Luxembourg’s thriving private debt market

June 08, 2022

The private debt market in Luxembourg is booming, and it doesn’t show any signs of slowing. Learn more about the opportunities and challenges of venturing into this market from one of our leading experts.

Private debt is poised to become the world’s “second-largest private capital asset class in 2023,” according to the Preqin 2022 Private Debt Report. The study projects that global private debt assets under management (AuM) will reach an astounding $2.69 trillion by 2026. And even as interest rates start to climb to keep up with inflation, private debt still provides many attractive benefits to fund managers – which we discuss in greater detail below.

“I think the desire for floating rate and higher returns will remain intact,” says James Whang, head of credit and municipal fixed income for U.S. Bank. “Also, the asset class should continue to provide diversification and non-correlated return benefits for overall investment portfolios.” 

One of the leading hubs for much of this year-over-year growth is Luxembourg – currently the largest center of alternative funds in Europe (when combining both regulated and non-regulated structures).

According to the annual ALFI-sponsored KMPG private debt fund survey, Luxembourg “saw AuM of private debt funds soar by 40.6% in 2021 compared to [the previous year], bringing total assets under management to a record €181.7 billion. This builds on the 36.2% growth in AuM for private debt funds seen in the 2020 survey.”

“Luxembourg ‘saw AuM of private debt funds soar by 40.6% in 2021 compared to [the previous year], bringing total assets under management to a record €181.7 billion.’”

We wanted to understand what makes this domicile so attractive for private debt, so we spoke to one of our Luxembourg experts, David Kubilus, chief commercial officer of U.S. Bank Global Fund Services – Europe. He explains why the market is flourishing and what you should keep in mind if you’re interested in entering it.


Q: Private debt is one of the fastest growing asset classes in Luxembourg right now. What’s driving this growth?

The low interest environment that prevailed for the past ten years forced investors to seek higher yielding investments. Private debt offered positive returns while a lot of bonds and money markets show zero or negative yields.

Now, as interest rates are ticking upward, there’s still a lot of appeal for private debt, as they haven’t lost value the way other bonds have due to their comparatively low durations. This AIMA article explains it well:

“Credit risk plays a larger role in determining the value of private debt than it does in many traditional bonds. Plus, private debt is extended for shorter terms. This means that many private debt instruments have comparatively low durations – a measure of how sensitive their prices are to changes in interest rates. By looking at bonds and private debt in terms of duration, we can see exactly why private debt might suffer less in a rising interest rate environment.”

In Luxembourg, the government and regulators have given asset managers a very flexible framework of vehicles and fund types that can address the requirements of different types of investors and the different geographies for private debt investments. There is also a mature ecosystem in Luxembourg to support these funds and their distribution from a legal, audit and management company perspective.


Q: What challenges does private debt present for asset managers?

Private debt is still a fairly new asset class for investment funds, and very few administrators in Luxembourg know how to handle its nuances. Maintaining the critical data elements required for accounting and servicing private debt instruments is a complex process.

Private debt is a sub-class of private capital but could include CLOs, CDOs, infrastructure debt and private loans. Each one of these structures has its own unique requirements. Many managers also want integrated loan servicing solutions – and they quickly realize there’s only a very small number of firms in Luxembourg capable of providing that.

Q: What are some common pain points asset managers encounter?

Entering the Luxembourg private debt space should be a relatively seamless process for fund managers. Unfortunately, however, that’s not always the case.

In conversations with clients, we learn about experiences they’ve had with other service providers. They often describe problems they’ve run into with opening bank accounts, with prolonged onboarding processes and with insufficient flexibility and transparency in general.

Clients in this market need service providers who are proactive to their business needs. They need partners who provide smooth onboarding, who have experience with various and unique asset classes and who can ensure high-quality white glove service for their investors.


Q: Why are agility and flexibility such important qualities in a service provider? And what other traits should managers look for?

There are many different types of private debt, and this asset class has its own requirements with regards to static data maintenance and events processing. Your service provider should have skilled staff with deep knowledge of the asset class along with the technology to support it. Another key requirement is an operating model that limits functionalization and focuses on high touch servicing.

Providers that can offer more than just the fund administration piece of your solution, such as the servicing of underlying investments – like loans – can also add value. With servicing teams working in the same integrated systems, you’ll receive consistent data output and reporting and an overall more efficient client experience.  

Q: What types of technology solutions are available to support private debt?

There are a few vendor solutions that can support private debt. However, the challenge is supporting all different kinds of private debt and automating the collection of data and calculations.

Our experience has been that you need to supplement vendor solutions with proprietary data enrichment and reconciliation tools to obtain a superior service experience. And again, it’s also important to prioritize the onboarding process to start the relationship off in a way that instills confidence and trust.

Q: What brought U.S. Bank to Luxembourg?

Many of our clients in other jurisdictions specifically asked for us to open an office here so they could launch Luxembourg funds with the same level of support and service experience to which they’d become accustom.

Our team in Luxembourg provides strong on-the-ground service from seasoned experts. We partner with clients to ensure that time and cost implications factor into every step of the process for successful, goal-specific outcomes.

Luxembourg clients benefit from the combination of our global presence, robust European offering, wealth of experience, strong market presence, solid credit ratings and stable balance sheet. Our foundational technology and operating model have been successfully servicing private debt for more than 20 years. We also have a cross-jurisdictional presence, enabling clients in other domiciles to leverage their existing service teams in the U.S. or Dublin.

Some other advantages we provide private debt clients in Luxembourg include the following:

  • In-house capabilities and one-stop-shop solutions
  • Experience managing various and unique asset classes
  • Agility and flexibility to implement bespoke solutions based on unique needs and requirements
  • Full scope of banking solutions
  • Integrated loan servicing solutions

Luxembourg’s private debt growth is soaring. If you’re interested in entering this market, there’s no better time than the present. Find an administrator with the right reputation, reliability and resources, and you’ll be well positioned to take advantage of the benefits Luxembourg offers.

For more information on the spectrum of fund servicing solutions offered by U.S. Bank Luxembourg, visit or explore these additional resources:


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U.S. Bank Global Fund Services is a wholly owned subsidiary of U.S. Bank, N. A.

U.S. Bank Global Fund Services (Ireland) Limited is registered in Ireland, Company Number 413707. Registered Office at 24 - 26 City Quay, Dublin 2, Ireland. Directors: Eimear Cowhey, Ken Somerville, Brett Meili (USA), James Hutterer (USA), Hosni Shadid (USA). U.S. Bank Global Fund Services (Ireland) Limited is regulated by the Central Bank of Ireland.

U.S. Bank Global Fund Services (Guernsey) Limited is licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 2020, as amended, by the Guernsey Financial Services Commission to conduct controlled investment business in the Bailiwick of Guernsey.

U.S. Bank Global Fund Services (Luxembourg) S.a.r.l. is registered in Luxembourg with RCS number B238278 and Registered Office: Floor 3, K2 Ballade, 4, rue Albert Borschette, L-1246 Luxembourg. U.S. Bank Global Fund Services (Luxembourg) S.a.r.l. is authorised and regulated by the Commission de Surveillance du Secteur Financier.

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