The firm writes that this further expands the offering of non-listed investments for Van Lanschot Kempen’s private banking clients. The fund focuses on small and medium-sized companies in Northwestern Europe and builds on our extensive investment expertise in this area.

Wendy Winkelhuijzen, Member of the Management Board of Van Lanschot Kempen, responsible for Private Banking Netherlands, says: “Van Lanschot Kempen advises its clients on the preservation and growth of their wealth. Together with the client, we set long-term financial objectives and based on that time horizon, we build an investment portfolio. Investments in private equity can be an attractive asset category to add to a portfolio from the perspective of potential returns and increasing diversification. We see a lot of demand from clients for these types of alternative investment products, in part because their value is not entirely dependent on the stock market. This new fund further strengthens our ongoing private equity offering, with a focus on small and medium-sized companies. This closely aligns with the areas of interest of many of our entrepreneurial clients.”

Kempen European Private Equity Fund III is a closed-end investment fund with a co-operative structure, and has a 10-year term. This is the fourth private equity fund that Van Lanschot Kempen has introduced in the past five years, following two successful funds with a focus on Europe and one fund focusing on North America. It is hybrid investment fund that combines investments in private equity funds with co-investments. This contributes to the objective of building a diversified portfolio while the addition of co-investments can help to reduce costs and accelerate the deployment of capital. As a result, repayments are also expected to occur sooner. The first subscription period runs until 7 March 2025, which may be followed by a second subscription period.

Sven Smeets, Head of the Private Equity Strategy at Van Lanschot Kempen, says: “Small is beautiful. That is our motto for this new private equity fund. Small and medium-sized companies are a very important part of our economy and it is typically in this segment of the market that private equity investments with the highest return potential tend to be found. Investing in small and medium-sized companies is one of our strengths. Our extensive experience and expertise with regard to investing in this asset category enables us to identify opportunities with attractive growth potential. Our carefully selected private equity specialists utilise their expertise and networks in order to add value to the selected companies. Value is created for instance by improving a company’s operational management and strategy, by enhancing its professionalism or by means of internationalisation.”

Preqin forecasts also highlight that capital targeting Europe is set to have lower growth from the end of 2023 to 2029 compared with North America. While Europe may lose ground to North America in future years from lower relative growth in assets under management (AUM), Preqin sees the growth profile of Europe as containing greater certainty, or lower risk, owing to the region’s broader exposure to the lower-risk asset classes: private debt and infrastructure.

Anticipation of falling rates gives private equity momentum, while decelerating that of private debt

As the European Central Bank’s policy rates start to fall in Europe, the report highlights the potential impact on private equity and private debt fundraising.

Looking to Europe-based private equity fundraising, fund managers raised EUR118 billion in the first half of 2024. If the second half of the year were to replicate this pace, it would be a record year with EUR236 billion secured, 30 per cent higher than the previous record of EUR181 billion in 2018.

The firm writes that private equity’s success has been partly driven by Nordic-based managers who secured more capital in the first half of the year than in any other previous whole year. However, capital targeted by Europe-based private capital funds in market dropped in the first half of the year, from EUR812 billion to EUR760 billion, mainly driven by a decline in private equity funds. As fewer mega funds are raising in that asset class, fundraising’s pace may slow in the second half of 2024, the firm says.

Meanwhile, Europe-based private debt fundraising decelerated with EUR14 billion raised in the first half of 2024, compared to EUR103 billion cumulatively in 2022 and 2023. In the first half of 2024, UK-based private debt funds raised EUR6.9 billion, West Europe-based managers EUR5.3 billion, and Nordic-based managers EUR1.7 billion.

European AUM growth underpinned by lower-risk asset classes

Preqin data shows that Europe’s share of alternatives AUM was almost EUR3.3 trillion, or 20.9 per cent, of the global total, by the end of 2023 – the latest data available. Based on Preqin’s most recent forecast for the global alternatives industry, Europe’s share of AUM is expected to contract to 20 per cent, or EUR5.5 trillion, by 2029 due to lower forecast performance and a slower pace of fundraising compared to North America, the dominant region.

While European AUM growth may be lower than North America, the region demonstrates a lower-risk AUM profile, with higher shares of private debt (15.3 per cent of Europe’s private capital AUM) and infrastructure (18.9 per cent of Europe’s private capital AUM) compared with North America’s 12.4 per cent and 7.5 per cent, respectively.

