Luxembourg is the and . With a growth rate of over 10% over 2013, Net assets under management have recently topped at the 2.600bln level across some 13.600 fund units and there are no reasons why this trend should not continue.
The reason for the success is very much a combination between many ingredients that sync perfectly within a highly tuned legal and regulatory framework. In this respect, Luxembourg combines extremely strong investor protection with a high degree of flexibility in fund structuring and design.
The availability of a wide range of specialised service providers including Fund administrators, Depository Banks, specialised law firms, consultants, Risk management firms, Management Companies, Audit companies etc. enables fund promoters to subcontract non-core activities and hence benefit from substantial economies of scale.
Within this large spectrum of service providers however, one role starts to take the spotlight in as much as it starts to be recognised as absolutely necessary from an investor protection view and this is the role of strong corporate governance.
As over the last 3 decades, Luxembourg specialised in the cross-border distribution of investment funds and has since become the platform of choice for promoters wishing to market their investment funds worldwide with 70% domicile share of authorizations for cross-border distribution being Luxembourg domicile, it goes without saying that corporate governance is of utmost importance in such a giant undertaking.
Given these huge numbers and the requirement to have "watchdogs" in place as well as people who must act in the best interest of all these investors, not forgetting the fact that regulators will crack down on what was known in the past as "breakfast directors", a good and large pool of non-executive independent directors is of absolute necessity to the Luxembourg financial center and it's continued success.