Asset Management

Luxembourg’s asset management industry is strong in two dimensions:

• On the one hand, Luxembourg managed to become the second most important hub for mutual funds in the world (after the United States) and by far the most important in Europe.
• On the other hand, Luxembourg is keen to repeat this success in the alternative investment scene. This activity was mainly triggered by the 2011 Alternative Investment Fund Managers Directive (AIFMD) of the European Union. In fact, Luxembourg was one of the first countries to implement the AIFMD.

Our alternative investment research questions focus on liquidity (in real estate and private equity), personal tastes (for art), or asymmetric information (for hedge funds and private equity). Due to increasingly stringent regulation of the banking sector, large amounts of wealth are now managed by hedge funds, while private equity is an important driver for the financing of young and innovative firms and of particular importance for a knowledge-based economy such as Luxembourg’s. Based on the Department of Finance’s expertise in empirical research and data analysis, a unique dataset for investment funds registered in Luxembourg is being created in close cooperation with the Luxembourg Association for Investment Funds (ALFI).

Our research in asset management also covers household finance and wealth management of (rich) individuals. We investigate the financial decisions of households including payments, investments, portfolio choices, borrowing and credit. Behavioural finance incorporates findings from psychology to explain individuals’ financial decision making and the related macro market outcomes. Combined with experimental methods, it offers insights into the behavioural patterns of private investors. Luxembourg has been notably successful in attracting an affluent client base; consequently, the area of wealth management has been of central importance for the industry.