Net assets of investment funds domiciled in Europe, UCITS and AIFs, totalled EUR 18.8 trillion at the end of 2020. Luxembourg and Ireland are the two largest domiciles of UCITS and AIFs, with a market share of 27% and 18%, respectively (2020). Germany, France and the United Kingdom follow in this ranking.
Sustainable funds have represented a growing segment of investment solutions in Europe, in particular in the last years. The net assets in sustainable fund products have more than doubled since 2018 and reflect 11% of total net assets domiciled in Europe at the end of 2020. More than half of the net new money that went into the investment fund market in 2020 was attracted by sustainable funds.
In line with its positioning as the largest European fund hub, Luxembourg maintains its market leader position also in terms of sustainable fund products. About a third of the assets managed by sustainable funds is domiciled in Luxembourg and two thirds of the net inflows attracted by funds domiciled in Luxembourg were directed into sustainable strategies in 2020.
As the graph below shows Luxembourg can claim to be the leading domicile for both conventional as well as sustainable funds with regard to net assets. Sustainable funds accounted for EUR 371 billion by the end of 2020 followed by France, Ireland and Sweden, all of them with almost identical net asset levels of about EUR 135 billion.
Over the period of 2018 and 2020, the net new money was positive across Europe with an increasing share of flows into sustainable funds. As the graph bellow exhibits this share amounted to almost 44% for the rest of Europe in 2020, reflecting an increase of net new money in sustainable funds of 422% compared to the flows in 2018. Considering the flows in funds domiciled in Luxembourg, the share of flows in sustainable funds was even more impressive, steadily increasing over the last three years and culminating to almost 70% of the total net new money in 2020 which corresponded with an increase of the absolute net new money by 561% compared to 2018.
Total net assets in Luxembourg investment funds hit EUR 5 trillion mark in January 2021.
Despite considerable challenges the world has been facing and the instability of financial markets last March, the Luxembourg investment fund industry has remained robust with the volume of net assets rising by 5.44% over the last 12 months. This evolution highlights the strong demand for Luxembourg UCITS funds and private assets (private equity, real estate and private debt), which have seen consistent growth over recent years.
From a global perspective the next few years should represent an era of significant continued growth for alternative investment funds, having witnessed global AuM tripling since 2008 to reach above 10 trillion US dollars as at June 2020.
Over the last three years, net assets under management in regulated alternative funds in Luxembourg have increased by nearly 30% (including for private equity, real estate, private debt and other alternatives such as infrastructure or hedge funds). The recent reports highlight robust growth across all asset classes for Luxembourg-domiciled funds as they become increasingly attractive outside the EU, both in terms of new AIFs set up in Luxembourg and the breadth of non-European institutional investment into these funds. With over three quarters of investors expecting to increase their allocation to alternatives, Luxembourg-domiciled AIFs are in a strong position to capitalise on this growth in interest and investment.