The Association of the Luxembourg Fund Industry, the grand duchy’s leading fund and asset management association known as Alfi, turns 35 this year. It’s a milestone to be marked at its upcoming European Asset Management conference on Tuesday 21 and Wednesday 22 March.
One highlight at Alfi’s top annual event, which can count on as many as 600 attendees, will be the traditional intervention by the Luxembourg’s financial supervisor CSSF. In an on-stage interview at the end of the second day of the event, CSSF director Marco Zwick is expected to elaborate on pressing regulatory issues such as new rules for the cross-border distribution of funds, the CSSF review on costs of investment funds, and, naturally, increasingly stringent sustainable finance and anti-money laundering requirements. Zwick will be interviewed by Maria Löwenbrück, board member of Union Investment.
Luxembourg’s finance minister Yuriko Backes will be interviewed by Alfi chair Corinne Lamesch on the first day of the conference. Speaking at Alfi last year, Backes made clear Luxembourg is keen to maintain a high level of hygiene in the financial sector. The European Commission this year is represented by John Berrigan, deputy director-general for financial services. He is expected to comment on the upcoming EU retail investor strategy and a possible ban on inducements.
Side pockets
Last year’s Alfi conference was held a month after Russia invaded Ukraine, a topic that also resonated in the Luxembourg fund sector with discussions on side-pockets for funds with stranded assets. These discussions eventually led to innovations in the EU’s Mifid framework, allowing the Luxembourg-inspired solution to be used across Europe.
While the panels at the 2023 Alfi conference will take a deep dive in topics such as ESG, the next generation of asset services, the association’s 35th anniversary will also be a moment to look ahead to what’s in store for Luxembourg’s fund management ecosystem in the next decades.
500-fold growth since 1980s
Since Alfi’s launch in 1988, Luxembourg has developed into a leading international distribution centre for investment funds, in a European as well as a global context. Luxembourg at that time was the first European country to transpose the EU’s directive on Ucits investment funds, a decision which became the cornerstone of Luxembourg’s success in the investment fund business.
Since the 1980s, assets managed by Luxembourg-domiciled funds have jumped 500-fold from less than 10 billion euro to more than 5,000 billion euro nowadays. That number means that Luxembourg now is the legal home to more than a quarter of all investment funds in Europe. At the same time, the grand duchy managed to develop its multi-jurisdictional and multilingual expertise to become a global distribution centre for funds.
Alfi since has grown into an association that represents over 1,500 Luxembourg domiciled investment funds, asset management companies and a wide range of business that serve the sector, such as depositary banks, fund administrators and transfer agents. Today, Luxembourg is the largest fund domicile in Europe and a worldwide leader in cross-border distribution of funds. Luxembourg domiciled investment funds are distributed in more than 70 countries around the world.
Luxembourg’s advantage
The trend of the next decades already is clear: alternative investments funds. Like with Ucits, Luxembourg has been quick to embrace new rules. The combination with its Ucits-based infrastructure places Luxembourg at an advantage in the fund business.
Kavitha Ramachandran, regional head of CRM – Northern Europe at Apex in Luxembourg and a member of the Alfi community, said she expects Ucits will remain a permanent feature of the Luxembourg ecosystem, but that other types of fund will take on growing importance, notably alternative investment funds and private assets.
“It’s another big milestone,” she said, referring to Alfi’s 35th anniversary during a recent interview. “Ucits will still continue to be the focus but in the last ten years plus, you know, the alternatives have really kind of skyrocketed if you look at the volumes in that space.”
“What Luxembourg has done very well is positioned itself in a way that its upfront leader, in terms of alternatives, and especially, I would say, in the less liquid space. So if you look at private equity, real estate, infrastructure, it pretty much leads in terms of the toolbox, the ecosystem. That's a very important part of Luxembourg, the service providers, the knowledge that is being developed.”
The recent adoption of a new EU framework for European Long-Term Investment Funds, or Eltifs, is also expected to trigger increasing popularity for Luxembourg-domiciled funds. The grand duchy already is in discussions about a special tax regime for Eltifs.
As media partner, Investment Officer Luxembourg will conduct interviews and provide editorial coverage during both days of the conference. Click here for the agenda of Alfi’s 2023 European Asset Management Conference.
