Olivier Noel (Northern Trust) : Supporting growth and innovation in private capital funds
Olivier Noel, Chief Operating Officer of Northern Trust's Luxembourg-based bank servicing sophisticated investment managers, outlines how Luxembourg is supporting the evolving role of private capital funds in the European investment market – and how Northern Trust is addressing the related challenges and potential opportunities.
What role is Luxembourg playing in supporting the European market for private market funds?
Luxembourg continues to maintain its status as Europe's largest domicile for investment funds, with over 5 trillion of assets under management and 26% European market share. It is also home to a growing number of private capital funds, such as those focused on private equity, private credit, and private real estate and infrastructure investments.
From Luxembourg, we see steady demand across all private capital strategies – particularly for hybrid funds offering a combination of strategies – including the use of ‘semi-liquid’ fund structures. At the same time, innovations are helping asset managers pursue sales channels, including providing retail investors with access to this asset class, which was formerly reserved almost-exclusively for institutional investors. Among these innovations is the introduction of the European Long-term Investment Fund (ELTIF 2.0). Luxembourg is currently home to 59 of the 95 ELTIFs so far launched in Europe.
“We see steady demand across all private market strategies”
What are the key challenges currently?
The macroeconomic conditions and inflationary pressures of the past two years continue to create a challenging environment for managers, with corresponding demand for greater expense control – increasing the industry’s focus on operational optimization. However, Luxembourg continues to see consistent growth momentum in the private capital arena; for example net assets under management in regulated alternative funds in Luxembourg increased by 19% between 2020 and 2022. More recently, Luxembourg alternative investment funds (AIFs) saw inflows of €3.879 billion in June 2023 compared to €1.731bn of net outflows the previous month, according to (at time of writing) the latest monthly factsheet published by the European Fund and Asset Management Association.
How are you supporting your clients and their investors in this space?
As interest grows in this asset class, we are helping our clients reduce manual processes both through automation and the use of digitisation to optimize workflows. Investor and manager demand for enhanced data experiences is driving investment in digitised systems and processes.
Northern Trust is supporting clients including through our partnership with Fenergo to digitise onboarding and due diligence for AML/KYC and associated compliance requirements.Our collaboration with Appian enhances the net asset value workflow communications between private capital fund managers and Northern Trust’s teams. This supports private capital fund managers with a secure digital experience offering enhanced efficiency, oversight, and data security for valuations. Northern Trust is supporting clients to drive operational efficiency across their business as they distribute their funds and communicate with investors, while managing the complexity and costs of doing business.