Alan Picone is head of consulting, asset management & alternatives at KPMG Luxembourg. Photo: KPMG

Alan Picone is head of consulting, asset management & alternatives at KPMG Luxembourg. Photo: KPMG

KPMG Luxembourg’s annual manco survey has found that market players’ operating models remain in significant evolution in order to cope with a continuously increasing pace of business.

Last year, KPMG Luxembourg’s manco survey found that 97% of mancos and AIFMs said that their ” How did things look this year?

The fourth edition of KPMG Luxembourg’s large-scale management companies & alternative investment fund managers , published in late June 2024, polled 22 mancos and 19 AIFMs with more than €3,000bn in assets under management to find out more about their strategies, products and operations. Alan Picone, head of consulting, asset management & alternatives, sat down with Delano to highlight a few key figures and takeaways. 

“All about scalability”

When it comes to operating models, “there’s no such thing as stagnation,” said Picone. They continue to be in “significant evolution.” Four in five market players (80%) said their operating model was currently evolving. Despite many years of applying the Alternative Investment Fund Managers Directive (AIFMD) and the Ucits directive, operating models continue to change. Why is that?

“The reason for that is the need to cope with a pace of business that is continuously increasing and which requires--keyword--scalability. It’s all about scalability. It’s all about making sure that the operating models are factoring in the necessary efficiency, the necessary scalability, the necessary--if you like--leanness, in order to be a conduit from product ideation to product manufacturing, product design, so to speak, the regulatory platform and the product platform.”

A second takeaway is that mancos and AIFMs are given more of a “recognition of being a centre of excellence,” Picone continued. But “this is a recognition that has to be earned every day; it’s not a recognition that is gained once and for all.” The survey has seen that more and more groups are “willing to assign key performance indicators to their management company in Luxembourg” to define expected performance and ensure that business objectives are achieved.

Another interesting finding from the survey concerned fund administration, noted Picone. Market players were asked: how many fund administrators to you have? The answer fell between one and 12. That’s “a very large range” of fund administrators and service providers that entities work with. “The maintenance of such a diverse set of delegates for a management company can be a challenge” because of potential operational risk and the need for regulatory oversight, due diligence and ongoing monitoring.

To investigate this topic, the survey asked participants with more than four fund administrators: what do you plan to do about it? “Forty-three percent told us: we are in the process of rationalising this,” said Picone. This is a “very important finding” because it shows there’s a “quest” for rationalisation to make operations leaner and more efficient.

With more delegates, you get more risk diversification. But “that does not seem to completely offset the benefits of having a more trimmed, a more reduced set of delegates that you operate. Clearly, this is a massive finding of the market in Luxembourg.”

Acceleration of licence acquisition

In terms of product findings, “we continue to see an acceleration of the acquisition of licences in the alternatives space,” said Picone. “Fourteen percent of the participants this year have acquired an infrastructure licence." That was followed by private debt (9%) and liquid AIFS (7%). The “takeaway” is that we continue to see an increase in manco abilities to provide products specifically focused on one area.

European long-term investment funds (Eltifs) and retailisation are another avenue of opportunity for the market. “A good third of the population--35% of super mancos, to be precise, and 38% of pure play AIFMs--are in the process of launching or conceptualising retail-based strategies for their retail clients.”


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A third takeaway on the “products” side of the survey touched on ESG. The poll found that 40% of players have the same number of article 9 products (these have a sustainable investment objective, compared to article 8 products, which promote environmental and/or social characteristics). Thirty-five percent of players had more than last year, said Picone, meaning they’ve launched additional additional article 9 products.

“But then there’s the leftover, and the leftover is interesting.” The remaining 25%--those who neither stagnated nor increased--have decreased the number of article 9 products, reflecting a deliberate decision to reclassify their products. “It means that some have come to the conclusion that having a product under an ESG banner is certainly attractive from a client perspective, but perhaps difficult to operate, difficult to build up a proper control framework, difficult to sustain given the level of regulatory scrutiny.”

Core vs non-core activities

Market participants regularly conduct core versus non-core analyses, added Picone, meaning they assess which activities should be retained by a management company and which can be externalised to a service provider. About a quarter of survey respondents (28%) said they were their outsourcing model: 13% were looking towards insourcing; 15% were looking towards outsourcing.

Activities that are outsourced are likely to be those that have little value added, like regulatory reporting. Those that are insourced back are more “core,” value-added activities, such as portfolio management, client services, corporate secretariat or fund administration.

76% have at least one branch

Branchification has continued. “Year-on-year, we moved from 55% of participants having at least one branch to now 76%,” explained Picone. “It grew quite significantly--that’s an important takeaway. The second important takeaway is that the nature of the activities offered by branches increased significantly. It’s no longer only marketing and sales; you also domicile in branches things like portfolio management, risk, compliance operations.” There’s a lot of “creativity” on how to use a branch. It can be used for European business management, as well a recruitment and retention tool.

Finally, the survey found that the Luxembourg and European regulators are becoming “more refined and sophisticated,” in the sense that they’re conducting more “thematic reviews,” noted Picone. Beyond things like governance, these can cover topics such as branch oversight, ESG or valuation. “One of the things that accelerates the most is ICT,” he said, including ICT outsourcing. “This is coming at a pace.”