For Frankfurt-headquarted DWS, one of Europe’s three biggest asset managers, Luxembourg has moved beyond its function as a fund servicing centre to become a core platform for scale, governance and product development, according to Nathalie Bausch, chief executive officer of DWS Investment SA.
That positioning is becoming more relevant as investors adapt portfolios to a more volatile macroeconomic and regulatory backdrop. Luxembourg supports a growing share of DWS’ fund activity, particularly in ETFs, alternatives and Ucits, and is increasingly central to how the group is preparing for the next phase of market and regulatory change heading towards 2026.
In this interview with Investment Officer, Bausch, reflects on the strategic importance of the Luxembourg platform within the DWS group, current allocation trends among professional investors and what to expect as the market looks ahead to 2026.
DWS has reported record assets under management and a sharply improved cost-income ratio. What role has Luxembourg played in that performance?
“Luxembourg has been a core pillar of DWS’ growth and efficiency for many years. As the world’s leading domicile for cross-border funds, it supports a significant share of our global distribution and product innovation, particularly in ETFs, alternatives and UCITS. Beyond asset growth, the Luxembourg platform has helped us achieve scale efficiencies through standardised fund structures, digitalisation and strong governance. Going forward, its role is evolving further as a strategic centre for innovation, which is why we continue to invest and add resources locally.”
More broadly, where does Luxembourg stand today in the European fund ecosystem?
“Luxembourg remains a cornerstone of the European fund landscape. Its strength lies in cross-border distribution expertise, regulatory stability and the breadth of its fund toolbox. With around 7,700 billion euro in UCITS and AIF assets, it offers structures that are fully aligned with EU regulation while supporting international distribution. As regulatory requirements become more complex, the close cooperation between regulators, government, industry and service providers is a real advantage, both in terms of investor protection and operational resilience.”
Looking ahead to 2026, what are the country’s main strengths and challenges?
“The key strengths are its international mindset, regulatory predictability and a highly skilled, increasingly international workforce. The ecosystem has repeatedly shown its ability to adapt. The challenges are also clear: rising regulatory complexity, competition for talent and ongoing fee pressure, particularly from passive strategies. This means continued innovation will be essential, especially in active, outcome-oriented and semi-liquid formats such as Eltifs.”
In a more volatile interest-rate environment, how are professional investors adjusting their portfolios?
“Investors are becoming more selective in fixed income. We see a split between short-duration strategies focused on liquidity and carry, and more selective core duration exposures in anticipation of potential rate-cut cycles. There is also renewed interest in high-quality credit. At the same time, investors are complementing traditional allocations with alternatives and income-oriented solutions, as well as inflation hedges such as infrastructure, inflation-linked bonds or gold, to manage less reliable stock-bond correlations.”
Which asset classes or themes look most attractive for 2026?
“Opportunities are likely to be spread across asset classes rather than concentrated in one area. Selective credit, infrastructure and private markets benefit from long-term structural trends, while equities remain relevant for growth, particularly in innovation-driven sectors. Flexibility and diversification will remain essential given ongoing macroeconomic and geopolitical uncertainty.”
Bond and factor ETFs continue to see strong inflows. What are institutional investors focusing on?
“Fixed-income ETFs remain a priority, especially shorter-duration exposures offering liquidity and transparency. Factor strategies are also gaining traction as tools for risk management and portfolio construction. Looking ahead to 2026, we expect growing interest in more outcome-oriented solutions, such as options-based or buffer strategies designed to generate reliable income.”
Market concentration around US megacaps has become a concern. How do you address this risk?
“We support investors through diversification, both regionally and across factors, as well as through active management and targeted exposures beyond the largest market capitalisations. Solutions such as equal-weighted strategies can also help mitigate concentration risk. Education and transparency are key so that investors fully understand where risks are coming from.”
Private markets are another growth area for DWS. What role do they play in portfolios?
“Strategies such as infrastructure debt play an increasingly important role in providing diversification, stable income and long-term risk-adjusted returns. For many institutional investors, they complement traditional assets and are well suited to liability-driven portfolios with predictable cash-flow needs.”
Could 2026 mark a turning point for semi-liquid solutions?
“Yes, interest is clearly growing. Semi-liquid structures can offer access to private-market returns with improved liquidity, provided they are designed with robust risk management and transparency.”
Finally, how is DWS preparing for higher ESG data requirements under SFDR and CSRD?
“We see the evolution of SFDR as a move towards clearer categorisation for investors, which is positive, even if some details are still being finalised. From a data perspective, we already work with external providers and expect these requirements to be managed within existing processes. For CSRD, the topic is addressed at group level, with a close watch on potential simplifications. Transparency and clear communication with investors will be essential.”