Luxembourg To Ease Regulation Of Hedge Funds

by Ulrika Lomas, Tax-News.com, Brussels

05 June 2002

Luxembourg is preparing legislation to ease its regulatory regime for hedge funds and venture capital funds, responding to the greater interest of investors in these asset classes since stock exchanges lost their bite in 2001. Draft texts suggest that funds would have a lower level of supervision and that listing requirements would be eased.

Henri Grethen, economics minister for the Luxembourg government, says: "It is a priority for us to prepare our draft texts on venture capital funds and hedge funds for shrewd investors. I would expect these in the summer - June or July."

Domestic European hedge funds targeting European investors are usually based in offshore centres such as the Cayman Islands, British Virgin Islands or Bermuda, but are listed in Dublin rather than Luxembourg, because the Irish offshore centre has less stringent authorisation.

Hoeever Luxembourg has increasingly been the choice of US mutual funds looking for a European base. Citing the results of a recent study conducted by London-based fund research company, Fitzrovia International, the WSJ recently announced that US mutual fund organisations had grabbed market share in Luxembourg-based funds from their European rivals, increasing their assets in the tiny jurisdiction by 69% at the end of last year.

The survey's findings revealed that although Swiss fund companies maintained their lead in terms of Luxembourg-based assets at 25.5% of the market, US companies beat their German counterparts to second place with a share of 22.5% to the German 16.5%.

'Americans have used Luxembourg as a gateway to Europe,' PricewaterhouseCoopers Luxembourg's Investment Management Group Head, Marc Saluzzi, told the WSJ, adding that: 'I remember in the early '90s, when Americans came to Luxembourg, and the Europeans laughed at them. But competitors are not laughing any more.'

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