Luxembourg has firmly established itself as the premier fund domicile in Europe and the second largest globally after the United States. As of February 2025, Luxembourg's investment fund industry manages €5.96 trillion in net assets, representing a 0.47% increase from January 2025 and a significant 10.46% growth (+€563.95 billion) over the past 12 months.
With €900 billion in regulated alternative funds, more than 260 authorized Alternative Investment Fund Managers (AIFMs), and 605 registered AIFMs, Luxembourg offers a comprehensive legal toolkit for fund establishment that meets diverse investor needs.
Luxembourg's fund industry demonstrates continued strong growth with total net assets reaching €5.96 trillion as of February 2025. Monthly growth from January to February 2025 stood at 0.47%, while 12-month growth reached an impressive 10.46%, representing an increase of €563.95 billion. Net sales for February 2025 amounted to €34.15 billion, substantially higher than January's €9.47 billion, signaling strong investor confidence in Luxembourg-domiciled funds.
The industry currently comprises 3,131 funds with 13,520 fund units/sub-funds. This structure reflects Luxembourg's efficiency in fund organization, with the majority of assets (92%) held in umbrella fund structures that allow for economies of scale and operational efficiency.
Luxembourg is the largest European fund domicile and second globally after the US, with €5.96 trillion in assets under management (AuM) as of February 2025. This preeminent position has been built over decades of specialized focus on the investment fund industry.
Located in the heart of Europe, Luxembourg hosts about 180 nationalities and is one of the most multilingual countries in Europe. This strategic positioning provides natural access to the European market while offering a culturally diverse business environment that facilitates global operations.
Luxembourg maintains an AAA rating according to several rating agencies as of May 2024. This exceptional stability provides reassurance to investors regarding the safety of their investments and the reliability of the regulatory framework.
As a leading global distribution center, Luxembourg funds are offered in over 80 countries worldwide, with a remarkable 55% global market share in cross-border investment funds. This extensive distribution network is supported by Luxembourg's sophisticated regulatory framework for passporting funds internationally.
Luxembourg has developed a globally recognized state-of-the-art legal and regulatory framework specifically designed for UCITS and alternative investment funds. This framework provides clarity, security, and flexibility for fund managers while ensuring appropriate investor protection.
The country offers robust investor protection alongside an approachable and responsive regulator. The Commission de Surveillance du Secteur Financier (CSSF) balances the need for oversight with operational practicalities, creating an environment that benefits both investors and fund sponsors.
Luxembourg has experienced impressive 50% annual growth in private assets over the past five years. Total assets under management in alternatives domiciled in Luxembourg have reached approximately €2 trillion in 2024, reflecting the jurisdiction's appeal for alternative investment strategies.
The country is home to a unique concentration of investment fund experts: lawyers, auditors, tax advisers, and professionals across the entire fund value chain. This ecosystem facilitates efficient fund establishment and operation, reducing time-to-market for new products.
Luxembourg boasts a deep talent pool with an increasingly specialized international and multilingual workforce. Current roles include deal structuring and coordination, deal analysis and screening, risk management, valuation, management of global banking relations, fund structuring, and investor relations.
Luxembourg's fund industry shows impressive diversity across asset classes. Equity funds lead with 33.7% of assets (€2.01 trillion), followed by fixed income with 24.1% (€1.43 trillion). Balanced funds represent 18.0% (€1.07 trillion), while money market and cash funds account for 10.7% (€639.75 billion). Funds of funds make up 6.4% (€383.80 billion), with private equity/venture capital at 3.2% (€191.70 billion), real estate at 2.2% (€132.63 billion), and other strategies completing the picture with 1.6% (€93.61 billion).
This distribution highlights Luxembourg's strength across both traditional and alternative asset classes, with significant presence in fast-growing sectors like private equity.
Luxembourg's global appeal is demonstrated by the diverse origins of fund initiators. United States-based sponsors lead with 20.1% of assets (€1.20 trillion), followed by the United Kingdom at 17.0% (€1.01 trillion) and Germany at 14.7% (€876.61 billion). Switzerland and France each control approximately 12% of assets (€709.45 billion and €696.39 billion respectively).