Alex Murray, VP, Head of Real Assets, Research Insights at Preqin, says, “The anticipated reduction in interest rates is a driver of both the acceleration of private equity and deceleration of private debt given their contrasting prospects in a looser monetary policy environment.  The fervour for private debt seen over recent years may be showing signs of slowing down in Europe, in line with market expectations for prompter rate cuts compared with North America.”

Additional key findings include:

Europe buyout discount nears 10 per cent: Europe buyout deals show a persistent discount compared with North America, with entry EV/EBITDA consistently lower between 2018 and 2023. Preqin Transaction Intelligence data reveals an average 9.8 per cent discount over the period, with discounts rising substantially in the information technology and industrial sectors in recent years.

Actual performance against targets varies by asset class: Preqin data shows private debt 2018–2021 vintages outperformed managers’ expectations, as post-pandemic contractionary monetary policy drove tighter credit conditions. Conversely, venture capital and real estate performance in similar vintages fell below targets in the face of continuing valuation pressures.

Open-ended fund launches and private wealth’s access to alternatives: The trend of enhancing alternatives access to high-net-worth investors underpins strong growth in European Long-term Investment Fund (ELTIF) and UK-specific Long-term Asset Fund (LTAF) structures. Preqin data shows that 125 ELTIFs and 13 LTAFs had launched, as of August 2024. Of the 125 ELTIFs, 84 are domiciled in Luxembourg, 20 in France,11 in Italy, seven in Ireland, and three in Spain.

Trading commenced in both Euro and Sterling currencies, offering access to AAA-rated, floating-rate CLO notes. Fair Oaks initially listed the CLO ETF on Deutsche Börse Xetra on Sept. 11.

Fair Oaks AAA CLO ETF (FAAA) invests 100 per cent in AAA-rated CLOs, based on Fair Oaks’ established investment processes. It is managed by a team of six professionals, supported by the broader Fair Oaks credit team and led by Miguel Ramos Fuentenebro and Roger Coyle, co-founders and partners of the firm.

The target market for the ETF is European institutional and informed investors. The total expense ratio for the Fair Oaks AAA CLO ETF is 0.35 per cent. All assets are compliant with EU and UK securitisation (risk-retention) regulations – a requirement for EU and UK ‘institutional investors’ as defined in those regulations.

FAAA was launched on the Alpha UCITS fund platform as an additional listed share class of an existing Fair Oaks UCITS fund, the Fair Oaks AAA CLO Fund (the Fund). The Fund was launched with Alpha UCITS in 2019 and has over EUR150 million in assets under management (AUM) as of August 31, 2024. The ETF share class offers investors access to the existing high-quality, diversified portfolio. FAAA is a long-only portfolio with no leverage and is classified as Article 8 under the EU Sustainable Finance Disclosure Regulation (SFDR).

Ramos Fuentenebro says: “We’re pleased with the initial reception to the Fair Oaks AAA CLO ETF. For the first time, European ETF investors now have efficient access to AAA-rated CLOs, an asset class that has a record of no historical defaults and an attractive yield.”

“CLO ETFs have been tremendously successful in the U.S. as they offer investors a unique high quality, floating rate, short duration asset. The new London listing offers UK and European investors access to 100 per cent AAA-rated CLOs in an ETF wrapper for the first time in Euros and British pounds,” says Stephane Diederich, CEO of the Alpha UCITS fund platform.

Far reaching changes to the ELTIF rules that took effect in January this year have brought momentum in terms of new launches and innovation in investment strategies as fund promoters gain confidence that the new formula meets the needs of asset managers and of individual as well as institutional investors.

Slow beginnings

The regime was conceived as a means to encourage the deployment of retail savings in the European Union toward assets seen as possessing long-term economic, social, environmental and strategic value, including critical infrastructure, the transition to sustainable energy and decarbonisation of the economy, and unlisted small and medium-sized companies that needed new sources of capital to exploit their potential.

The first iteration of the legislation did win some converts, especially in Luxembourg, which quickly became established as the go-to domicile and service centre for ELTIFs targeting cross-border markets. But the sector’s growth was slow; over the seven years after the regime’s introduction in December 2015, just 81 funds were launched, attracting an estimated EUR7.4 billion in assets.

Managers expressed frustration about many aspects of the rules, often added in the name of investor protection, including diversification requirements that stipulated individual assets could not exceed 10% of a fund’s portfolio, and tight restrictions on the use of leverage. Meanwhile the bar was high for acceptance of non-professional investors, so much so that promoters opted to concentrate on institutional money or different types of fund.

