Dublin Chases Luxembourg In Race For Top Retail Investment Funds

by Carla Johnson, Investors Offshore.com

13 June 2001

A survey conducted by the Financial Times has revealed that the status of Luxembourg as Europe's top investment fund centre could be seriously threatened by Dublin which looks like it could beat Luxembourg at its own game.

On paper, Luxembourg doesn't appear to have much to worry about just yet. Last year assets in funds domiciled in the principality increased by US$70 billion to US$817.3 billion. But Dublin, usually home to institutional investment vehicles, is showing signs of shaping a very formidable reputation for itself with its recent foray into retail investment.

The timing is good for Dublin because it is offering a wide range of alternative investment products at a time when many investors are looking to move away from traditional funds in search of something more innovative. And it could be argued that Luxembourg's investment industry, saturated in history and tradition, presents less of an appeal when compared to its Irish rival for some investors.

The FT report points out that Luxembourg-based fund managers are hardly going to lose sleep over the survey's conclusions. The principality still manages five times as many funds as Dublin and it has a well-established infrastructure that is home to all the major players in Europe.

Viet Schulen, chief executive of JP Morgan Fleming Fund Management, Luxembourg told the FT: 'People speak different languages everywhere. But in Luxembourg they are actually nationals, so they have the culture too.' He explained that JP Morgan chosen Luxembourg for the simple reason that it is 'acknowledged to be the place in Europe to launch and sell funds from.'

Sharing this view is Richard Goddard, managing director of ABN Amro Investment Funds, who pointed to the low taxes on institutional funds and money market funds in Luxembourg. However, ABN Amro do not domicile their hedge funds in Luxembourg but have chosen Dublin for that privilege instead.

According to the FT, hedge funds domiciled in Luxembourg are comparatively rare since they are usually linked to high levels of risk and the principality has really only promoted funds that 'well-diversified and with strict gearing ratios.' But fund managers are beginning to offer hedge funds with lower levels of risk attached and Luxembourg is going to miss out on this increasingly popular strategy in the funds industry.

John McCann, general manager at Trinity Fund Administration says that 'in the alternative arena Luxembourg is losing business to Dublin,' and this has alot to do with the Irish government's policies of offering tax incentives on new and alternative investment vehicles as well as Ireland's fast growing skills base in Information Technology. But Luxembourg needs to get to grips with Dublin's decision to target Europe's retail market - traditionally the exclusive domain of Luxembourg.

Gary Palmer, chief executive of the Dublin Funds Industry Association, who is conducting a local survey of Dublin's full potential as a retail investment centre predicted that 'there will be an awful lot more individual investors in funds as they become more sophisticated.' He added: 'We have always believed that Dublin is a retail centre, but it has just not been exploited because it had so much institutional business presented to it.'

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