Luxembourg is the largest European fund centre and maintains its position throughout the years, driven by its adaptability and forward-thinking approach.
Our Chief Operating Officer for Luxembourg, Kavitha Ramachandran, spoke with Luxembourg Times’ Kabir Agarwal to discuss the key factors behind Luxembourg’s success.
The conversation covers the rise of the alternatives industry, Luxembourg’s pivotal role in financial markets, the growing shift toward ESG investing, and the challenges and opportunities within the alternatives sector. Snippets are below.
The Luxembourg fund industry has been very successful, and I think there are three key characteristics that stand out as reasons for that success – adaptability, innovation and being forward-looking. These qualities apply to the finance industry in general, but they are particularly notable in the fund sector. Luxembourg has always been nimble, quick to adapt and to seize the opportunity.
I would also say that a unique aspect of Luxembourg, one which has been critical to its success, is its ability to get different organisations and people to come and work together. For example, regulatory bodies are actively involved in industry events and open to feedback, ensuring they remain connected with industry needs and developments. The Luxembourg ecosystem is characterised by collaboration between the regulator and the industry, constant innovation and adaptability.
The alternatives sector is growing, and we have seen consistent growth, particularly since 2020. Many of the big managers now operate in both the traditional and alternatives spaces. They see the advantages of diversifying, and the evolution of products like the Eltif is a good example of bridging these two worlds.
One key catalyst for future growth could be the retailisation and democratisation of private assets, which is gaining traction. But it’s also important to remember that the retail investor will always have their go-to funds. So Ucits are unlikely to disappear. Many investors will continue to be active in both traditional and alternative investments.
There are several challenges in the alternative assets industry in Luxembourg. First, we have to consider geopolitical factors. These days, what we used to call “black swan” events seem to occur more frequently. They are no longer as rare as before. While we can’t predict every event, resilience and the ability to adapt quickly are crucial for businesses.
Second, there’s the regulatory landscape. Regulation is necessary, but it shouldn’t stifle innovation. Finding that balance is important.
Third, talent is a critical area. Ensuring that we have people with the right skills and that we are continuously developing them is essential. There is a noticeable generational shift happening, and we must focus on attracting and nurturing the next generation of talent.
The interview was originally published in Luxembourg Times Autumn’24 Edition magazine.
For the full interview, please visit the Luxembourg Times website.