The dawn of ELTIF 2.0

Hence the concerted effort launched by the European Commission in 2021 to revise the ELTIF Regulation in order to fulfil its original ambition of mobilising retail as well as professional investment. Following extensive consultation with asset managers, and with support from EU member states which perceived that the urgency of the envisaged investment priorities had in no way diminished, what has been dubbed ‘ELTIF 2.0’ is now in effect.

The revised regime addresses most issues raised by asset managers regarding ELTIF investment strategy rules, including greater flexibility on diversification, borrowing limits and eligible assets. It also removes many of the barriers to non-professional investors, including the previous minimum investment requirement of EUR10,000 for non-high net worth individuals.

Also important are the detailed regulatory technical standards adopted by the European Commission on July 19 this year. Following a debate with the European Securities and Markets Authority, the Commission has opted for a flexible approach to liquidity and redemption policy at ELTIFs open to individual investors, giving promoters freedom to adapt the fund’s structure and terms, including redemption frequency and notice period, to its investment strategy and goals and the needs of the investors it targets. Asset managers are satisfied that a philosophy of flexibility has won out over rigid one-size-fits-all requirements.

To this extent the regulatory regime promises to drive growth in the establishment of ELTIF funds and the assets they attract. One of the key aims behind the launch of regulated long-term funds was to channel retail capital into strategies aligned not just with the investment needs of the economy but with the long-term retirement provision requirements of an ageing population. The constraints of asset classes that do not offer short-term liquidity, including real estate, infrastructure and private equity and debt, fit better with longer investment horizons.

The conception of ELTIFs also tied into the economic environment of the 2010s, with low inflation and rock-bottom interest rates diminishing the appeal of savings accounts and fixed-income investment. While that changed with surging prices and the rapid rise in central bank rates in the wake of the Covid-19 pandemic, the signs point to lower levels in the coming years. The search for higher returns than those offered by short-term investment look set to be a permanent characteristic of the investment landscape in the years to come.

Optimism for the future

Are these factors bringing new impetus to ELTIFs? The signs are positive: as of the end of August, a total of 132 funds had been established across Europe, with Luxembourg accounting for almost two-thirds (84). And despite the ongoing process of finalising the detailed rules, 34 have been launched so far since January 10, 2024, when the ELTIF 2.0 legislation took effect.

Forecasts for the growth of the ELTIF range from €35 billion by the end of 2026, according to German rating and analytics firm Scope, to a more speculative European Parliament report suggesting that ELTIF assets might reach EUR100 billion by 2028. But there is broad confidence that the legislative and regulatory tools are now in place for Europe’s long-term fund regime at last to fulfil its potential.

This is the view from the EU Principal Traders Association (FIA EPTA), which released its policy recommendations for the incoming European Commission, arguing that the Union’s capital markets “are not yet fully positioned to fulfil their essential function”.

Piebe Teeboom, Secretary General of the FIA EPTA, says: “Rightly, the focus for building a Savings and Investment Union is on invigorating the capital-raising function of the financial system. To do so, the EU must become a more attractive destination for companies to grow.”

He continues: “A more dynamic primary listing market, where innovative, world-class companies can secure private capital through Initial Public Offerings (IPOs) and bond issuance, will be key.”

But he adds that thriving EU primary markets require “vibrant EU secondary markets” which provide suitable liquidity; something Teeboom argues is lacking in the European capital markets.

To enhance the flow of capital into the European economy, it is crucial to have markets with deep and diverse liquidity.

He says: “The EU faces a significant liquidity shortfall compared to other regions, with reported average daily volumes stagnating. Notably, the EU is underperforming relative to the US and is increasingly falling behind other global markets. This perception contributes to declining capital allocation towards European markets and the migration of share listings elsewhere.”

Teeboom argues that “bold and comprehensive policy action is needed” if the EU is to “grasp the clear opportunities” the Association envisages for EU capital markets to take on a leading global position.

He says: “European capital markets must be built out on a foundation of strong liquidity provision. As the industry association representing Europe’s independent market makers who provide liquidity to European end-investors and markets, FIA EPTA is strongly committed to reversing this liquidity shortfall.”

The Association makes three policy recommendations which it believes will foster greater economic security in Europe.

First, strengthening the single market for capital by advancing supervisory convergence and making progress toward more centralised supervision.

Second, enhance the attractiveness and global competitiveness of EU markets by setting clear competitiveness objectives, fostering greater competition, streamlining regulatory processes and simplifying regulatory regimes.

