2023 was marked by a market recovery for ManCos having nearly rebounded to pre-correction level of 2022 with an increase of 5.6% of the assets under management (AuM) to reach EUR 5.2 trillion. Despite a stable performance of UCITS of 2% of increase, a strong growth in regulated and unregulated alternative products has been noted. Indeed, year-over-year, alternative investments demonstrated a robust growth with non-Regulated investments increasing by 16% since 2022.
Evolution of ManCos and employment PwC Luxembourg
This growth is confirming Luxembourg as the first domicile in Europe with 30% of the total EU AuM domiciled in Luxembourg by the end of 2023. On top of this position, it also confirms the transformation of the Luxembourg domicile from a UCITS domicile to a UCITS and Alternative/Private assets domicile.
At the end of 2023, the total number of ManCos was 298 representing, for the second year in a row, a net decrease of 3 compared to 2022. This concentration trend is mainly due to a withdrawal of over 40 UCITS licences in the past five years. This concentration is explained by the continuous cost and regulatory pressure that ManCos must support. Despite this decrease, the market remains very dynamic with 1) a continuous increase of staff employed by ManCos (At the end of 2023, 7,700 people were employed by the ManCos industry representing an increase of 11% compared to 2022) and 2) with many transactions on the market. This concentration trend has evolved, and can be segregated as follows:
- Numerous M&A activities mainly in the third-party business,
- Transactions with ManCos transferring their activities to third-party Mancos,
- And more and more transactions done between Assets Servicer and ManCos to provide one-stop-shop solutions.
The survey confirms the partial shift toward third-party ManCos, with the increased use of these third-party Mancos reflecting a shift in operational strategies. Indeed, the Average AuM of third – party has dropped from EUR 8.9 billion in 2018 to EUR 19.3 billion in 2023. Entering in the top 10 of the third – party ManCos has moved from EUR 12 billion in 2018 to EUR 38 billion in 2023.
Evolution of AuM in Luxembourg per product type (in EUR billion) PwC Luxembourg
In terms of evolution and transformation of operating model, ManCos consider that the key drivers are streamlining their internal process, the implementation of automation and digital initiatives and strengthening internal governance. From a governance perspective, it appears that 13% of ManCos created new conducting officer functions to reinforce core functions within the organisation (such as compliance & AML, ESG and tax. In 2024, ManCos are projecting establishing new conducting officer roles and for half of them to reinforce lines of defences – Risk Management, compliance and AML – .
Digital transformation is a key topic within the industry. Eighty-four percent of the ManCos consider the need to improve their internal process – data management and digital solutions – in the coming year and 64% are still leveraging on group solution. But 68% are also utilising external solutions – like IT solutions and digital solutions – to complement their existing tools and solutions.
Even if ManCos are facing challenges, cost and regulatory pressures, they have strongly responded with efficient and strong operational models, adequately using digitalisation and transformation thanks to a strong governance.
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