The total net assets of Luxembourg-based undertakings for collective investment (UCIs) reached €5.639trn as of 31 August 2024, the Luxembourg Financial Sector Supervisory Commission (CSSF) on Friday 27 September 2024. This figure represented an increase from €5.619trn reported at the end of July 2024, marking a growth of 0.35% over the one-month period. Over the past twelve months, the volume of net assets in the UCI sector increased by 8.53%.
Net capital investments
The Luxembourg UCI industry experienced a positive variation of €19.723bn in August 2024, noted the CSSF, driven by a combination of positive net capital investments and favourable developments in financial markets. Net capital investments totalled €17.461bn, reflecting a growth rate of 0.31%. Additionally, financial markets contributed positively with an increase of €2.262bn, or 0.04%.
UCI structures
As of August, the number of UCIs in Luxembourg totalled 3,205, a slight decline from 3,211 the previous month. Among these, 2,098 entities operated under an umbrella structure, encompassing a total of 12,642 sub-funds. When combined with the 1,107 entities employing a traditional UCI structure, the total number of active fund units in the financial centre reached 13,749.
Market volatility and economic concerns
According to the CSSF, various categories of UCIs and net capital investments experienced fluctuations in August. The month began with significant volatility in equity markets, primarily driven by a surprise interest rate hike and the Bank of Japan’s announcement of a quantitative tightening programme, which resulted in the worst daily loss for the Nikkei since October 1987. This turmoil coincided with disappointing economic data from the US, particularly concerning the labour market, which raised recession concerns and led to considerable losses across global equity markets, although these were less severe than those experienced in Japan.
As the month progressed, markets stabilised and gradually recovered, buoyed by strong corporate earnings and increasing expectations of a monetary policy easing in the US, supported by low inflation data and positive statements from the US Federal Reserve chairman. This anticipation of lower interest rates weakened the US dollar against most currencies, including the Euro. By the end of August, stock markets had recorded slightly positive returns.
Equity UCI capital investments
Despite the overall market recovery, most equity UCI categories reported negative capital investment during August, with the largest outflows occurring in the Latin American and Eastern European equities sectors. Conversely, yields declined across both the US and European markets due to expectations of looser monetary policies, benefiting all major bond UCI categories. The USD money market and USD-denominated bonds were the only categories to experience losses, which were primarily attributed to currency effects.
In the fixed income space, all UCIs recorded positive net capital investment in August, except for emerging market bonds. The money market categories saw the largest inflows during the month.