Other significant contributors include Italy (6.0%), Belgium (4.8%), Luxembourg itself (4.3%), Denmark (2.0%), and the Netherlands (1.9%). This international distribution underscores Luxembourg's role as a global hub for fund management, with fund sponsors from across the world choosing the jurisdiction for their European and international fund offerings.
Over the last 30 years, Luxembourg-based fund managers and service providers have accumulated deep knowledge of the entire asset management industry value chain, including alternatives and socially responsible investment. This expertise has been the key enabler of the impressive development of Luxembourg as a fund center over the past three decades.
Today, fund managers, custodians, lawyers, auditors and other service providers aim at adding ever more value to the global asset management industry. They increasingly service not only funds domiciled in Luxembourg, but also funds based abroad, thereby contributing to the evolution of Luxembourg from a fund domicile to a fully-fledged fund servicing center.
This evolution has been underpinned by state-of-the-art market infrastructure in which Luxembourg is constantly investing to meet the requirements of the most sophisticated global fund managers.
Luxembourg offers multiple fund vehicles tailored to different investment strategies:
UCI Part II Funds: These provide flexible investment capabilities with risk-spreading requirements and are available to all investor types. They benefit from tax-exempt status regarding corporate, municipal business, and net wealth tax.
Specialized Investment Funds (SIFs): Available to well-informed investors, SIFs feature a streamlined regulatory approval process with few investment restrictions or leverage rules. They are subject to minimal taxation with only a 0.01% subscription tax.
Reserved Alternative Investment Funds (RAIFs): These can be established quickly without CSSF approval and feature light regulation with minimal borrowing restrictions. RAIFs enjoy favorable tax treatment with just a 0.01% subscription tax.
SICARs (Investment Companies in Risk Capital): Designed specifically for private equity and venture capital, SICARs have no risk-spreading obligations and no restrictions on dividend payments. They offer tax transparency for qualified investments.
Partnership Structures (SCS/SCSp/SCA): These provide a high degree of contractual freedom with rapid incorporation processes and lower operational costs. They offer tax transparency at the fund level, making them particularly attractive for certain investor types.
Analysis of historical data reveals significant structural evolution in Luxembourg's fund industry. While the number of standalone funds has gradually decreased (from 3,274 in 2023 to 3,131 in February 2025), the industry has maintained growth through efficiency and umbrella fund structures with multiple sub-funds.
As of February 2025, 2,069 umbrella funds contain 12,458 sub-funds, with these structures holding €5.48 trillion, representing approximately 92% of total assets. The average size of Luxembourg funds continues to increase, reflecting operational efficiencies and the ability to attract and manage larger mandates.
Despite Luxembourg's general corporate income tax rate of 24.94%, investment funds benefit from:
These tax advantages, combined with the regulatory framework and distribution capabilities, make Luxembourg particularly attractive for international fund sponsors seeking efficient structures for global investors.
Luxembourg's fund industry shows robust signs for continued growth:
Continued innovation: The jurisdiction maintains ongoing development of fund structures to meet evolving investor needs, staying at the forefront of product innovation.
ESG leadership: Luxembourg has established strong positioning in sustainable finance and ESG-focused investment vehicles, with regulatory developments supporting this growth area.
Digitalization: The industry is embracing fintech solutions to enhance fund operations and investor experiences, streamlining processes and improving reporting capabilities.
Alternative investments expansion: There is growing importance in the private equity, venture capital, and real estate sectors, with Luxembourg increasingly the domicile of choice for these strategies.
Cross-border distribution: Enhanced capabilities for global fund distribution leverage Luxembourg's regulatory reputation and extensive network of distribution agreements.
Luxembourg's combination of political stability, regulatory flexibility, tax efficiency, and strategic location continues to strengthen its position as Europe's leading fund domicile. Its diverse range of fund structures provides solutions for virtually any investment strategy, making it particularly attractive for fund managers seeking both EU market access and global distribution capabilities.
With assets approaching €6 trillion, strong recent growth trends, and unparalleled expertise across the investment fund value chain, Luxembourg's fund industry demonstrates resilient performance and ongoing appeal to international fund sponsors and investors alike. As the investment landscape continues to evolve, Luxembourg remains well-positioned to maintain its leadership role in the global fund industry.
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