From first mover to market leader
In April 1988, Luxembourg became the first country to implement the European directive which brought in regulated investment products – so-called Undertakings for Collective Investment in Transferable Securities (UCITS). An investment product that could be marketed across the whole of the EU and was no longer confined to national markets, thanks to the introduction of a “fund passport”.
Luxembourg’s role as a UCITS pioneer was no coincidence, and the Grand Duchy continues to lead the way, accounting for 36% of the world’s UCITS assets today.
From European to Global
For global fund managers, choosing the right fund type and location is an important decision. With the proper fund domicile, asset managers are able to raise money internationally with one fund structure, rather than having multiple investment vehicles for a multitude of jurisdictions.
Luxembourg’s fund centre operates beyond Europe and its funds are recognised as market leaders the world over. Over 330 ManCos, 260 authorised AIFMs and 600 registered AIFMs are present in Luxembourg.
From UCITS to Alternatives
Since the turn of the millennium, Luxembourg has introduced a wide new range of investment vehicles explicitly designed for alternative investments, including:
- the Investment Company in Risk Capital (SICAR) in 2004;
- the Specialised Investment Fund (SIF) in 2007;
- the Undertaking for Collective Investment (UCI), most recently updated in 2010;
- the Special Limited Partnership (SLP) in 2013;
- the Reserved Alternative Investment Fund (RAIF) in 2016
Two key changes have galvanised Luxembourg’s alternative investment fund industry.
The first change was the transposition of the EU’s Alternative Investment Fund Managers Directive (AIFMD) into national law in 2013. Similar to the UCITS directive, the AIFMD created a management and distribution passport for AIFMs and their products that is valid across the entire EU.
The second change was the launch of the SLP and RAIF. The RAIF vehicle, for example, is regulated only at the manager level and therefore does not require regulatory approval at a fund level before launch; rapidly speeding up time to market.
From traditional to sustainable
Asset management continues to respond to changing times, with sustainable investing now moving front and centre. Thanks to the right regulatory framework and expertise, Luxembourg has built an ecosystem uniquely suited to raising international capital for responsible investments.
32%
Luxembourg has the leading share of Europe’s sustainable fund market
1st
The Luxembourg Green Exchange has the largest marketshare of listed green bonds worldwide
Luxembourg has also bult up a strong track record for sustainable finance in capital markets. The world’s first green bond was listed on the Luxembourg Stock Exchange and sustainable bonds now have their own dedicated platform in Luxembourg – the LGX – on which half of the world’s green bonds are listed.
From asset servicing to complex data management
Luxembourg’s expertise has been built around handling the complex operational procedures surrounding the lifecycle of investment funds. The fund centre is focused on responding to the regulatory, compliance and operational needs of cross border financial services, ranging from KYC and fraud detection to fund reporting and automated investor information tools.
Many FinTech firms are headquartered in Luxembourg operating on an international scale and in diverse fields, including payments, big data AI, RegTech, InsurTech, Cybersecurity, FundTech, and Investments, Blockchain and Lending.
From fund administration to asset management
Luxembourg has become a critical part of the global asset management chain due to the expertise on investments, international fund distribution and asset servicing. While Luxembourg’s initial foray into these activities began as a hub for setting up and administering investment structures, it has since moved up the value chain to take on new roles, and has made a name for itself as a regulatory, risk and compliance competence centre.
Portfolio management is another area which Luxembourg is increasingly covering. Over the years, the country has developed a unique know-how in managing portfolios from multiple jurisdictions, with global distribution and covering various investment strategies.
A growing number of companies have added significant client-facing and portfolio management roles in Luxembourg. Additionally, following the UK’s decision to leave the EU, many financial institutions decided to relocate activities and resources to Luxembourg, either by establishing a new entity or by expanding existing operations within the Grand Duchy.