Alternatives
Alternative Investments: keeping the pace
There can be no doubt that Luxembourg has been an exciting growth hub for Alternatives to watch in the past few years. Despite the uncertainties surrounding the COVID-19 crisis and its impact, alternative investments still have a major role to play in the success of the future growth of AuM.
Today, Alternatives is the financial services sector with the largest revenue growth for PwC Luxembourg, but also in terms of resources and growth potential.
Alternative funds have been an important vector for growth since the introduction of the AIFM Directive into national law in 2013. In the second quarter of 2019, Luxembourg counted EUR 0.76 trillion in regulated Alternative assets and ranks fourth as a domicile for Alternative funds in Europe, accounting for 11.8% of total AIF assets in Europe. (Source: ESMA EU Alternative Investment Funds Report 2020)
PwC Luxembourg’s Alternatives practice team, with over 650 experts, is the largest in the country. Since 1 July 2019, our respective Real Estate, Private Equity and Hedge Funds (non-liquid assets) have been combined into one industry segment — Alternatives — to market a combined Alternative Funds and Asset service approach. This consolidation presents an important change within our firm and an early fast move within our network, PwC Luxembourg being a pioneer to market our services towards the industry in this way. The team has made it their mission to respond to the evolving needs of Alternatives players who are diversifying their activities (from single asset class to multi-asset classes) and adapt to their strategy whether outsourcing or insourcing of operations.
In Luxembourg, on top of private equity, we should not underestimate Real Estate, Alternatives and Debt Funds if we want to remain competitive. Fund managers do not want to cherry-pick – looking for one jurisdiction per type of investment – they want a one-place strategy. So we need to make them happy in Luxembourg, i.e. to stay and not change their jurisdiction of choice.
Building strong relationships
This year presented an additional complex set of challenges and considerations to people and organisations around the globe and the impact of COVID-19 has yet to be entirely realised. The current, ever-evolving situation means that many companies have had to adapt their way of working, and PwC is no different.
However, the outbreak and subsequent lockdowns significantly impacted global markets with increased volatility and we cannot be sure yet what “shape” full recovery will take when it occurs. There was disruption on many aspects, but especially on the valuation of assets.
In uncertain times like these, companies are looking for agility and stability. They want a responsive and trusted advisor who can help them to face these challenges in all the various aspects. Our experts maintained close communication with their clients to continue to serve them at the same level of service as when they could still physically meet.
Digitally enabled firms and industries are more future-proofed
Digital innovation, whether disruptive or innovative, is reshaping the way we conduct business, and COVID-19 and its impact, has accelerated this need. A big part of our strategy was working on the development of new platforms, apps across the PwC global network and initiating a digital upskilling across the firm to prepare people for the workplace demands of tomorrow.
We have been saying for some time that, with the emergence of new technologies, alternative investments professionals need to adapt quickly and efficiently and digital needs to be high on every organisation's agenda, especially those who are lagging behind. To remain competitive, alternative investments players should focus their "digitalisation" both at the firm, and at the portfolio investments level. Companies need to prepare and be future-proof, and we have already seen that over the COVID period for example, it has been the digitally enabled firms and industries that have fared the best.
We augmented our dedicated advisory team for Alternatives invested in hiring new profiles to enlarge our support to clients and engaged in an upskilling training programme that included elearning, workshops and C-level sessions.
Vision for the future - keeping Luxembourg a prime location for alternatives
Alternatives will continue to be a growing segment in the future financial success of the Grand Duchy. AuM in Luxembourg alternative funds are expected to reach EUR 1.1 trillion in 2025, and the growth in all asset classes should be particularly spectacular. But, competitiveness will be the key. Luxembourg has to make sure that it keeps, and even improves on, the qualities that differentiate it from other jurisdictions and make it easy to market – cross-border opportunities and access to other markets, a unique toolkit of investment products, flexible structuring options, a favourable and predictable tax environment, quick decision making and the ability to shape regulation (and these are just some).
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