Finally, unlock additional liquidity by implementing targeted regulatory reforms to ensure proportionate prudential requirements for investment firms and apply robust transparency regimes to support competition and healthy price formation. Additionally, more incoming global investment should be encouraged by strengthening regulatory coordination and cooperation across the entire European trading region.

Teeboom also calls for greater regulatory coordination across the entire European trading region.

He says since global investors view the EU/EEA, the UK and Switzerland as a single capital market and trading destination, it makes sense to align regulatory frameworks.

“Given their shared values and common strategic interests, including the need for resilient capital markets in the face of geopolitical risks, increased coordination and cooperation is essential. By enhancing coordination and cooperation, the European region as a whole can become a more attractive and successful destination for global capital, leading to deeper and more vibrant markets,” Teeboom says.

As slowing growth colours global economic forecasts in 2024, fund groups need to play to their strengths and flex their brand attributes to compete in a saturated market that cannot sustain the current levels of competition, the firm says.

“In a year that saw passive managers gain further momentum, Vanguard moves into the top-10 brand rankings, scoring highly as a key international player and for its solidity,” says Barbara Wall, Director of Global Distribution Insights, Broadridge. “Fellow passive specialist iShares also moves up the league table from eighth place to sixth, unseating Robeco, although the Dutch active manager maintains pole position for its ESG credentials. The passive trend is further evidenced by the entry of Xtrackers into the top 50, with the firm’s range of sectoral and thematic ETFs proving popular with fund selectors.”

The independent study, now in its 13th year, measures and ranks asset managers’ relative brand attractiveness based on fund selector perceptions: taking into account 10 brand attributes to reveal the top global and regional brands in Europe, APAC, and the US. FB50 also reveals the local market brand leaders in Europe and APAC’s most significant retail markets for third-party fund distribution. 

The top 10 European asset management brands according to the study are: BlackRock; JP Morgan Asset Management; Fidelity; Pictet Asset Management; Amundi; iShares; Robeco; Schroders; Vanguard and PIMCO.

The firm writes that the top-five global brands, led by BlackRock, are all industry giants in terms of both assets under management and operational scale. While the top five remain undisturbed from last year, there is significant movement in the top 10. The remainder of the top-50 list sees selector’s favourite companies run the gamut, from niche product and local market specialists to the major one-stop-shop providers.

The big story is that 2023 was a bad year for ESG in Europe, Broadridge says. “Transparency issues, poor performance, regulatory pressures, and energy security issues all exacerbated the situation. Outflows from responsible investment funds, greenwashing concerns, and the reclassification of many Article 9 products were all compounding factors, as some commentators have questioned whether ESG has reached a tipping point.”

Broadridge interviews with fund selectors suggest that this may be overexaggerated, as ESG still constitutes a major consideration in investment decision-making. But firms are undeniably more sceptical and subject asset manager credentials to greater scrutiny to validate a firm’s ESG bona fides. To facilitate this, selectors would like a more standardised vocabulary around ESG, as well as improved communication around portfolio positions and engagement.

Asset management brands strongly associated with ESG investing, such as Robeco, Liontrust, Nordea, and Pictet have all seen their brand scores fall in 2023, which may point to sustainability credentials being less of a differentiator in this more sceptical climate. Further regulation has been touted as a solution, but Broadridge’s fund selector interviews suggest that this could prove a hindrance, rather than a help, to the ESG cause.

The top-five most important attributes in Europe have seen subtle shifts in 2023. ‘Appealing investment strategy’ replaces ‘Client-oriented thinking’ in first place. This is due to asset managers presenting alternative investment choices to worried clients, many of whom were withdrawing from long-term mutual funds and resting their money in interest-bearing savings accounts.

Fund launch activity was subdued as providers prioritised cost-cutting efforts. The firm writes that this is telling that ‘Innovation/Adaptation to market change’ dropped out of the top five to be replaced by ‘Solidity’ – an attribute that last year was far more prominent in US and APAC than EMEA. “This change benefits the large global firms, a trend we have also observed in APAC and the US. Big firms tend to benefit when investor confidence is low,” the firm says.

“Good communication remains vital, which is why ‘Keeping best informed,’ moves up a rung to third place. Selectors particularly value proactive communication when funds have underperformed.”

Additional findings from this year’s study include:

·          While ESG convictions may not be the game changer they once were, it is noteworthy that 50 per cent of the top-10 brands score highly in this area. Amundi, in particular, has been praised for its range of sustainable investments, including its climate-neutral ETF offerings.

