Lydia Linna

Luxembourg’s fund regulator is shifting its supervisory focus from rule-setting to enforcement, zeroing in on governance failures, operational fragility, and liquidity risks as structural vulnerabilities in the sector become harder to ignore.

For years, Luxembourg has been where funds are domiciled, administered, and reported on, while the actual investment decisions got made elsewhere. That may be shifting. Luxembourg is moving, slowly but surely, from being a back-office location to one with front-office roles.

The elephant in the room, centralized supervision, was impossible to avoid during the Association of the Luxembourg Fund Industry’s annual Global Asset Management Conference in Kirchberg on Tuesday. Though in favor of supervisory convergence, Luxembourg remains firmly against centralized supervision by Esma, the European securities and markets authority.

When it comes to passing on assets, Luxembourg’s wealthy are focused on legacy rather than tax optimization, according to Ellen Brullard, chair of STEP Benelux and counsel at Arendt & Medernach. Anticipation is key, though it is more complex than it sounds.

Digital, operational and cyber resilience are key priorities for the year to come, says CSSF director-general Claude Marx, who points out that Europe is already being targeted by hybrid warfare attacks and expects to see more in the future.

Young people today are looking for a modern, balanced, purposeful, and flexible work environment, say heads of HR at Luxembourg private banks. Employers, on the other hand, are focusing on whether candidates bring transferable skills.

As real estate returns to favor as an asset class, sourcing investment opportunities is not necessarily the biggest challenge that wealthy families face. The real hurdle is conducting thorough due diligence—but this can be tackled by joining forces with other family offices.

As European regulators reassess what Ucits funds should be allowed to hold, Luxembourg’s fund industry is drawing a clear red line: do not compromise a global brand that already works. The Association of the Luxembourg Fund Industry cautioned that proposals to tighten eligibility rules could push the framework backwards rather than modernise it.

Despite a steady increase in the number of European long-term investment funds over the last two years, concerns around gold-plating continue to persist, with France attempting to exclude non-domestic Eltifs from French life insurance products. For Alfi CEO Serge Weyland, “this is against all the EU laws.”

Valuation sits at the heart of Luxembourg’s private markets ecosystem, yet supervisors remain unconvinced that current practices are consistently robust. Speaking at an event organised by Kroll and the Association of the Luxembourg Fund Industry, the CSSF flagged shortcomings in the review and approval of valuation models at investment fund managers, underlining that governance, documentation and independent challenge still require closer attention as private assets continue to scale.