Luxembourg Provides Opportunities for Debt Investments

Debt investments gained massive traction following the last financial crisis in 2008 and 2009 when banks, hampered by post-crisis regulations, were unwilling to provide businesses and investors with sufficient loan financing. This created a need for private debt investments, filling the gap left by banks and offering investors promising yields and portfolio diversification.

The current economic situation, fueled by several crises since the beginning of this decade, will further boost the need and opportunities for private debt investments in 2023 and beyond. The recent failures of the First Republic Bank, Silicon Valley Bank, Signature Bank, and Silvergate Bank in the United States, and the rushed takeover of Credit Suisse by UBS in Switzerland further show weaknesses in the banking sector that may result in reduced bank lending.

The assets under management in debt by regulated Luxembourg funds such as Reserved Alternative Investment Funds (‘‘RAIFs’’) and Specialized Investment Funds (‘‘SIFs’’) exceeded EUR 260 billion in June 2022, representing a year-on-year growth of more than 45%. These impressive developments are indicative of the positive outlook for this asset class.