Luxembourg still a dominant domicile vs Dublin, says Cerulli’s Yoon Ng
Yoon Ng, senior analyst at Cerulli Associates, says that despite the much touted jump in net inflows to Dublin last year Luxembourg remains by far the bigger domicile.
When it comes to international fund jurisdictions, think of Dublin as feisty and scrappy and always talking a good game, and Luxembourg as the far bigger, but no less competitive rival from across town – or, in this case, situated in the heart of Europe. Yes, rivals they are, but in truth Luxembourg not just dominates the two when it comes to Europe (€1.8 trillion in domiciled assets versus a piffling one-tenth of that for Dublin), but over the last few years has really stolen a march over its Irish counterpart when it comes to establishing itself as the domicile of choice for the now globally recognised Ucits fund moniker.
So when we heard last week that the Irish fund centre had ended 2011 with net inflows of €50 billion (US$65.2 billion), compared with net outflows of €16.8 billion for Luxembourg, we had to check this out, if for no other reason to see if this was just good ole Irish blarney, or was this the start of something more serious. Is Luxembourg’s imperious reign as the global cross-border fund under threat, and could this be the start, as some cynics have suggested, of the end of the all-powerful Luxembourg brand?
As it turns out nothing so dramatic, as the number will show, and indeed the reason is rather more prosaic. Firstly, net fund flows out of Luxembourg were lower than Ireland across every single asset class except for fund of hedge funds, property and the “others” category; and the bulk of the of the difference in flows eventually boiled down to two asset classes: Equity and Money Market Funds. Even now knowing what we now know about how equity funds in 2011, it still shocks to hear that equities saw net outflows of over €63 billion in assets across the industry, one of its worst in recent history – and it just didn’t help Luxembourg’s case that it is home to 3,676 equity funds compared to 867 in Ireland.