The Grand Duchy of Luxembourg was home to a record EUR5.86 trillion in global financial assets at the end of last year, according to new data released on Friday by the country’s financial supervisor CSSF. That is up 17.8 percent from the end of the previous year.
Financial institutions based in the United States, the United Kingdom and Germany again were the leading sources of origin for Luxembourg-based assets last year. Switzerland and Germany accounted for nearly half of all funds based in the country.
The total value of assets held in Luxembourg funds rose to 5.86 trillion from 4.97 trillion at the end of 2020, largely buoyed by a global upturn in financial markets. US-based investors held 1.20 trillion euro in Luxembourg, while the UK accounted for 977 billion, ahead of Switzerland and Germany with each more than 800 billion euro, according to CSSF.
Down 145 over last year
In its latest data report on undertakings for collective investments, known as UCIs, CSSF - Commission de Surveillance du Secteur Financier - said that Luxembourg was home to a total 14.445 funds at the end of 2021, down 145 from a year earlier.
Part of this decline can be attributed to the uptake of Reserved Alternative Investment Funds, a relatively new option for fund managers. These funds are not directly supervised by CSSF and are seen as more flexible than traditional Specialised Investment Funds that are counted as UCIs. (Click here to read an earlier IO story on these funds.)
Switzerland was the country that held the highest outright number of funds in Luxembourg - nearly 3000 - followed closely by Germany, with 2377 funds. UK-based firms owned 1644 funds while US-based institutions accounted for 1161 funds.
Different instruments
More than half of Luxembourg-based assets were invested in funds with a variable yield or fixed income policies, according to CSSF. Funds with a mixed policy accounted for about one fifth of the total, the CSSF data said. The bulk of the remainder was held in money market instruments, funds-of-funds and real estate.
The Association of the Luxembourg Fund Industry (ALFI) said the overall increase of 886 billion in net assets stemmed from both increasing asset values and from organic growth in net subscriptions. Asset values accounted for 9.9 percent, or 491 billion euro, while subscription growth, at 394 billion, contributed 7.9 percent.
Strong subscriptions
ALFI said subscriptions have averaged 30 billion euro per month over the last four years.
“The high amount of net subscriptions month after month is a testimony of the success of investment funds as the optimal investment product for retail and institutional investors alike,” said Camille Thommes, Director General of ALFI, in a press release.
“The Luxembourg asset management and fund industry is ready to meet the challenges which lie ahead of us. Our society has reached a point of no return in the need to move towards a sustainable business model and asset managers must accompany that transition. The Covid-19 pandemic has been an accelerator in the pace at which new technologies are being deployed. Reaching out to investors digitally has become the new normal,” said Thommes.
Fastest growth in private equity
Private equity is the fastest growing asset class in Luxembourg with growth of 29.9 percent, said ALFI, followed by equity and funds of funds, with respective increases of 29.9 percent and 25 percent in assets.
With 249 billion euro, Belgian-based investors accounted for about 4.3 percent of total assets held in Luxembourg, while their Dutch-based counterparts owned 128 billion euro, or 1.2 percent. Belgium owned 775 funds in Luxembourg at the end of last year and the Netherlands 261, according to the CSSF data.