While market trends appear positive, there are concerns that regulators and policy makers could upset the long-term outlook. Net assets in Luxembourg hit the €5trn mark for the first time in January after a 5% increase over 12 months, but it’s not a cloudless sky. “We see the creation of barriers to cross-border trade and greater focus on internal markets,” Lamesch noted. In particular she is concerned about pressure on global asset management models, especially the delegation model which has shaped the EU's cross-border fund industry in which Luxembourg is the world leader.

These arrangements are currently being reviewed at EU level as part of a reform process of the alternative investment fund managers directive (AIFMD). “As our sector grows in size and importance, it will continue to attract the attention of policy makers, and new regulation in the area of investor protection, systemic risk and liquidity may be expected,” she noted. "There's also increased competition from passive fund strategies, and this is putting profit margins under pressure," she noted.

Too much change could put current arrangements and potential benefits at risk. As well as the remarkable growth in assets despite the pandemic, Lamesch sees further capacity for growth thanks to the booming appetite for sustainable investing.

The entering into force of the sustainable finance disclosure regulation last week will “provide greater clarity for investors on a common approach,” she said.

Private assets are also on the rise, with institutions, and increasingly, high net worth individuals engaged with these strategies. She also pointed to good signs in developing markets, particularly China. There is also the push to digital transformation given by covid, and she highlighted the need for regulatory regimes to keep pace with technological change.

On the latter point Lamesch highlighted how Luxembourg's legal framework has just been amended to recognise the use of distributed ledger technology for issuing and settling dematerialised securities. "I believe that our industry can and will continue to thrive," she concluded.