Luxembourg-domiciled funds grow in 2010

Luxembourg successfully took advantage of a growing cross-border business for investment funds last year, as the number of funds domiciled in the jurisdiction and their assets increased, while sophisticated investors showed a returning risk appetite by their asset class choices.

A growing European cross-border investment funds industry meant Luxembourg was able to increase its footprint as Continental Europe’s preferred domicile in 2010, Lipper’s latest Luxembourg Fund Encyclopaedia shows.

By the numbers of funds registered in the jurisdiction, Luxembourg gained 593 more funds for its servicing industry, with the previous year’s 12,115 funds rising to 12,708, or by 5%.

Measured in euros, fund assets domiciled in Luxembourg meanwhile increased to a level higher than they were in 2007, a peak year for the industry, in a wider indication of performance and/or sales of funds restoring to pre-crisis levels.

Assets rose by 11% on the previous year’s €1,863bn to the tune of €2,202.8bn at the end of 2010, whereas in 2007, assets domiciled in Luxembourg were €2,068.4bn.

Investors in Luxembourg-domiciled funds showed growing risk appetite, too. Cash products’ assets decreased from $594.6bn to $491.7bn, down by 17%, demonstrating hunger for higher returns.

Equity fund assets also jumped by 18% on the previous year, from  $861.9bn to $1,014.8bn. Sales of equity funds in 2010 meanwhile beat those seen in 2007 by a stark margin, with €48bn going into the asset class, against €7bn, other Lipper data showed.

Bonds also gained by assets, rising substantially to $722.6bn from $569.1bn, or by 27%. Whereas in 2007, bond funds were hit with net redemptions of €21bn, in 2010 sales were €96bn.

The improvement in equity and bond fund sales last year was driven mainly by appetite for emerging markets funds, Lipper’s head of cross-border research Ed Moisson said.

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