Mike Gordon

Luxembourg, a hub for global finance, has seen a significant uptick in alerts on questionable transactions that could signal money laundering or even finance terrorism.

Despite rapid development, private credit is still in its very early growth stages. Despite macroeconomic and cyclical challenges, Jiři Król, the deputy CEO of the Alternative Investment Management Association, sees private credit catching up to the much larger private equity in the next 10 years. He also sees huge potential development from the reformed European long-term investment fund vehicle (Eltif).

Investors in Ucits investments funds like those based in Luxembourg are paying about 1/5 less in operational charges after a decade-long reduction in such fees, according to a report by ICI Global, an association representing regulated investment funds. “Asset managers are responding to investors tastes by developing products that investors want.”

With 29 new funds registered, last month was the best September in three years for new Raifs issuance, data analysis by Investment Officer Luxembourg shows. Raifs are Reserved Alternative Investment Funds. In Luxembourg these vehicles in recent years have gained significant international traction among those active in private assets such as credit, real estate and private equity.

With the collapse of the Green vote ending the country’s so-called “Gambia” (blue, green, red) coalition, Luxembourg’s financial sector is seen to stand to benefit from the near-certain return of the exiled Christian Socialists to governing. There’s an emerging consensus that a prime minister Luc Frieden would be good news for the financial sector and would also make finding solutions to problems besetting the country more likely.

A new global tax system is coming, putting globally-active Luxembourg firms, especially investment funds, into a desperate search to see whether they could be exposed to pay a potentially substantial top-up tax, according to rules that, to some, could seem just mean.

Panel discussions at Alfi’s Global Distribution Conference on Wednesday exposed differing viewpoints on the definition of a retail investor, casting a shadow over prospects for success for the next generation of European Long-Term Investment Funds, or Eltifs.

Registrations of reserved alternative investment funds took a very relaxed late-summer break during August, quietening to a level last seen early in the Raif product’s history — in January 2019. Only 15 new funds were registered during the month, according to data from Luxembourg Business Registers analysed by Investment Officer.

Upcoming legislation bringing challenges to the fund distribution industry – notably adding reporting requirements and increasing costs – will be a key focus on Wednesday’s Global Distribution Conference of the Association of the Luxembourg Fund Industry, known as Alfi. “Distribution is still the key to the success of the asset management industry,” said Steven Libby, a partner and Emea AWM leader at PwC and an Alfi board member, who will serve as Master of Ceremony at Wednesday’s event.

Luxembourg-based investment funds looking to invest in the UK have good news: a new Luxembourg-UK double tax treaty will take effect in 2024. The treaty grants Luxembourg corporate collective investment vehicles access to treaty benefits, either as a Ucits or through a beneficial ownership test. It also closes a tax loophole that allows Luxembourg structures to sidestep taxes on UK real estate investments.