Third-party management company (ManCo) services are a growth business. Many institutional investors are outsourcing more asset management functions and the size of the outsourced mandates is also increasing. This trend towards outsourcing is partially responsible for driving the growth of the ManCo sector.
Why ManCos Are Booming in 2024: Luxembourg's Dominance and Global Trends
The global Management Company (ManCo) sector continues to demonstrate remarkable growth in 2024, driven by evolving market dynamics, regulatory developments, and increasing demand for specialized investment structures. Luxembourg, in particular, stands at the forefront of this industry, cementing its position as the leading ManCo market in Europe. This blog delves into the key factors behind the boom in the ManCo sector, with a focus on Luxembourg's dominance and the global trends shaping the industry.
Luxembourg: The Epicenter of ManCo Growth in Europe
Luxembourg has solidified its status as the primary hub for ManCo activities in Europe, managing over EUR 5 trillion in Assets under Management (AuM) as of 2023. This figure represents 30% of the continent's total AuM, positioning Luxembourg well ahead of other major European markets, including Ireland (23%), Germany (15%), and France (13%).
Rapid Growth Despite Challenges
Despite facing geopolitical uncertainties and an increasingly complex regulatory environment, Luxembourg's ManCo industry experienced a robust 22% growth in AuM over the past year, reaching €5.314 trillion. This growth underscores the resilience and adaptability of Luxembourg's financial ecosystem, which continues to attract global asset managers seeking a stable and well-regulated environment.
Why Luxembourg?
Luxembourg's appeal as a ManCo destination is underpinned by its strong regulatory framework, strategic location within Europe, and the presence of a sophisticated financial services infrastructure. The country's commitment to innovation and its proactive approach to embracing trends such as digitalization and ESG integration have further enhanced its attractiveness to global investors and asset managers.
Waystone: A Global ManCo Powerhouse
In the global ManCo landscape, Waystone has emerged as a key player, overseeing more than $400 billion in AuM worldwide. This significant growth reflects the increasing number of investment managers and sponsors, particularly from the US, leveraging Waystone's comprehensive services. Waystone's global reach and expertise make it a preferred partner for asset managers looking to navigate the complexities of the ManCo sector and expand their international footprint.
Key Trends Shaping the ManCo Sector in 2024
Growth in Third-Party ManCos
A notable trend in the ManCo sector is the rising prominence of third-party ManCos. The share of AuM managed by these entities has grown from 6% in 2018 to 18% in 2023, highlighting the sector's dynamic nature. This growth is driven by several factors, including the increasing complexity of regulatory requirements, cost efficiencies, and the desire of asset managers to focus on their core competencies while outsourcing operational and compliance functions.
ESG Integration: A Driving Force
Environmental, Social, and Governance (ESG) criteria are becoming increasingly integral to investment decisions within the ManCo sector. Asset managers and investors alike are recognizing the importance of sustainability, leading to the widespread integration of ESG factors into investment strategies. This trend not only aligns with broader global sustainability goals but also enhances the long-term resilience and appeal of investment portfolios.
Mergers, Acquisitions, and Consolidation
The ManCo sector is witnessing significant mergers and acquisitions (M&A) activity, driven by the need for scale, efficiency, and enhanced service offerings. Smaller ManCos are increasingly merging or exiting the market due to cost pressures, regulatory challenges, and the demand for digitalization. This consolidation trend is expected to continue, reshaping the competitive landscape and leading to the emergence of larger, more robust entities capable of offering comprehensive solutions to global asset managers.
Challenges and Opportunities in the ManCo Sector
Regulatory Complexity and Cost Pressures
One of the primary challenges facing the ManCo sector is the growing complexity of regulatory requirements across different jurisdictions. Compliance costs are rising, and the need for robust governance frameworks is more critical than ever. This has led to increased demand for digital solutions that can streamline regulatory reporting, risk management, and operational efficiency.
Digitalization and Automation
Digital transformation is no longer a choice but a necessity for ManCos looking to stay competitive. The adoption of digital tools and automation technologies is accelerating, enabling ManCos to enhance their operational capabilities, reduce costs, and improve client service. In particular, the use of advanced analytics and AI is helping ManCos better understand market trends, optimize portfolio management, and meet the evolving needs of investors.
Opportunities in European Markets
The European ManCo market, particularly in Luxembourg and Ireland, continues to offer significant opportunities for international expansion. These markets provide asset managers with access to a well-connected, global network and the ability to leverage structures like UCITS (Undertakings for Collective Investment in Transferable Securities), which are highly regarded for their investor protection features and flexibility.
A Thriving Sub-Sector
The global ManCo sector is thriving, with Luxembourg leading the charge as the premier destination for asset management companies in Europe. The sector's growth is fuelled by a combination of regulatory developments, market dynamics, and the increasing demand for ESG-compliant investments. As the industry continues to evolve, ManCos that can adapt to these changes, embrace digitalization, and offer comprehensive, client-focused solutions will be well-positioned to succeed in this competitive landscape.
How does Dasseti support ManCos?
Dasseti's flexible compliance and third party risk management platform makes it easier for ManCos to maintain oversight and control over large numbers of third parties. Custom reporting formats and analytics dashboards make it easy to demonstrate value back to clients quickly and with minimal effort.
Dasseti COLLECT is packed with features that remove the need for multiple platforms and systems, such as CRM, document and research management, findings and reviews plus others. By consolidating features into a single platform, Dasseti streamlines internal processes and reduces complexity across the investment technology stack.
Get in touch to find out more about Dasseti COLLECT works with ManCos to de-risk their business.
