2023-12-04 08:31:36
According to the latest Private Debt Fund Survey prepared by KMPG and ALFI, the assets in this segment amount to 404.4 billion euros, with a median growth of 51% between June 2022 and June 2023 among the 12 depositories surveyed.
Third year of spectacular growth of private debt funds in Luxembourg. According to the latest Private Debt Fund Survey prepared by KMPG and ALFI, the assets in this segment amount to 404.4 billion euros in 2023. But these figures follow two equally powerful years. According to previous studies, the category has gone from 181,700 million in 2021 to 267,800 million in 2022 and now reaches a new milestone with a median growth of 51% between June 2022 and June 2023 among the 12 depositories surveyed.
What explains the attractiveness of private debt funds
There are multiple factors that explain this growth: the current macroeconomic environmentwith high inflation combined with low economic growth in the EU and high nominal interest rates, has played overall in favor of private debt funds (by investors). “During the past year, Difficulties in accessing the syndicated bank loan market made private debt funds an attractive alternative (by the borrowers)”, they add from KPMG.
The private debt fund market is also becoming a important source of capital for new acquisitions and refinancing in various economic sectors, while the market for syndicated bank loans was quiet last year. “Private debt also seems immune to inflation, as it relies heavily on variable rate characteristics and shorter maturities,” they point out.
The attractiveness of this asset class continues to grow, detects Julien Bieber, Tax Partner, Alternative Investments and Co-Head of Private Debt at KPMG in Luxembourg. “We are seeing private debt reach new levels.” widespread acceptance levels compared to traditional bank loans, which impacts the way borrowers access and negotiate debt packages. The demand for debt financing remains strong, such as the financing of sustainable projects in many economic sectors and large infrastructures,” he notes.
Who invests in private debt funds in Luxembourg
The investor in private debt funds continues to be eminently institutional. The representation of retail and private banking is still testimonial. That said, there is a change in the trend with a 2.5% growth in the wealth segment compared to last year.
What is maintained is that the Luxembourg funds in the category They are European products for European investors. That is, the majority of investors come from the EU (46.5%) and expanded Europe (22%) and that the assets in the portfolios are also predominantly investments in Europe. Thus, the EU (42%) and expanded Europe (27%) remain the preferred investment target, followed by North America (13%).
How to invest in private debt funds in Luxembourg
There is also a clear preference for assets. 64% of private debt funds in Luxembourg are direct lending. “It is possible that a more complicated macroeconomic environment will lead to growth in distressed debt vehicles, but at the moment they only account for 13%,” predicts Julien Bieber, Partner in Taxes, Alternative Investments and co-head of Private Debt at KPMG in Luxembourg.
There is quite a bit of diversity in the portfolios if we look at the sectoral distribution. Although the largest proportion is invested in Infrastructure and Transportation (18%), it is closely followed by Energy and Environment and Chemical Products, IT, Telecommunications and Communications (16%), and then Health and Life Sciences (15%). .
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