The rise of private markets as a growing asset class has sparked an ongoing debate about their operational efficiency and scalability compared to the well-established Ucits (Undertakings for the Collective Investment in Transferable Securities) funds industry.
While Ucits is renowned for its speed, scale, and efficiency in distribution, private markets remain bespoke, complex, and highly dependent on specialised knowledge.
With the second iteration of the European Long-term Investment Fund – known as “Eltif 2.0” – offering a pathway for retail investors to access private markets, a crucial question emerges: can private market operations ever replicate the efficiency and scalability of Ucits?
This conundrum was among the topics discussed during a Funds Europe roundtable held in Luxembourg recently, where panellists evaluated the viability of Eltifs.
Do firms have the right networks?
The viability of this product, though, doesn’t just centre on the back and middle offices that support it. One of the biggest obstacles facing private market investments is distribution. Unlike Ucits, which has a robust and well-oiled retail distribution network, private market firms have traditionally catered to institutional and professional investors.
Christophe Lavall, conducting officer at Riverside Europe, acknowledges this challenge, saying: “It is only the beginning for Eltif 2.0, and it will take time for this market to mature. It’s a great opportunity to target retail investors with private equity funds, but I also see one potential issue: many private equity firms market to professional investors and institutions, so do they have the networks to make this a success in terms of distribution to retail?
“Certainly, smaller firms will not have the networks. This is a possible issue for the success of the Eltif.”
Private market managers must either build new retail-focused distribution networks or partner with existing platforms. Diana Tisescu, client relationship director at IQ-EQ, set out the complexity involved, saying fund promoters may have to rely heavily on external expertise in order to successfully distribute the product.
“You need to go where somebody’s already doing it, somebody’s already launched it, somebody’s already worked with it,” said Tisescu.
Bryan Astheimer, the US-based head of investment managers business at SEI, said the US had experienced a similar story after the launch of Business Development Companies (BDCs) – organisations that invest in smaller companies – and unlisted closed-end funds that offer controlled liquidity, known as interval funds.
“We went through this around ten years ago with BDCs and interval funds for our clients in North America. The largest investment managers that had an alternatives group were fine because they already had the distribution platforms in place. They had the connections into the wire-houses, they had connections to RIAs [registered investment advisors], or they had their own captive RIAs where they could distribute this product.
“But mid-market managers struggled where they had never gone through a distribution channel. They had to rely on someone else to tell their story and so there were many growing pains through that process.”
This historical precedent suggests that unless private market managers in Europe establish or integrate with strong distribution networks, they may face similar growing pains in scaling up retail access to private investments.
Eltif is a priority for many ManCos
Private markets are evolving within a tightly regulated framework, which presents both opportunities and constraints. On one hand, regulation ensures investor protection and trust. On the other, the administrative and operational burdens create hurdles that limit scalability.
Chrystelle Veeckmans, Emea head of asset management at KPMG, points to the momentum Eltifs are gaining despite these complexities.
She said that KPMG survey data showed that 30% of either ‘management companies’ (known in the industry as “ManCos”) and ‘alternative investment fund managers’ (AIFMs) considered it a priority to launch Eltifs in the coming years. ManCos and AIFMs are the legal entities behind many EU funds.
Some 45% planned to launch Eltifs, Veeckmans said, with Luxembourg as the dominant domicile for Eltifs.
“So, the promise there is of the democratisation of private assets – a long-term investment, which for high-net-worth individuals can be a way to invest money for higher and more stable long-term returns.”
The Eltif structure has gone through two iterations since the regulations were first introduced in 2015. Sensing the first set of rules for “Eltif v1” were too stringent, policymaker relaxed rules around eligible assets and minimum investment levels. The Eltif 2.0 was widely welcome by the industry. However, not everyone is convinced of its necessity for democratising private markets or for channeling capital to non-listed European companies.
Thomas Klein, group head of asset servicing& financial intermediaries at Quintet Private Bank in Luxembourg, said it was possible that digital platforms may already be providing the access to private markets that Eltifs seek to create.
“Access to alternative funds already exists,” he said. “There are fund distribution platforms such as Moonfare that allow this access, and they are growing very fast. There are already multi-billion-dollar platforms where you can, through fee structures, do exactly the same thing.
“When Eltif 2.0 was introduced, I wondered about some of the benefits. Five years from now, tokenisation of the whole universe will likely be in place, further easing access to private markets.”
Klein argued that alternative fund managers should focus on product transparency and liquidity concerns rather than relying so much on the Eltif to raise funds and investors.
