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“ Traditionally Ireland has been losing private fund structures to Luxembourg because it has a wellestablished LP structure .”
DAVID BARRY , GLOBAL HEAD OF OPEN-ENDED FUNDS , APEX GROUP
the playing filed by adding another fund structure to its toolbox and should make it more attractive to the likes of private equity and real estate funds . This might be of particular interest to UK and US asset managers who have historically favoured Ireland as a domicile .”
King of the hill Luxembourg has long been the fund domicile of choice in Europe , with a favourable , innovative and flexible regulatory regime ; an abundance of skilled , multi-lingual staff ; excellent communications ; a geographical position between the key markets of Germany , France and Belgium ; and , for many protagonists , economies of scale . Its appeal goes beyond the EU attracting registrations from the around the world . While its pre-eminence as a centre for cross-border funds came about because of the development of a cluster of organisations that sought to take advantage of the opportunities arising from the UCITS directive , the government and regulators have ensured that investment and innovation continue to occur in order to retain and grow its position . “ What sets Luxembourg apart from other jurisdictions is the combination of many factors playing together ,” says Anja Grenner , head of sales , fund services , Luxembourg at TMF Group . “ Amongst those a stable political and fiscal environment , a strict but accessible regulator , a vast network of high-quality service providers , an array of fund structures that meet the needs and requirements of fund managers from around the globe , multi-lingual staff and a good accessibility of the country in the middle of the EU . “ Obviously , external factors such as a low interest rate environment driving institutional investors into alternative assets , the implementation of AIFMD , more recently Brexit and further upcoming EU regulation have accelerated the move towards Luxembourg .” In addition , Grenner adds that the government is supporting growth vertically and horizontally by fostering and facilitating the creation of start-ups , financing R & D , investing in infrastructure , adjusting the regulatory framework to new requirements and ensuring that the technology environment grows in line with the alternative fund sector in a controlled and secure manner . The numbers for Luxembourg are impressive in terms of total assets and percentage growth . The 2020 Monterey Insight Luxembourg Fund Report
“ The link between the two financial places , London and Luxembourg , has always been strong in the past , with both regulators now working hard towards overcoming the new hurdles .”
ANJA GRENNER , HEAD OF SALES , FUND SERVICES , LUXEMBOURG , TMF GROUP showed the total net assets for regulated collective investment funds domiciled in Luxembourg increase to 14 % year-onyear to $ 5.35 trillion in 2020 . Taking a closer look , almost all products increased in assets during the year , including Reserved Alternative Investment Fund ( RAIFs ) and Luxembourg Limited Partnerships ( LuxLPs ). The global appeal of Luxembourg-domiciled funds means that they are likely beneficiaries of the continuing growth of pension funds in Europe , the Americas and elsewhere . A report published by ALFI and consultants PwC found that global pension assets are likely to grow from to $ 61.1 trillion in 2025 , or at an annual rate of 5.4 %. The report also pointed out the growing focus on ESG investing by pension funds over the previous four years or so . This is good news for the Luxembourg funds industry , which accounts for 31 % of sustainable funds and 39 % of sustainable fund assets in the EU , according to ALFI . Coming back to Brexit , the Grand Duchy certainly benefited from the political shift and Grenner believes the two regulators could work together in the future . “ The link between the two financial places , London and Luxembourg , has always been strong in the past , with both regulators now working hard towards overcoming the new hurdles ,” she adds . “ Subsequent arrangements for the continued management of EU funds by UK AIFMs through investor consent , secondments and delegation of functions from Luxembourg to the UK have already been put in place .” I started the piece by saying there ’ s never a dull moment in the European funds landscape and this will ring true in the future as these three domiciles continue to evolve and regulations , an ESG drive and the ‘ new normal ’ continues to take hold . While this feature has hopefully given you an overview of the current state of play , don ’ t be surprised to see some major changes in the coming years , particularly in the UK .
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