Nicholas Pratt looks at the set-up some of Luxembourg's largest funds, including custodians and administrators.
Last year was a record-breaking year for Luxembourg-domiciled funds, according to the Association of the Luxembourg Fund Industry (Alfi). By the end of December, assets under management were €2.4 trillion, a growth of 13.7% in 12 months, while net sales stood at €123 billion. In terms of investment class, net assets were mainly divided between fixed income (44.7%), equities (27.6%), and balanced (18.6%). And in terms of market shares of fund sponsors by country of origin, the US, Germany, China and the UK constitute the top four.
Next year, Alfi says its focus will be on “supporting measures that build investor confidence and strengthen the economy, by facilitating the swift introduction of regulated alternative investment funds and further developing the competitiveness of Luxembourg as a global centre of excellence for the asset management industry”.
In December, Luxembourg published the Alternative Investment Fund Managers Directive (AIFMD) level 2 measures, suggesting that it will be fully prepared once the directive goes live this July.
For the predominantly Ucits funds domiciled in Luxembourg that do not come under the AIFMD, there are also rule changes that have to be adhered to – for example, the decision of the Commission de Surveillance du Secteur Financier (CSSF) issued a circular in November calling for an end to the use of promoters to guarantee the financial stability of Ucits funds.
This responsibility now falls to the asset management firm itself. Furthermore, the CSSF is also looking for evidence of greater solidity from asset managers and, more importantly, that Luxembourg is the centre of their decision-making and administration and not just simply where those funds are domiciled.
There is an expectation that 2013 will see an expansion in the Luxembourg operations of the asset managers that have chosen the Grand Duchy as their Ucits distribution base, in terms of personnel, technical and IT infrastructure. There may also be a greater focus on the use of third-party service providers and the composition of boards and directors.
The list below, proved by Lipper, shows the six largest Ucits funds in assets under management in Luxembourg (excluding money market and liquidity funds and limiting the number to one per asset manager). As with the overall figures for the Luxembourg funds market, the asset classes range between fixed income and equities, with a widespread use of emerging market holdings.
Meanwhile, the US is the dominant country of origin. In terms of the custodians and administrators, familiar names appear – Brown Brothers Harriman, State Street, BNP Paribas Securities Services and JP Morgan.
For the largest of Ucits funds in Luxembourg, evidence of well-resourced management companies will not be as hard to provide for some of the smaller funds but it will be interesting to see if the CSSF’s circular and general mission to see an enlarged local presence from management companies has any effect on the support services and infrastructure within Luxembourg during 2013.
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