Luxembourg And London: International Fund Management After Brexit

Luxembourg is Europe's leading investment fund centre, and the world's largest after the USA, with more than €3 trillion in assets managed by a multitude of international fund managers. Indeed, its reputation as a respected fund hub has been carefully built and maintained over the last decades.

However, even though the investment funds themselves are located in Luxembourg, the majority of the investment decisions are taken by fund managers located elsewhere, such as the EU, Switzerland, the USA, Asia and beyond, under the so-called delegation model.

This delegation model has been embedded by the AIFMD and UCITS directives, which recognise that the investment capabilities and expertise—in asset classes like global and regional equities, real estate, infrastructure and direct lending—lie with specialist teams of fund managers and their research teams in different parts of the world.

AIFM and UCITS management companies need to have strategic decision-making abilities and management in Luxembourg, with sufficient substance, people and systems to effectively manage their overall operations. A delegation of investment management must be supported by risk management as well as by delegate oversight teams on the ground in Luxembourg that are responsible for due diligence and effective monitoring of the delegate's performance.

A Brexit shift

London's power and influence in the realm of managing EU funds is similarly longstanding. And...