“Retail investors are shy of lock-up periods and products that are not easy to access or redeem,” he said. “Alternative funds still have these characteristics. Portfolio managers must create products that are easy to understand and accessible.”
Eligible Asset Regime change
Tisescu also underscored the role of technology in making alternative investments more accessible.
“Digitisation could support the complexity in private markets. It would be a great marriage,” she said.
Automation, tokenisation and digital platforms could streamline private market operations, reduce costs, and improve distribution, making them more comparable to Ucits funds. If fund managers embrace these advances, private market products could scale more efficiently.
Given Ucits’ dominance in global fund distribution, some argue that modernising the framework to accommodate more alternative assets is necessary. Jean Marc Goy, chairperson of Alfi, acknowledges the need to rethink Ucits’ scope.
“It is crucial that our markets meet investors’ needs and preferences as they evolve,” he said. “We need to ensure that regulation enables a well-diversified offering, including access to private assets.
“Ucits is the oldest and most successful brand in the EU single market and globally. We should consider updating and modernising this successful regime. The upcoming Eligible Assets Directive discussions are the right forum to explore these possibilities.”
If Ucits expands to include a broader range of private assets, it could address the operational inefficiencies and limited retail distribution currently hindering private markets.
Private markets face an uphill battle in matching Ucits efficiency, particularly in terms of distribution, operational standardisation, and cost-effectiveness. However, progress is being made. Eltifs are gaining traction, digital solutions are improving accessibility, and regulation is evolving to support alternative investments.
The panel discussed whether operational processes in private markets fund administration could ever replicate the operational efficiency and scalability of Ucits.
According to Bryan Astheimer, automation is already making significant strides in private markets.
He said SEI had seen a “real pivot” in technology around data to make workflow more efficient. He cited the usage of AI.
Investor subscription document processing, which could previously take up to 5 hours manually, can now be completed in under 10 minutes using large language models, said Astheimer. This magnitude of efficiency improvement is a testament to the transformative power of AI in private markets.
The full value chain
Mike Delano, asset and wealth management leader at PwC Luxembourg, said that efficiency gains extended across the entire value chain.
“It starts already with the simplification for portfolio management,” he said. “Deal sourcing – which is now extremely cumbersome – will be semi-automated because the data analytics is running on its own. Then, of course, there’s RPA [robotic process automation] reducing the manual workload, and going forward, AI. For the distribution channel and settlement cycles, blockchain and smart contracts will completely change the game.”
This perspective suggests that while private markets may not completely replicate Ucits efficiency, they are moving decisively in that direction. Automation is not just streamlining back-office functions but also transforming key front-office activities like deal sourcing, portfolio management, and investor relations.
But it may have its limits
Despite these advancements, experts caution against assuming that private markets will ever fully mirror the relative speed and efficiency of products sold in the Ucits framework. Chrystelle Veeckmans at KPMG said private assets were more complex and more bespoke than publicly available assets, meaning that although many efficiencies could be found, the market will likely never achieve the level of standardisation found in public markets.
Diana Tisescu at IQ-EQ said that longer term investment horizons in private markets meant the asset class required a more bespoke approach in areas like due diligence.
Some believe that blockchain and tokenization could radically transform private markets, improving efficiency and liquidity. Christophe Lavall, conducting officer at private equity firm Riverside Europe, acknowledges these benefits but remains sceptical about full parity with Ucits.
“I think we will fill the gap, but we will never achieve the same efficiency as for Ucits,” he said. “Blockchain and data analytics will reduce timeframes, but full standardisation is almost impossible.”
Borno Janekovic, chief executive of Omphalos Fund, takes a more radical stance, suggesting that AI and tokenisation could eventually replace traditional investment roles entirely.
“If your job contains a lot of routine, it will be replaced very soon. If 60% of your job is getting an email and sending the email out, you will have no job in five years,” he said. “If your job is filling an Excel sheet with discounted cash flows and from that you get to a recommendation, you will have no job.”
Yet he acknowledged the role for a human element in fund management, saying many investors would still want personal interaction and the reassurance of a human being.
While automation, AI, and blockchain are undoubtedly transforming private markets, full standardisation on par with Ucits remains unlikely. The complexity and bespoke nature of private assets mean that some inefficiencies will persist. However, efficiency gains across the value chain — from deal sourcing to fund administration — are undeniable.
As technological advancements continue, private markets may not fully replicate the Ucits model, but they will become significantly more streamlined, scalable, and investor friendly. The key question for industry players is not whether they will reach Ucits-like efficiency, but rather how quickly they can adopt these innovations to stay competitive in a rapidly evolving financial landscape.