·          The expansion into the private markets space is an emerging differentiator. Schroders reputation in the growing private markets and fixed income spaces mitigated criticism of the firm’s fees and allowed the manager to limit the damage done to their brand to dropping a single rung on the ladder.

·          Fixed income was one of the few bright spots in an otherwise gloomy landscape, as risk-averse investors sought guaranteed returns. PIMCO’s strength in the fixed income space helped the firm regain a top-10 berth.

·          A relatively risk-averse European climate was a boon to passive specialists. In many cases, this was at the expense of active specialists, although active ETFs are a growing niche – comprising approximately 5 per cent of Europe’s total ETF intake in 2023, the firm says.

“Going forward, there will be much clearer mandatory disclosures on E, S and G factors, their respective weightings, and methodologies used. ESG rating providers will also not be allowed to provide credit rating, auditing or consultancy services to avoid conflict of interest. ESG ratings providers based in the EU will now be authorised and supervised by the European Securities and Markets Authority (ESMA) and those from outside the EU will require endorsement, recognition or equivalence to provide their services within the EU. In the case of financial market participants whose activities are already subject to regulatory governance and disclosure requirements, legislators have gone with a balanced approach for internally produced ratings which recognises that these differ in nature and use compared to those offered by external ESG ratings providers. This pragmatism will prevent duplication with existing legal obligations while still considering the need for transparency.”

In terms of other types of ESG data products, EFAMA writes: “While we acknowledge the significant progress made, there is unfortunately still a gap when it comes to regulating other ESG data products in the EU. The International Organization of Securities Commissions (IOSCO) and ESMA have both stressed the need for robust regulatory frameworks that include all ESG data products, to combat greenwashing and uphold transparency in ESG reporting. In the UK, an industry led working group convened by the Financial Conduct Authority (FCA) developed a code of conduct for both ESG data and ratings providers. We would urge EU legislators not to wait for a future review of the ESG ratings regulation, but to develop a regulatory framework or a code of conduct for third party ESG data products as soon as possible.”

Chiara Chiodo, Regulatory Policy Advisor at EFAMA, says: “Transparent and complete ESG information is key to fully empowering investors to make confident decisions when choosing financial products with sustainability features. Covering ESG ratings in this regulation is a necessary step forward to drive the transition towards a greener economy. Hopefully EU policymakers will be looking at remaining ESG data issues when setting their priorities to boost the Capital Markets Union during the next legislative mandate.”

This shortage of innovation and investment significantly dampens Europe’s Initial Public Offerings (IPOs) market.

As of early December 2023, European IPOs garnered only USD9.2 billion, contrasting starkly with the USD20.3 billion raised in the US. This represents a 35 per cent decline for Europe compared to 2022, while the US witnessed a staggering 157 per cent increase. Additionally, prominent European companies like Birkenstock, Oatly, and On Running are opting for US stock exchanges, exacerbating the situation. The absence of a unified European market compounds these challenges, yet innovation in Europe requires robust policy support. Policymakers must devise creative solutions beyond regulatory adjustments, emphasising the need for funding and financial backing to rejuvenate innovation and bolster IPO activity.

Red tape

European innovation is underfunded and burdened with labyrinthine regulations. This situation is reflected in the small number of IPOs in Europe, especially when compared to the rest of the world. European IPOs made up 2.31 per cent of global capital in 2019, and by the period from Q1 to Q3 2023 this had been reduced to 1.17 per cent.

France Digitale, the largest start-up association in Europe, claims that the lack of European investment into start-ups can be attributed to regulatory barriers that limit the extent to which institutional investors in the EU can fund new companies, while making it riskier to start a company in Europe than in other jurisdictions. Pension funds in the US are far more likely than their European counterparts to invest in venture capital (VC), and this relative lack of pension fund investment is not compensated by other institutional investors. While the US’ lax regulatory landscape on pension funds may not be right for Europe, this situation illustrates the extent to which EU startups have trouble raising the necessary funds to innovate or go to market. 

Indeed, European tech companies are estimated to have raised USD45 billion in 2023 – down from USD82 billion in 2022 and over USD100 billion in 2021. What’s more, according to PwC’s IPO Watch Europe series, most IPOs in Europe have occurred outside the EU in recent years. Indeed, in the first three quarters of 2023, 33 out of the 44 large IPOs in Europe were not in the European Union.

Public investment into research and development is also especially low in Europe, which removes much of the public sector support that startups enjoy in other regions of the world. Just 2.27 per cent of EU GDP is spent on innovation, compared to 3.45 per cent in the US, 2.40 per cent in China and 4.81 per cent in South Korea.

