Global market trends and regulatory developments in fund distribution

20 November 2023

The biggest theme impacting fund distribution in Europe relates to a discernible trend towards democratisation of private equity.

With Luxembourg’s recent fine-tuning of its local funds law, the jurisdiction has further strengthened its position as one of the leading locations for funds in Europe.

The marketing of funds across the European Union (EU) remains fairly streamlined, with widespread use of passporting which has reduced reliance on national private placement regimes in all but special cases. The EU offers a straightforward entry point for fund distribution.

Outside of the EU, we increasingly see regulators open to addressing enquiries related to the marketing of alternative investment funds, particularly when those come from Luxembourg.

Global market trends

Right now, the biggest theme impacting fund distribution in Europe relates to a discernible trend toward democratisation of private equity and the retailisation of private assets. While discussions on this are prevalent, concrete solutions are only now being developed and the opening of the asset class is in its infancy.

In the US, the alternative funds market remains mainly unregulated, though we see an increased focus from regulators to address that. Most notably, the US Securities and Exchange Commission (SEC) announced a significant overhaul of private funds in August 2023 which will have impact beyond US borders. The SEC’s new rules and amendments are designed to reinforce governance.

In Asia, there has been a notable increase of single-family-office set up in Singapore, a key financial hub in Asia. Additionally, the use of Variable Capital Company funds to structure funds for managing investments is on the rise.

In these markets, institutional investors enjoy access to a wide range of investment opportunities through various vehicles, often with few restrictions other than those related to sensitive or strategic sectors.

Where we are seeing increasing differentiation is in the efficiency of jurisdictions in catering to retail clients. Here, Organization for Economic Cooperation and Development (OECD) countries and a few others such as Singapore have developed markets for retailisation of different asset types, be they liquid or illiquid.

In countries with limited access to such markets, high net worth and ultra high net worth individuals are having to seek offshore investments due to less developed domestic financial systems.

Latest structuring themes

In Luxembourg, there continues to be a considerable demand for fund structuring in the form of partnerships, with or without the Reserved Alternative Investment Fund designation. Private equity and real estate are the primary asset classes in demand, with private equity slightly outweighing real estate in popularity.

While the cryptocurrency market has experienced a slowdown, at the same time, we have also seen a resurgence in interest in digital assets.

Navigating economic challenges

While the US remains by far the largest fund market, just like Europe, it has experienced a decline in M&A transactions since the beginning of 2023 and fund activity has slowed. There are now some signs of a reawakening, and we see asset managers gearing up for a return to the market, with numerous projects being considered for set-up.

Interest rate hikes that have seen rates reach their highest levels since the start of the 21st century have made a big impact on fund activity, and the hope now is that central banks have reached the limit of those increases and recession has been avoided. While it is unclear how long rates will stay at these elevated levels, a period of stability could now herald a return to dealmaking.

Asia has been undergoing significant growth in fund structuring in recent years that seems unlikely to slow. Much of this growth can be attributed to the relocation of assets from Hong Kong to other Asian centres, perhaps due to political or economic tensions.

Shifting fundraising landscapes

One meaningful shift we have observed in recent private markets fundraising is the emergence of “boat liners” which are investment funds with substantial fundraising.

KKR raised $8 billion for its sixth European private equity vehicle in April 2023, while EQT’s tenth vehicle closed at a substantial €21.5 billion, albeit taking longer than anticipated. This trend may lead to challenges in finding suitable investment targets, as larger fund sizes necessitate more and/or larger deals. Whether this will also contribute to an increase in EBITDA multiples remains to be seen.

The other noteworthy trend is the need to address demand from wealthy individuals for alternative assets. Currently, the market is exploring various solutions, but no definitive direction has been established yet. We will wait and see which solutions will ultimately emerge to meet this demand and address the additional liquidity and regulatory requirements associated with tapping this new investor class, but significant progress has been made in the past few years.

Finally, the attention around pure Environmental, Social and Governance or ESG funds, and particularly those classified as Article 9 under Sustainable Finance Disclosure Regulation (SFDR), appears to have calmed.

Asset managers seem to be returning to a more traditional approach as a safe harbour for returns, and as such we see ESG funds becoming more of an exception rather than the norm in the current environment.


There are many emerging trends in the fund distribution space such as structuring themes, navigation of new economic challenges, and a shift in the fundraising landscape. Luxembourg – along with other European and global jurisdictions – continues to offer a competitive fund environment for fund managers.

How ZEDRA can help

ZEDRA’s Fund Solutions team of 100 experts assists clients across locations including Luxembourg, the Channel Islands, Cayman Islands, Singapore, Curaçao, and the US. The team provides the full range of fund administration services for both open and closed-ended funds to global clients.

Please contact Charles-Alexandre Houillon, Director Luxembourg to find out how we can help you.

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