Luxembourg for Finance (LFF)

Luxembourg is the second-largest asset management hub in the world after the US, with approximately EUR 4.4 trillion in Assets Under Management through 3.858 funds and 14.851 fund units. Luxembourg funds are distributed in over 70 markets worldwide, including in many countries outside of the EU (particularly in Asia and Latin America). Out of the top 100 asset management companies worldwide, 98 have funds domiciled in Luxembourg.

One of the key reasons for this success was Luxembourg’s very early implementation of the UCITS directive (Undertakings for Collective Investments in Transferable Securities) in 1988. Luxembourg was quick to realize that UCITS as a product that could be marketed across the European Union thanks to a fund passport. Whereas larger European countries mostly focused on their domestic markets, Luxembourg saw in the UCITS fund passport an opportunity to develop a truly European investment product. Coupled with the language skills on hand in Luxembourg, the Grand Duchy was quick to be able to provide a quality offering for Europe.

More recently in 2013, Luxembourg was also very quick to harness the AIFMD directive, managing passporting for alternative investments. This has allowed it to develop a sizable industry in non-retail investment funds, including a significant presence in particular in the field of private equity.

Luxembourg is home to over 130 banks from 28 countries both within the EU and beyond.  Their primary activities in Luxembourg include depositary banking services supporting the fund industry, along with private, corporate and retail banking.

For non-EU banking groups, Luxembourg is a key gateway to the EU. Institutions from the US, Canada, Switzerland, Latin America, and Asia, benefit from a passport for their products and services, providing access to the EU Single Market.

 Luxembourg’s expertise in cross-border financial services gives it an edge as an EU-onshore base for international private banking, with AuM of EUR 363 billion in 2017. 60% of its clients are from the EU and 40% from the rest of the world. Luxembourg provides expertise here in multijurisdictional global wealth management, encompassing all of a client’s assets and business interests across multiple locations.

Banks in Luxembourg benefit from the stable political and economic environment of Luxembourg, which is one of only 11 countries worldwide that maintains an AAA sovereign credit rating. Banks in Luxembourg are also well capitalized, with an average solvency ration of 25.9% and a Tier 1 capital ratio of 25.1%.

Luxembourg is home to 95 insurers offering a variety of life and non-life insurance services.  There are also around 197 reinsurers based in Luxembourg. The Luxembourg insurance industry has long been a champion of providing services and products across the EU. In fact, 80% of life insurance premiums in Luxembourg originate from cross-border contracts under the Free Provision of Services (FPS) regime. Total premiums for 2018 were at € 38.7 billion being the largest segment life insurance (€23.8 billion)

While Luxembourg-based insurers are overseen by the Commissariat aux Assurances (CAA), Luxembourg’s insurance regulator, insurance contracts sold outside of Luxembourg fall under the supervision of the policyholder’s national regulator. The Luxembourg insurance industry offers diverse geographic outreach, sales teams that speak the client’s local language and long-standing expertise in providing insurance products to clients across the EU that are fully in line with local regulations and tax rules.

The Luxembourg insurance sector offers the highest possible level of investor protection. Not only does Luxembourg have a dedicated insurance regulator, but insurers must at all times have a solvency ratio high enough to cover all outstanding assets. Luxembourg’s ‘triangle of security’ offers an extra degree of investor protection unique in Europe.

Luxembourg Stock Exchange is the leading venue for the listing of international securities listing over 37,000 instruments today (of which 31,000 are debt securities) by +2,100 issuers in 60 currencies.  It has a long history in this field, dating back to the creation of the international Eurodollar market in 1963 through the listing of a USD denominated Eurobond by Autostrade, the Italian Highways authority.

In 2016, the Luxembourg Stock Exchange also launched LGX – the Luxembourg Green Exchange. LGX is the world’s first platform entirely dedicated to green securities. It imposes stringent eligibility criteria, providing an environment issuers and investors can count on to fulfill their green objectives. Today LGX accounts for around 50% of global outstanding listed green bonds assets.

Another leading actor in this field is also present in Luxembourg - Clearstream, one of only two international central securities depositories worldwide, is located here and provides post-trade services to over 7 trillion of assets under custody.