Face to Face

February 3, 2013 3:24 am

Luxembourg could strike fund gold again

Marc Saluzzi illustration

Marc Saluzzi scoffs at the suggestion that the Grand Duchy of Luxembourg is locked in a skirmish to win more new business than Ireland, its rival fund domicile.

“We’re not trying to grab market share from the Irish,” retorts Mr Saluzzi, chairman of the Association of the Luxembourg Fund Industry, with a shrug.

Mr Saluzzi says he is not a competitive type. Indeed, he says he hopes new regulations on alternative investment funds from Brussels – which ratchet up standards for real estate and private equity funds as well as hedge funds sold in Europe – will bring financial rewards for the Irish as well as Luxembourg.

“Here in Luxembourg, we’re trying to convert some of that unregulated alternatives business around the world into a regulated business, and the Irish are as well,” Mr Saluzzi notes. “We share the same objective and there’s more than enough business for the two fund centres to share.”

In theory, at least, the arrival of the Alternative Investment Fund Managers Directive will force droves of foreign fund houses to set up a base in Luxembourg or a nearby domicile as companies will find it difficult to comply with any related requirements from offices in New York, Singapore or Moscow, according to Mr Saluzzi. Separately, a push is on to encourage pension funds and other big investors to consider taking stakes in regulated hedge funds and other kinds of alternatives.


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The directive, which will be rolled out from July, has the potential to shower fortune on Luxembourg, which retains its title as Europe’s largest fund domicile, with €2.4tn under management. And Mr Saluzzi is not squeamish about showcasing his ambition. His lofty projection is that the AIFMD’s arrival will allow Luxembourg to double the assets in its property, private equity and hedge funds to as much as €500bn from its present range of €200bn to €250bn. “That’s what we want. That’s the big picture,” he says.

How will he meet that goal? A plan is in place, with steps being taken to orchestrate lobbying efforts as a draft bill on the AIFMD makes its way through Luxembourg’s parliament. “We’re trying to push the AIFMD through our parliament,” he says. “The parliament has launched a consultation process on the draft bill and we’re expecting that to end in the next few weeks.”

He adds: “We expect the bill to be signed by the first quarter.”

Other aspects of the draft legislation also look to make Luxembourg attractive to fund managers; these range from rolling out limited partnership regimes that offer investors more flexible terms than share classes permit, to allowing wealthy individuals to buy into alternative funds; and clarifying the taxation of carried interest, which holds appeal for private equity funds.

Luxembourg maintains another competitive strength, Mr Saluzzi points out. The country pioneered the concept of fund “passports”, allowing funds to be sold across Europe and to skip country-by-country regulations, when the first iteration of Ucits rules arrived in 1988.

Mr Saluzzi makes the following argument: “Because we have spent the last 15 years convincing investors, fund managers and regulators in up to 70 countries that Ucits was a good vehicle for local investors to buy in to, we believe we can easily replicate that discussion when promoting our Luxembourg alternative investment funds.”

Over the course of the past year and a half, Mr Saluzzi and his colleagues have embarked on a roadshow, criss-crossing the globe to persuade alternative fund houses to set up shop in Luxembourg and institutional investors to purchase their funds.

“We want to replicate, in alternatives, the success we had in Ucits,” he says. “We just want to convince institutional investors and alternative fund managers that the regulated fund concept is a good one going forward and to help them leverage the passport that comes with this higher level of regulation.”

Thus far, Mr Saluzzi finds that many parties he preaches to are receptive to greater regulation of alternative investments. For example, an upsurge in support for better supervision of real estate, private equity and hedge funds is being won in Chile and Mexico, where pension fund managers are looking to diversify into alternative investments.

“Obviously, they need regulated vehicles,” he says. “So they’re enthused by this concept of regulated alternative investment products. At the moment, they’re invested in long-only funds that generate a certain return, but they believe they should start creating diversification in their asset base.”

His strategy is to “look at the different pockets of institutional money around the world and find out which ones are more likely to buy into regulated funds going forward than others”.

Hong Kong hedge fund managers are a favourite audience, for example, as European institutional investors buy as much as 30 per cent of their assets, according to Mr Saluzzi. “European investors are so important to them,” he explains. “If they want to keep 30 per cent of their assets, they will have to design solutions for European institutional investors and that might trigger the need for a European-based alternative investment fund manager.”

The phasing out of the old system, where foreign managers marketed non-EU funds via “private placement” and went cap in hand to regulators in Spain or France, is guaranteed within a few years for two reasons, according to Mr Saluzzi.

First, it will be too demanding for non-EU fund houses to manage affairs in Europe from their home countries. Second, by abiding by the passport regime, fund houses will gain the ability to pick a single regulator who will oversee their funds in Europe. “When you choose the private placement regime, you don’t choose your regulator. The regulator that is imposed on you is the one that is looking after the country where you sell most of your funds,” Mr Saluzzi explains.

The success Mr Saluzzi and his colleagues achieved in marketing Ucits funds, which now hold close to €9tn in assets, offers a glimmer of the potential regulated alternative investment funds hold.

“With Ucits funds, we had to go through a long learning curve,” Mr Saluzzi concludes. “But hopefully, this time, we won’t have to dedicate 15 years to pass along the message about alternative investment funds. What we’re offering now is a way to expand your universe to other asset classes through some kind of regulated products and that is an attractive proposition.”


Curriculum vitae

Marc Saluzzi

Born 1963


1986 Graduate of Institut Supérieur de Gestion (ISG), Paris


1986 Joined PricewaterhouseCoopers (PwC)

1996 Partner, PwC

2006-2010 Head of PwC Global Asset Management

2002 Member, CSSF-OPC Committee, advising Luxembourg government

2001 Member of board and strategic committee member, Association of the Luxembourg Fund Industry (Alfi)

2009 Chairman of alternative committee, Alfi

2011 Chairman, Alfi


The Association of the Luxembourg Fund Industry

Created 1988

Associations Member of EFAMA, the European Fund and Asset Management Association and IIFA the International Investment Funds Association

Assets under management in Luxembourg funds

€2,383.82bn as of end Dec 2012

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