The fund industry plays a key role in economic growth and, after a period of focusing on regulation, 2015 should be a year where asset management companies can not only implement the regulation that has been introduced, but also grow their businesses and focus exclusively on serving investor needs.
2014: a good year for Luxembourg
2014 was a historical year for the Luxembourg fund centre. For the first time in its history, assets under management exceeded the EUR 3,000bn threshold in September. After 12 months of uninterrupted growth, this figure stood at EUR 3,095bn (USD 3,758bn) at the end of December 2014. More than half of the growth (52%) was driven by net sales.
Luxembourg retained its position as the leading European domicile in 2014, attracting more than 42% of the net sales of European regulated funds (at the end of November 2014) which is twice as many as the second domicile. In 2013, net sales represented 46% of all net sales in European regulated funds, 53% more than the second fund domicile. “We’ve also seen an average of 100 new promoters coming in each year, notably following the introduction of AIFMD, and we currently have 183 authorised AIFMs, putting Luxembourg in 3rd place in Europe after the UK and France,” Marc Saluzzi, chairman of the Association of the Luxembourg Fund Industry stated at its annual Luxembourg press conference.
“After years of intense – and expensive – regulation, it is time to let asset management companies concentrate exclusively on serving investors,” said Marc Saluzzi. “Investment funds enable people to plan for their long-term financial security, they benefit the economy in terms of job creation and it is essential that, after a period of focusing on regulation, 2015 should be a year where asset management companies can not only implement the regulation that has been introduced but also grow their businesses.”
Mr Saluzzi also highlighted the key role the fund industry plays in economic growth: “Investment funds are important mobilisers of financial resources from private, institutional and public investors. They form a key link between investors and corporations, banks and government agencies which need funding, and funding is channelled from one country to another, around the world.”
Tax issues are topical again in 2015
At the beginning of the new year, the introduction of a financial transaction tax (FTT) is back on the agenda, a tax that ALFI strongly opposes.
In the context of the recent work within the OECD base erosion and profit shifting project, to which Luxembourg is actively contributing, ALFI believes that there are good grounds for UCITS to be considered as residents, thereby avoiding double taxation of income at both fund and investor level.
In Luxembourg, ALFI has opened talks with the Government on the fiscal treatment of investment funds. The aim of these talks is to analyse carefully the efficiency of investment fund taxation in a highly competitive environment. The access of investment funds to double taxation treaties as well as Luxembourg’s positioning in the rapidly growing area of passive asset management are of particular importance in this context.
Luxembourg fund industry committed to growth
ALFI has noticed the first signs of a growing trend that countries are trying to seal their markets off from foreign competitors. Despite this, the Luxembourg fund industry is targeting new markets, namely Brazil, Mexico, Australia and China. In China the progressive internationalisation of the Renminbi – and the position Luxembourg has gained as an offshore RMB centre – as well as the Shanghai Hong-Kong stock connect program are fuelling hopes of a gradual opening of the Chinese fund market.
With the entry into force of the AIFMD, the Luxembourg fund industry is striving to replicate its UCITS success story in the alternative sector. In addition to a total of 183 Alternative Investment Fund Managers authorised to date, the incorporation of 419 Limited Partnerships since the legislator introduced this legal structure into Luxembourg law is a clear indicator of the strong interest of AIFMs in the Luxembourg fund centre.
Innovative products and a strong focus on responsible investing should also contribute towards the Luxembourg fund industry’s growth targets. ALFI therefore welcomes the creation of a new regulatory framework for private European Long-Term Investment Funds (ELTIFs) that would only invest in businesses that need money to be committed to them for long periods of time. These new products would be especially suitable for infrastructure financing, which is increasingly required across Europe.
Last but not least, the Luxembourg fund centre will continue to enhance its market infrastructure allowing it to service not only funds domiciled in Luxembourg, but also funds based abroad, thereby contributing to the evolution of Luxembourg from a fund domicile to a fully-fledged fund servicing centre.