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Since the Global Financial Crisis, alternative lenders have proved to be a key additional source of funding for start-ups, SMEs and midmarket companies which account for broadly 99% of EU businesses – when traditional bank lending is not always in a position to deliver. This diversification of the financing source is a priority of the EU’s agenda as outlined in its Capital Market Union plan.
In the wake of the COVID-19 pandemic and its far-reaching impact on EU businesses, alternative lenders will have an even more important financing role. This is once again fully supported by the EU (for instance, via the recent increased flexibility of the EU securitization framework).
With a proven track-record for fund structuring and distribution, Luxembourg is the number one EU jurisdiction for asset managers launching a debt fund.
EY Luxembourg, supported by the EY network, has extensive experience and dedicated specialists (audit, tax, valuation, regulatory advisory, etc) working at different stages of the debt fund (design, launch, running, exit) taking into account the different types of strategy, the preference of both the managers and LPs as well as requirements applicable in borrowing jurisdictions.
Featured articles
Tax, transfer pricing and securitization vehicles: what’s new?
Securitization vehicles can be a powerful vehicle for carrying out third-party debt investment, but recent structuring options have introduced transfer pricing considerations that were previously overlooked. Market participants should be mindful of transfer pricing regulations while optimizing their strategies to leverage the flexibility of these vehicles. Adhering to the arm's length principle can help manage associated risks. Proactive collaboration with tax and transfer pricing experts is crucial for ensuring compliance and achieving financial objectives.
The rise of private debt: navigating valuation challenges
As the private credit landscape continues to evolve, the importance of robust valuation practices and heightened regulatory oversight becomes increasingly critical, especially in the context of economic fluctuations and changing financial conditions.
With a market valued at over US$ 3 trillion, what’s in store for the future of private credit?
Private credit has solidified its role as a vital pillar of global finance, demonstrating remarkable resilience and adaptability amid economic turbulence. From supporting diverse borrowers to delivering steady returns for investors, the sector continues to thrive even in the face of inflation, geopolitical tensions, and post-pandemic recovery challenges.
Aligning carried interest with sustainability indicators in private debt
The strong development of the private debt market combined with the increasing appetite from stakeholders for impact investing, and the recent EU Regulations have led to a variety of mechanisms ensuring proper alignment of financial interests with Environmental, Social, and Governance (ESG) principles. In this respect, the incorporation of sustainability key performance indicators into the carried interest structures of private debt funds is an evolving practice designed to align financial incentives with social impact goals. This approach is gaining traction in impact investing, especially for funds classified as Article 8 and 9 as per Sustainable Finance Disclosure Regulation (SFDR). However, the expected benefits may not be realized without proper management and verification.
Falling interest rates: The good and bad news for private credit
Recent actions by the Fed and the European Central Bank to decrease interest rates have brought some relief and hope to the markets. While private credit has good reasons to rejoice, concerns are also rising about the future performance of this asset class.
Financing the Economy: The Future of Private Credit
The size of the global private credit market is estimated at over $3 trillion, as per latest industry research by the Alternative Credit Council (ACC), the private credit arm of the Alternative Investment Management Association (AIMA). The 10th edition of Financing the Economy report, published in collaboration with EY, looks at the industry in detail.
The reverse hybrid rules - navigating the practical implications of the Exemption for Collective Investment Funds
The new AIFMD Directive’s roll-out unpacking main impact on IFMs
The proposal reviewing AIFMD and the UCITS Directive (the new Directive) was adopted by the Council on 26 February 2024. EY Luxembourg’s Laurent Capolaghi, Private Equity Leader, and Vincent Remy, Private Debt Leader, highlight some of the main changes impacting investment fund managers.
Private debt – an expected but uncertain “golden moment”?
Since 2008, private credit has not stopped expanding. Yet, banks have reduced their exposure to lending because of regulatory changes, and are not able to satisfy the strong demand from the economy.
Increase in credit risk among banks: a gateway for private debt
We explore the impacts of emerging trends, such as the surge in private debt investment in the global and European markets, at the Luxembourg market level.
Renforcer l’attrait de la boîte à outils des fonds d’investissement
Un projet de loi omnibus visant à moderniser le texte luxembourgeois sur les fonds est en vigueur depuis juillet 2023.
Loan funds and AIFMD 2: Where do things stand?
Loan funds and AIFMD 2: Where do things stand?
A welcomed modernization of Luxembourg’s fund toolbox - Draft Law 8183
A welcomed modernization of Luxembourg’s fund toolbox - Draft Law 8183
The current geopolitical instability, spiraling inflation and energy prices, looming recession and massive supply chain issues, lead to an increasing risk of defaults, insolvencies and volatility.