The European Round Table for Industry (ERT) has called to integrate European capital markets by creating a capital markets union with the intent to abolish internal barriers. This would certainly help institutional investors fund start-ups and lead to more IPOs, but the root cause runs deeper than that, and the lack of IPOs is burdened by an adverse macroeconomic environment, in addition to a sub-optimal investment landscape.

Economic hindrances

The period of high interest rates is making it more difficult to take new companies to market in the EU, as capital is harder to come by than in previous years. This also helps explain why in 2023 and 2022 an increasing number of European companies went public outside the EU. However, interest rates are not the full story. Türkiye is the country with the most IPOs in 2023 – yet its central bank recently raised its main interest rate to 40 per cent, making the ECB’s key interest rate of 4 per cent look meagre in comparison. 

It should be noted that IPOs in Europe have grown in value and quantity for four consecutive quarters from Q4 2022 to Q3 2023. However, if European economies are to remain competitive this growth will need to accelerate, and IPOs and value will need to be created in a wider swathe of the continent, rather than a handful of hotspots.

The surge in private capital and acquisitions is outpacing IPO growth, contributing to a decline in IPOs. In recent years large corporates have increasingly opted to buy their would-be competitors before they go public, a trend taking place in the US as well as in Europe. This means that many companies that may have gone public are instead shelved, harming innovation. 

Conclusion

Public investments in research and development coupled with support for private ventures are crucial but insufficient on their own. Europe requires new institutional frameworks to enhance its attractiveness for bringing innovative ideas to market. Establishing a capital markets union would facilitate investment flow to talented entrepreneurs within Europe, while safeguards against anti-competitive practices are essential to protect startups from being absorbed prematurely by larger incumbents. 

Currently, Europe’s innovation and startup ecosystem lacks the momentum necessary for sustaining competitiveness in the medium to long term. Urgent action from investors and policymakers is needed to redirect the trajectory before Europe’s position becomes irrecoverable in the global landscape.

The team behind the report writes that it provides a deep dive into the state of the crypto-assets market in the Grand Duchy after a year filled with global shocks.

● 127 industry practitioners responded to the survey conducted in Q1 2023, up from 123 participants in the previous edition conducted in Q4 2021.

● Despite a decidedly pessimistic year for crypto-assets, the novel asset class continues to hold promise for the Luxembourg financial centre, the authors say:

● 39 per cent of respondents believe the global crypto-assets market is still in its early stages and holds significant potential, while 33 per cent see it as reaching an inflection point towards broader adoption and maturity.

● Recent shocks to the global crypto-assets market have not significantly discouraged stakeholders in Luxembourg, the report says, as 34 per cent see these events as being the consequence of corporate governance and due diligence failures, while 23 per cent see the current moment as an opportunity to rebuild.

● There is a significant increase of respondents who view Luxembourg as being aligned with the leading financial centres in Europe in the area of crypto-asset management and a concurrent decrease in respondents who consider Luxembourg a laggard in comparison to EU counterparts, according to the authors.

● While only 19 per cent of respondents consider Luxembourg to be a leading jurisdiction in the crypto-assets space globally, the Grand Duchy is being ranked ahead of both the UK and France in this survey.

● 82 per cent of respondents consider it from somewhat to extremely important for Luxembourg to take a more active stance in the broad crypto-assets space.

● The main constraints to broader crypto-assets adoption in Luxembourg are lack of maturity of relevant market infrastructures, the high volatility of crypto-assets, and the high AML risks perceived to be inherent to the asset class.

● Nonetheless, almost a quarter of respondents see high potential in crypto-assets from an investment strategy perspective, while 34 per cent see some potential. There is an increase in respondents who see no investment rationale whatsoever with regard to crypto-assets. The diversification benefits of crypto-assets continue to be viewed as their most attractive feature, whereas their perception as an inflation hedge has suffered.

● One-third of respondents believe regulations such as the Markets in Crypto Assets (MiCA) EU Regulation to be a critical prerequisite for industry development, while 17 per cent are carefully considering such regulations when developing their value proposition and products.

● Looking forward, a majority of respondents view a strengthening of investor education as an absolute imperative in terms of investor/customer protection while another 25 per cent agree that there is a need to strengthen financial education around the topic without having strong views on a particular approach.

● 71 per cent of respondents believe crypto-assets will be from somewhat to extremely important for the future of asset management in Luxembourg.