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Luxembourg looking to repeat its UCITS success with AIFs

07 October 2016

Global Investor/ISF hosted a roundtable to discuss whether Luxembourg can replicate its UCITS success with alternative products

Read more: Luxembourg alternatives

Ceri Jones, Global Investor/ ISF:   How has Luxembourg’s position versus other financial centres changed over the last year? Can it repeat its UCITS success with AIFs?

Marc-André Bechet, head of legal and tax affairs, ALFI:   It’s fair to say that 2015 was a good year for the Luxembourg market. The growth of assets was slightly above 13%, with 72% of that coming from net subscriptions. Growth on UCITS and AIFs together accounted for 41% of net subscriptions for the European market. Luxembourg’s historical market share of UCITS is 36%, so that 41% means an increase in our market share. On AIFs we have a slightly lower market share, which is explainable by the fact that traditionally these funds are rather domestic funds, so you see countries such as France and Germany leading the pack. 

I would say, yes, we can repeat the success of UCITS with AIFs, for several reasons. In terms of net sales in 2015, we had a market share of 22% for Luxembourg AIFs in Europe, which is again growing our market share. I would not like to predict 2016 because markets are so bumpy, but last year is a good place to start. Of course, on the management company side, we have a tremendous presence of Luxembourg UCITS ManCo, and these ManCos have traditionally moved into the alternative space and transforming the licences into what we call a Super ManCo, looking at UCITS and AIFs.

What are the legal reasons for the success of UCITS and AIFs in Luxembourg?

Claude Niedner, partner at Arendt & Medernach:  We have to distinguish between the UCITS and the alternatives side. On the UCITS side, Luxembourg is the leading European jurisdiction, and Luxembourg UCITS are recognised as the reference for cross-border international distribution. UCITS is a more mature market, but from time to time we still see additional asset managers bringing funds to Luxembourg, either new funds, re-domiciling funds or launching new funds. Some Channel Islands funds are coming over, which have more a retail-distribution approach. Recently, we had a Danish initiative coming to Luxembourg, but it’s generally a mature market.

On the alternatives side, Luxembourg can grow significantly. For me, the most important point was that the Alternative Investment Fund Managers Directive (AIFMD) created a European passport for distribution of alternative investment funds for professional investors in Europe. What created the success of Luxembourg was having European passports for distribution. We are recognised as a pan-European fund distribution centre, and even though France and Germany have quite a significant role, going forward, this international, cross-border component will become more important.

Ewald Hamlescher managing director of GAM (Luxembourg):   AIFs will take time gaining as prominent a role as UCITS, which are clearly a marketdominant brand that Luxembourg has disseminated globally. But I think in the AIF space, though we have more competition, there is clear and strong potential, definitely.

What other innovations have there been in Luxembourg?

Bechet: We have always been at the forefront of innovation in terms of legal structures, covering the needs of any European asset manager, be it German or French, and more recently, the Anglo-Saxon world, because we have introduced the limited partnership and special limited partnership regimes, which are geared to asset managers in the alternative space. But we have also traditionally had umbrella funds for maximum flexibility. Other centres are copying what we’re doing, but we have the lead. Maximum flexibility for asset managers and promoters is, of course, a key consideration in terms of innovation.

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