Luxembourg still eyes alternatives as broader assets rise 13%

Luxembourg on mapLuxembourg funds saw assets under management increase by 13% last year to €3.5 trillion, figures out this week showed. The Grand Duchy – which specialises in servicing Ucits cross-border funds and has ambitions to be a leading service centre for regulated alternative funds – remains the largest fund domicile in Europe. While Luxembourg is most strongly associated with Ucits funds, Alfi, the Luxembourg funds industry association, says Luxembourg is also growing as a hub for alternative investment fund managers. Alfi says there are 211 authorised alternative managers in Luxembourg, 626 registered ones, and 950 limited partnerships. Luxembourg is in intense competition with Ireland for market share of the alternative funds market. Official figures from Ireland show that, as of October, there were 1,978 Irish-domiciled ‘qualifying investor funds’ (QIFs), including sub-funds, with €368 billion of assets. QIFs are a typical structure for alternative funds. Overall, Luxembourg has €559.4 billion of alternative assets domiciled there, while Ireland had €454 billion of “non-Ucits”, at October last year, according to the Central Bank of Ireland. Ireland’s dominance is perceived to be in hedge funds. Alfi says Luxembourg is “leading the way in Europe” for real estate and private equity funds. Beyond alternatives, Alfi says it is attracting fund managers from all over the globe, particularly the US and UK with €759.8 billion and €581.5 billion of domiciled in Luxembourg, respectively. Chinese managers that have chosen Luxembourg as an entry point to Europe include Harvest Fund Management, China AMC, ARC China and Oriental Patron. Alfi recognises that continued growth is not certain due to increased competition between financial centres – which includes the Channel Islands, which also have a specialism in alternative fund services – the uncertain economic environment, and the current high volatility of capital markets. Furthermore, the relentless barrage of regulation is taking its toll on the funds industry in Luxembourg. Alfi says that while each piece of regulation is founded on the good intention of protecting the investor, when added together they create a compliance challenge and lead to additional costs for companies and their clients. “If some recent developments and trends clearly have the potential to stimulate the sector, others are more likely to have a negative impact,” said Denise Voss, chairman of Alfi. ©2016 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.