Since 2017, the ABBL and the CSSF have jointly conducted a survey on the activity of external asset managers or independent asset managers, which refers to the management of assets held by clients within Luxembourg banks. These independent managers may be professionals from the Luxembourg financial sector, but also foreign players with equivalent or comparable licences.
This survey was designed to collect relevant statistics related to the external asset managers servicing business in Luxembourg, in particular assets booked within the Luxembourg custodian bank and assets booked within the European branches.
21 banks participated in the 2021 edition of this survey. Although the survey is voluntary, the market coverage exceeds 95% of this segment of the banking industry.
Key points of the results of the survey conducted in 2021
Evolution of assets under custody
+19% of assets under custody (AuC) compared to the previous year, reaching 53 billion euros on 30 June 2021. This reflects a consolidation of the sector at a respectable level, with AuD now 35% above the level reached in 2017. While the market effect partly explains this development, the increase remains considerable. The development of third-party managers creates healthy competition between market players, which benefits the client as well as the Luxembourg sector as a whole. To date, the assets managed by these independent managers (Luxembourg PFS and foreign players with equivalent or comparable licences) represent 10% of private banking assets held in Luxembourg.
A European activity
50% of the assets come from European clients, and 39% from life insurance accounts, held mainly (99%) by European clients. Moreover, two thirds of total assets under management are managed by non-Luxembourg independent managers, which reflects the international nature of the offer studied.
Slight increase in headcount
The number of employees increased by 2% to 188 at 30 June 2021.
Results of the 2020 survey
45 billion of assets under management by external asset managers
Assets under management by external asset managers in Luxembourg in Luxembourg increased by 13% between 2017 and 2020, reaching 45 billion as at 30 June 2020. This is a significant figure, especially when compared 466 billion in total assets under management in private banking at the end of 2019.
While this development is partly due to the market effect, it is also attributable to the fragmentation of the Wealth Management offering. Clients who, until a few years ago, bought deposits, mandates, products and advice from the same company, now tend to diversify and mandate different players, particularly independent asset managers.
Finally, the private banking market has been consolidating in recent years, as shown by the ABBL/CSSF Private Banking Survey 2020. This is linked, among other things, to the increase in costs linked to regulatory issues, which weighs on the margins of private banking players. Some of them have therefore decided to transform their activity to focus solely on external asset management. This consolidation trend is expected to continue in the coming years, strengthening the external asset manager business in Luxembourg.
A well-established sector in Luxembourg
Of the 54 banks active in the private banking sector, 20 have a department dedicated to independent asset management. The main reason why this type of service is well established in Luxembourg is that, as a leading cross-border financial centre in Europe, the country attracts new independent asset managers. These managers elect domicile in Luxembourg and offer their services in Luxembourg and other European Union countries on the basis of the Free Provision of Services (FPS) regime.
The survey shows that the vast majority of the clients of these third-party managers are European. Moreover, two thirds of the assets monitored by an independent asset management service are managed by non-Luxembourg companies, which reflects the international nature of the sector.