Luxembourg-domiciled Fund Assets Hit Record $3T

Jan 30 2013 | 2:24pm ET

For a tiny country, Luxembourg is home to a heap of investment fund assets—a record $3.2 trillion as of the end of 2012, according to the Association of Luxembourg Funds Industry.

The figure represents a year-on-year increase of 13.7% and ensures Luxembourg, home to 3,842 investment funds, retains its title as largest European investment fund center—and second-largest in the world after the U.S. (The latest report doesn't provide exact numbers for hedge funds, but in 2011, according to ALFI, 74.6% of assets under management in hedge funds was held in funds both domiciled and administered in the Grand Duchy.)

Europe's asset management and investment fund industry represents over $10 trillion of assets under management.

Luxembourg's net sales for 2012 amounted to $165 billion, representing the bulk of the total $441 billion in Europe. The investment sector plays an important role in the country's economy, representing 8% of GDP, 10% of fiscal income and 4% of the active population.

Said Marc Saluzzi, ALFI chairman, in a statement: “The asset management and investment fund sector continues to play a key role in the European economy. It is ALFI’s wish that 2013 will allow asset managers to digest the numerous recent regulations and to concentrate on operational practice to expand their business.”

Regulation in Europe means chiefly the Alternative Investment Fund Managers Directive which ALFI expects will “further enhance Luxembourg as a leading domicile for fund and management companies in the alternative sector."

A key measure of the AIFMD involves the introduction of a European passport for alternative investment fund managers who wish to access the entire European market. ALFI says it has contribued  to the draft law on the implementation of the AIFMD in Luxembourg submitted to the country's parliament in August 2012.

That draft creates a limited partnership structure “which will add a flexible and secure partnership structure to Luxembourg’s fund product offering and which might be particularly appealing to investors familiar with the Anglo-Saxon model,” according to ALFI.

Secondly, the draft bill provides for additional clarifications regarding the taxation regime of the carried interest.

Said Saluzzi: “Based on Luxembourg’s current regulatory framework, expertise and the quality of our market infrastructure, I’m confident that pragmatic solutions can be found in order to allow alternative asset managers to move into compliance. Details about the specific adjustments to be made will be ready in March.”

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