Luxembourg,’ comments Marc Meyers, head of the
Luxembourg Banking & Finance and Investment
Management practices at Loyens Loeff.
‘Private banking will change in nature. The exchange
of information won’t attract people who want to stow
away their money, but the sector will remain strong.
The nature of private banking will change, but the
industry isn’t under threat,’ says Dirk Leermakers. ‘As to
corporate investment – most investment flows out
immediately. We deal with outbound not inbound
investment. Corporations set up Luxembourg structures
for tax planning, and I don’t think that will change.
We’ve seen some new developments recently – the tax
administration has issued some directives that make it
more difficult to get away with token taxation. But
Luxembourg has many talented tax practitioners and
accountants who will no doubt find imaginative solu-
tions to restructuring existing structures or setting up
different financings.’
‘The Luxembourg banking sector remains attractive,’
adds Josée Weydert. ‘Nowadays, the challenge is to
draw in clients by offering an attractive range of prod-
ucts accompanied by top quality service.’
FUNDS
Funds are of course what excite the legal community in
Luxembourg. ‘In terms of assets under management,
Luxembourg is the second jurisdiction in the world,’
says Dirk Leermakers. ‘Luxembourg has done a lot to
enhance its attractiveness not only for managing regu-
lated but also non regulated, specialized investment
funds. Luxembourg has also modernized the law on
classic investment funds (UCITS IV). The regulations
that we needed to comply with by July 2011 were actu-
ally in force by last December.’
‘As regards legislation concerning investment funds,
the recently voted Alternative Investment Fund
Managers (AIFM) Directive has already had a positive
impact on Luxembourg,’ says Marc Meyers. ‘With the
adoption of the specialized investment fund (SIF)
regime in 2007 and the tremendous success of the SIF
ever since, Luxembourg has the requisite experience to
ensure a smooth transition to a lightly regulated envi-
ronment for alternative funds which remain largely
unregulated to date.’
‘Luxembourg offers a variety of investment structures
that are tailored to investor’s requirements and profiles,’
comments Pierre Reuter, an investment funds partner at
NautaDutilh. ‘In recent years, Luxembourg has experi-
enced significant growth both as a “domicile of choice”
and an administration centre for all varieties of alterna-
tive investment funds. This can largely be attributed to
innovative legislations put in place by the Luxembourg
government.’
A trend noted by the industry is the market’s current
interest in investment onshore. ‘There has definitely
been a trend to move more funds onshore form off-
shore jurisdictions like the BVI and Cayman Islands,’
explains Dirk Leermakers. ‘This is for a number of rea-
sons – there are a large number of funds where the
administrators where the fund is established can’t pro-
vide the services the investment funds need;
Luxembourg moving from the grey to the white list
makes it more attractive and Luxembourg is a country
with great political stability – you can count on it not
changing its tax laws every other government. This
expectation of stability attracts investors who want to
manage their money out of Luxembourg.’
‘Fund managers are now more interested in setting
up onshore in Luxembourg because investors desire
stronger regulatory supervision and stricter rules per-
taining to risk management,’ says Pierre Reuter. ‘This
move from “offshore” to “onshore” has been one of the
key trends in the hedge fund industry in recent years.
Luxembourg’s location, its attractive regulatory and tax
structure, along with its experience and expertise allow
it to support the high growth in alternative asset class-
es. The increase in transparency and disclosure will be a
key challenge across the fund industry. However, the
diversity of Luxembourg’s fund offerings will continue
to meet the demands of investors and the market. This
trend will be/has been further increased by AIFMD,
which will impose a regulated environment on all fund
products sold in Europe. Luxembourg is thought to be
in a position to largely benefit from this directive as it
has the required human and technical infrastructure
already in place and is active in this sector for more than
a decade. It has also an extensive experience with pass-
porting (due to UCITS) as introduced by AIFMD.’
‘The main driver is less the upcoming regulation
(which is still some time away of coming into force)
than the stigmatization of being ‘offshore’, adds Vivian
Walry. ‘Funds moving onshore from tax havens
(onshoring) benefit from a cleaner status and a known
regulatory basis. The AIFMD regulation, when it comes
into force, will make it even more interesting to be
based onshore because of the passporting provisions.
This is much to the benefit of Luxembourg, with its tax
efficiency and stability and traditionally strong banking
and finance expertise it’s a very attractive location.’ ■
