The trend shows a general improvement compared to 2022, driven by organic growth, acquisition of new clients and favorable market conditions. However, the growth is heavily concentrated, with 71% of the growth attributed to five entities.

The Assets under Depositary (AuD) composition showcases a dynamic surge in alternative funds, with Reserved Alternative Investment Funds (RAIFs) and other Alternative Investment Funds (AIFs) partnerships rapidly gaining momentum.

The AuD of Luxembourg-domiciled UCIs, for which the banks in scope act as the depositary, has risen by:

• €144 billion for RAIFs
• €180 billion for other AIF
• €57 billion for SICARs

However, UCITS maintains its dominance, accounting for 66% of the total AuD in 2023, equivalent to €4 trillion in AuD. Source: Depositary section of the LFR.

Compared to the past year, the AuD for equity funds and bond funds have steadily increased, maintaining dominance across all assets classes, where:

• €188 billion for bond funds
• €105 billion for mixed funds

However, non-standardized funds, such as private equity funds, are on the rise:

• €108 billion for private equity funds
• €229 billion for other funds, which includes movable property, infrastructure, syndicated loan, timber, cryptoassets.

The shift calls for a rapid increase in the optimization of operational workflows, resources allocation and digitalization, as these non-standardized funds currently heavily rely on manual processes from the depositary banking perspective.

The positive trend is primarily driven by five entities, fueled by organic growth, the onboarding of new clients, and favorable market conditions. The overall growth is primarily associated with an increase in Assets under Custody (AuC) attributed to managed accounts, influenced by the onboarding of clients from two entities only.

As the financial landscape evolves, the Depositary and Custody sector continues to thrive, marked by a steady increase in both Asset Under Custody and Asset Under Deposit. This growth showcases the sector's remarkable ability to adapt to increasing complexity and expansion, while successfully maintaining a balanced 1:1 ratio of local to international staff.

This balance allows for local expertise to tackle the intricacies of the alternative investment funds sector and other assets, while also utilizing personnel outside of Luxembourg in operational centers to support the global functions of depositary banking and custodian services.

For a deeper dive into the evolving landscape of Luxembourg's depositary banking sector, explore the full findings of our survey. A must-read for industry professionals!