And finally…
Finishing our conversation, the panel were asked to suggest key topics for the immediate future.
The implementation of the Markets in Crypto-Assets Regulation (MiCA) in the European Union marks a significant milestone in the effort to create a unified regulatory framework for crypto-assets. However, the question remains: is MiCA truly transformative for the funds industry, or does it merely provide guidelines for future developments?
Tisescu believes that while MiCA establishes a structured framework for asset managers, its transformative potential for the funds industry is yet to be seen.
“Whilst MiCA is establishing some parameters for how we would work and gives some structure to asset managers on how to apply it around crypto-assets, I don’t know if it’s as immediately transformative for the fund industry as is being proclaimed,” she opined.
She emphasised that while MiCA provides guidelines, there are still unanswered questions regarding its practical implementation. “I personally haven’t seen any sort of fund on crypto yet. I haven’t worked with crypto, but I’d be very keen to see how that would look,” she added. “Of course, we are keen to partner with the regulator on this journey and are keeping our eye on market practice.”
Veeckmans pointed out that digital assets are becoming increasingly relevant due to generational shifts. “We are probably none of us investing in bitcoin, but if I look at my son’s generation, the only thing that they want is to become [involved],” she shared.
According to Veeckmans, MiCA enables a more unified market and encourages innovation, facilitating the integration of digital assets into investment portfolios. However, she also highlighted the challenge of balancing compliance costs, particularly for smaller asset managers. “Balance is compliance with innovation — finding the right balance is key,” she said.
For Thomas Klein at Quintet, however, MiCA is a stepping stone towards the institutional adoption of crypto-assets. He believes that as states begin discussing holding crypto reserves, institutional investors will inevitably follow.
“It will show us if the institutional world adopts crypto or not,” he concluded.
Other factors of importance raised by the panel were, from Mike Delano at PwC, a need for asset managers to focus on investment outcomes rather than overly fixated on specific products.
“Asset managers and some asset owners get too hung up on the products. More focus should be placed on the outcomes,” he said. “Retail and institutional investors ultimately seek the same results, even if they use different wrappers. The key is understanding what investors want and determining the best way to get them there.”
Jean-Marc Goy drew attention to Luxembourg’s recently introduced law on distributed ledger technology – among which blockchain – as a step towards legal certainty in digital asset management.
The changing sources of capital also present challenges and opportunities with Astheimer noting that: “Retail investors are looking for access to vehicles and returns they historically didn’t have access to, while a massive wealth transfer is occurring over the next 10 to 20 years. Firms must be positioned to access and distribute this capital, or risk being left behind.”
For Tisescu, technology will be a game-changer, but firms must approach it strategically. She advises asset managers to “stay ahead of regulatory compliance and technological trends as AI and emerging digital products will reshape the industry.
“A technology development plan is essential to streamline operations and ensure compliance. Asset managers must clearly define how these shifts will impact their portfolios and ultimately drive investor returns.”
Beyond traditional competitors, new entrants will reshape the industry, believes Borno Janekovic at Omphalos Fund. “We are witnessing the arrival of non-human intelligence, which will change everything,” he said. “New players will emerge through tokenisation and digital assets, many of whom may not be regulated. This shift must be closely monitored.”
Agility and collaboration will determine the industry winners of the future, with Veeckmans saying: “The rapid changes in politics, technology, and markets make it difficult to succeed alone. Firms must build partnerships with tech companies and fintechs to better address customer needs.”
Christophe Lavall at Riverside Europe echoed this sentiment, emphasising that “digital transformation and technology are key to enhancing investor experience and cutting costs to compete against larger players.”
As the asset management industry moves forward, firms must focus on outcome-based investing, regulatory adaptability, technological integration, simplification, and agility in partnerships. Those who effectively navigate these challenges will be best positioned for success in an evolving financial landscape.
PARTICIPANTS:
- Bryan Astheimer, head of investment managers business, SEI
- Mike Delano, asset and wealth management leader, PwC Luxembourg
- Jean-Marc Goy, chairperson of the Association of the Luxembourg Fund Industry (ALFI)
- Borno Janekovic, chief executive of Omphalos Fund
- Thomas Klein, group head of asset servicing & financial intermediaries, Quintet Private Bank
- Christophe Lavall, conducting officer, Riverside Europe
- Diana Tisescu, client relationship director, IQ-EQ
- Chrystelle Veeckmans, Emea head of asset management, KPMG Luxembourg
The first report on the roundtable may be viewed here.
