Luxembourg, Europe’s largest fund domicile and second worldwide, ranks first in cross-border distribution of investment funds, marketing over 50% of assets under management (AUM) around the world. An innovative cross-border distribution strategy is crucial for asset managers to boost their sales and attract new investors worldwide.
With more than 45,000 cross-border notification packages released in 2023, Deloitte Luxembourg leads in this industry. Based on this large experience, we identified jurisdictions offering promising cross-border opportunities.
Asia-Pacific
The APAC region ranks second in cross-border AUM (after Europe). In Singapore and Hong Kong, foreign products (especially Ucits) are very popular. Foreign funds marketed to retail investors outnumber domestic vehicles (ratios of 1:4 in Singapore and 1:3 in Hong Kong). Around 70% of these funds are Luxembourg-domiciled.
International asset managers also market their European flagships in South Korea, Taiwan, Macao and Japan. We see a growing appetite from retail investors in Brunei Darussalam.
Additionally, some local fund structures in Thailand and Indonesia are set up to invest in Luxembourg funds.
Latin America
Private pension funds, especially in Chile, Peru, Colombia and Mexico, dominate the Latam segment. In Chile, 72% of foreign funds authorised for marketing to pension funds are Luxembourg-domiciled mutual funds. Public marketing, subject to local regulator registration, is only possible in a few jurisdictions and sales are limited.
Passive ETFs listed on local stock markets in Mexico and Colombia are good alternatives for local retail investors. The region’s most important financial market, Brazil, can be accessed via local feeder funds/fund of funds. High net worth clients in the region are often served via hubs in Uruguay, Panama and Miami.
Middle East
The United Arab Emirates has become the frontrunner for foreign funds, offering attractive market entry options. However, this huge success has instigated a recent policy shift to the reinstate barriers to foreign funds with the objective of promoting local funds. Nevertheless, the UAE’s appeal persists; we see a rising interest in setting up local funds.
In Bahrain, foreign fund distribution massively surpasses local funds with a ratio of about 15:1. Based on our experience, Oman is also a promising market.
Rest of the world
With over 150 foreign fund registrations, South Africa leads Africa in cross-border distribution. The Canadian market, though of high interest, is limited to institutional investors under exemption regimes, as retail distribution is complex given the province-specific approach.
Guillaume Scaffe moderated an emerging markets distribution trends panel at the Association of the Luxembourg Fund Industry’s Global Asset Conference on 19 March 2024. This guest contribution first appeared in Delano’s print edition.