Cross-border funds accounted for 14% of assets under management worldwide and 49% in Europe at the end of the first quarter of the year, an industry paper said.
The report, “Cross-border distribution of investment funds”, was published by the global fintech outfit Broadridge during the Association of the Luxembourg Fund Industry’s Global Distribution Conference on 20 September 2023.
Luxembourg’s leadership and the rise of US managers
Luxembourg has cemented its position as the leading domicile for cross-border assets globally, with 53% of these assets domiciled there. Concurrently, US managers are making headway, their share growing to 50% in the first quarter of 2023.
Despite a global sales decline since 2021, Europe remains the cornerstone for cross-border asset distribution, with some €640bn of the AuM originating from outside the continent. As of March 2023, the cross-border market’s size stands at €5.788trn.
Challenges and resilience
The year 2022 was tough for cross-border funds, witnessing an unprecedented level of withdrawals due to geopolitical tensions, the Ukraine war and economic volatilities like rising energy prices and inflation.
However, the losses present a layered story. Long-term growth rates have propelled the industry’s AuM from €1.6trn before the financial crisis to €6.7trn in 2021. The 4.3% of AuM lost in 2022 was just half of the 2008 drawdown, underscoring the sector’s resilience.
The report emphasised Europe’s crucial role as a cross-border asset management hub. However, the sector is not without its challenges; the number of new fund launches has been on the decline, with last year’s total dropping to one-third below its 2018 peak. The trend is expected to worsen in 2023, “which will have a knock-on effect on overall net sales.”
