new model for the Luxembourg entity as a “Center of Excellence”/“Service Center” embedded within the Group organization.
This requires high mobilization by the Luxembourg ManCo with a special focus on instilling the mechanics of that servicing culture locally.
This has prompted the review of governance arrangements, valuable subject matter expertise on the ground and a desire to accelerate the decision-making process.
More efficient & leaner models: the review of Fund Administration arrangements
Historically, market players have gone for a best-of-breed approach for the selection of Fund Administration (FA) services.
As a result of the evolution and repositioning of the Luxembourg ManCo, market players are eager to review their existing fund administration arrangements to establish leaner and more efficient operating models.
Continued appetite for Alternative Investment strategies
Market players continue to explore opportunities in the alternative investment space to expand their business volume and product offering.
In particular, 21% of market players see alternative investments as their primary growth path. We also notice that many market players are increasing their focus on Infra, PD and Private Equity strategies in order to cater to a wider set of investors.
Ranking of the most popular AIF strategies this year
ELTIF and Retailization: leading as market favorites
After the successful launch of retail AIFs by leading Alternative Investment firms, several ManCos have followed suit and launched AIF vehicles tailored for retail/HNWI investors as a response to investor demands and explore new avenues for growth.
While market concerns persist regarding the required flexibility of ELTIFs under the new regime, 45% of ManCos and AIFMs have either already launched ELTIFs or are considering doing so in the future.
We see an increase in ManCo activity regarding the launch of ETFs/passive strategies. Notably, the proportion of ManCos managing ETF strategies in Luxembourg increased when compared to last year.
Caution around ESG: carefully navigating its complexities and impacts
In the past years, we have seen a rapid sprint towards ESG adoption, driven by investor demands and industry direction.
Today, ManCos and AIFMs are shifting their stance into a more cautious approach, recognizing the operational challenges ESG implies.
Prompted by increased regulatory scrutiny and high operational requirements, we have seen a tendency to decelerate ESG adoption and, in some cases, players reclassifying Art 9 funds.
Art. 9 funds evolution since last year
No change32%
Decrease18%
Increase50%
Protecting core value as the centerpiece of operating models
ManCos and AIFMs are increasingly emphasizing core value protection and scalability through a strategic shift towards a "Core vs Non-Core" approach. This entails identifying and prioritizing core functions essential to their value proposition while streamlining non-core activities.
Embracing strategic outsourcing - both within the Group and through third-party managed service providers, is a notable trend to access specialized skills, reduce costs, and enhance agility.
The Branchification Phenomenon continues
ManCos and AIFMs systematically expand their reach and service offering through their branches.
While last year we saw an increase in the number of branches and associated FTEs, we now see a refinement of branch operating models:
Additional activities performed in the branches:
- DPM
- Investment Advice
- 2nd line of defense
- Internal PM
Branches are increasingly viewed as a form of "near shoring”, bringing operations closer to home markets for enhanced efficiency and control.
Sophistication and refinement: regulatory direction of travel
Sophistication and refinement characterized the regulatory direction of travel last year. Years ago, regulatory inspections were mostly on holistic topics such as governance arrangements or AML.
We now see the Regulator delving into greater levels of detail during thematic inspections, covering novel inspection topics such as ESG, ICT outsourcing, MiFID, and Sharia compliance.
New topic!MiFID Activities
x3Number of inspections on branches has tripled since last year
x2Number of inspections on ESG has doubled since last year
Want to know more?
Meet the team
Alan Picone
Head of Consulting, Asset Management & Alternatives
KPMG Luxembourg
Jean Christophe Cabilin
Partner, Risk, Regulatory & Compliance
KPMG Luxembourg