Why is Luxembourg such a sought-after destination for fund governance?

Luxembourg is a key European financial hub and as such plays a significant role in fund and SPV (Special Purpose Vehicle) governance. The factors outlined below reflect why its an ideal destination for fund managers and investors alike for both debt and investment funds as well as securitisation activities.

1. Stability and reputation

With over EUR 4,500 billion in net assets under management in regulated funds, Luxembourg is the largest investment fund centre in Europe and the second largest globally after the U.S.

2. Global reach and growth:

Luxembourg is the largest global distribution centre for investment funds. Debt funds especially have seen substantial growth globally since the 2008 financial crisis. In Luxembourg, total assets under management for debt funds reached EUR 267.8 billion in November 2022 with a 45.4% year-on-year increase.

3. Resilience:

Luxembourg’s investment fund sector weathered the Covid crisis by swiftly adapting to remote working models.

4. Investor-friendly ecosystem:

Luxembourg offers a broad range of investment vehicles that combine different legal forms, fund regimes, tax qualifications, and regulatory frameworks.

5. Market dominance:

Luxembourg’s investment funds have a high percentage share in both the retail and institutional marketplace in Europe. They are also the preferred vehicle in many parts of Asia, Latin America, and the Middle East.

6. Regulatory flexibility:

Luxembourg offers reduced complexities and almost full tax neutrality alongside compliance procedures that protect both the fund and its investors

Does good governance really matter?

Yes. It can be difference between success and failure. It’s critical to uphold the standards set in any country, demonstrating to investors that any funds or vehicles are robust and well managed, that they won’t encounter regulatory issues in the future that evoke penalties and fines. Funds also require substance when located in Luxembourg so any structures must prove their compliance to keep running. Fund managers will often outsource the administration and compliance responsibilities to a third party to get the best expertise possible.

What should you look for when outsourcing fund governance needs in Luxembourg?

• Efficiency and cost-effectiveness: Using a service provider can reduce internal responsibilities and costs compared to in-house administration
• Independence: A provider will guarantee no conflicts of interest and be able to assess situations fairly and without bias.
• Reporting ability: Accountability is very important – a third party will make sure paperwork requirements are documented and filed correctly
• Operational resilience: They should adhere to governance, risk management, and systems and controls guidelines
• Adaptability: A provider should be able to change according to your fund’s evolving requirements.
• Managing risk and investor expectations: A good structure will offer transparency to investors so they know what they are investing in

How can Ocorian help?

Ocorian has a team of highly regarded industry professionals in Luxembourg who can do all of the above and more, our reputation is second to none. We regard investor protection via independent oversight as our number one priority.

We offer corporate services like a registered office, director and substance services, tax and reporting, board support and provision of compliance officers. Everything you need that ensures great governance and peace of mind for you, the fund or SPV and those wanting to invest. If you want to be in Luxembourg, do so with Ocorian by your side.

Contact us to see how we can support you.