Complementarity to other EU Centres

EU integration and globalisation have brought about unprecedented trading and investment opportunities. However, such opportunities entail the complex navigation of multiple markets and jurisdictions, with their different rules and laws. Even within the EU, despite decades of harmonisation, some 5000 different national regulations continue to apply to the selling of services across borders, according to a survey conducted by The Economist. In addition to complexities brought about by these multiple national regulations, cross-border sales of financial services still face difficulties arising from the diverse cultural norms and traditions of consumers and investors across the EU.

Over decades, Luxembourg has developed a financial services industry specialised in helping financial institutions market their products and services across multiple jurisdictions.

Whether it is a fund manager looking to set up investment vehicles to be sold to clients in Spain, the Netherlands, Sweden and Italy, or whether it is an entrepreneur planning his succession while living in France, running a company with operations in Germany and Poland, children living or studying in the UK and in Belgium and eventually looking to retire in Portugal, Luxembourg has made it its trade to help provide solutions to complex cross-border questions, while ensuring full compliance with the different aspects of the administrative, consumer, tax and other regulations that apply to each situation.

Today, this expertise covers not only Europe but has taken on a global reach as our industry caters to an ever greater number of markets. For instance, Luxembourg investment funds are admitted for sale in 73 different jurisdictions around the world. Asian asset managers, for instance, can set up a fund in Luxembourg and sell it from here across multiple Asian markets.

Many European and international groups have set up competence centres in Luxembourg to perform exactly these kinds of multi-jurisdictional tasks. To support these centres, an entire ecosystem of third-party service providers has developed in Luxembourg over the years to provide bespoke legal, tax and consultancy services. The financial sector authorities in Luxembourg have also developed a high level of expertise in regulating and supervising cross-border business.

This expertise is also vital to expanding Luxembourg’s role in the wealth management sector, particularly by further developing Luxembourg’s offer in terms of family office and multi-family office service. This is an area of potential growth, where Luxembourg can provide a stable and safe environment in combination with the financial expertise of Luxembourg’s private wealth management ecosystem.

Another area where Luxembourg’s multi-jurisdictional expertise will see increasing demand over the coming years is in the area of alternative investments. In the current low-interest rate environment, an increasing number of investors, both institutional players, such as insurance firms or pension funds, as well as family offices, are looking to invest in alternative asset classes, such as real estate or private equity. Assets under management in Luxembourg private equity funds increased by 20% in 2019 and even 50% in 2020. This is an opportunity Luxembourg intends to seize. A growing number of institutional investors in alternative asset classes are seeking investment vehicles and funds located in an onshore jurisdiction. Luxembourg offers a unique environment and toolbox catering to investors from civil law and common law traditions. The introduction of a special limited partnership regime in 2013 has allowed Luxembourg to capture this growing onshore alternative investment business. The creation of a new product, the Reserved Alternative Investment Fund or RAIF, has also significantly contributed to the success Luxembourg has enjoyed in this sector. It is one where we will continue to ensure conducive legislation and a congenial business environment.