The 2024 edition of the Investment Funds in Luxembourg guide has been published

A celebration of the 2024 Investment Funds Guide and 20th anniversary of the SICAR law

Luxembourg, 19 September 2024. EY Luxembourg has released the 2024 edition of its flagship publication, Investment Funds in Luxembourg – a technical guide. This year the launch coincided with the celebration of the 20th anniversary of the SICAR Law, a milestone celebrated together with 600 clients.

“Investment Funds in Luxembourg” is the definitive technical guide providing an introduction to Luxembourg as a center for investment funds, the types of fund vehicles available and a summary of the regulations applicable to the setting-up and operation of Luxembourg investment funds. It also includes the regulations applicable to both traditional and alternative management companies, and the provisions applicable to other Luxembourg service providers. The 600-page guide has been serving as a reference for the fund industry, not only in Luxembourg but across the globe, for over 25 years, covering the legislative and regulatory changes relevant to the sector in the Grand Duchy and Europe for the year prior.

Nicolas Bannier, EY Luxembourg Partner and Wealth and Asset Management Leader, introduces this latest edition and the major trends that have been shaping the industry over the past year. 

Retailization: This year marked the enactment of the ELTIF 2.0 Regulation on 10 January 2024. Luxembourg was already the preferred domicile for ELTIFs under the initial regulation, and is poised to benefit from the growing trend of making private asset alternative structures available to retail investors, currently holding two-thirds of the market share. In addition to ELTIF 2.0, in March 2024, the new Directive proposing changes to the AIFMD and UCITS Directives was published, set to be applicable by 16 April 2026. The amendments, which revise delegation, liquidity management, ancillary services, and loan origination rules, among others, aim to harmonize and increase the flexibility of these frameworks, and Luxembourg, with its toolkit and supportive fund ecosystem, is well-equipped to take advantage. Lastly, the European Parliament formalized its position on the Retail Investment Strategy in April 2024, but the current timeline foreseen in the draft Directive puts the application date not before the beginning of 2026.

Digitalization, and related regulation: The industry is adopting new digital technologies at a remarkable rate, and this has led to an increase in digital regulations. Firms are preparing for the imminent Digital Operational Resilience Act (DORA) compliance deadline on 17 January 2025, and the upcoming implementation of the EU's Markets in Crypto-Assets (MiCA) Regulation this past summer. Additionally, the sector must anticipate and adapt to forthcoming regulations on artificial intelligence under the EU AI Act.

Sustainable finance: In 2024, the Luxembourg Green Exchange (LGX) achieved over EUR 1 trillion in green, social, sustainability, and sustainability-linked bonds. Luxembourg also  managed to keep its ranking as the top financial center for green finance in the EU, according to the Global Green Finance Index. In regulation, there is currently an undergoing re-assessment of the present situation, specifically for ESG. Recent reports from the EU Commission suggest amendments that may not only ease the current sustainability-related disclosures but also improve transparency to retail investors by, among others, establishing a categorization system (which, in practice, is already used – unofficially – by industry when referring to Articles 8 and 9).

Nicolas comments: “This past year has been quite transformational for the European fund industry, which has seen trends reshaping investment strategies and regulations. Not only this, but global stability has been impacted by elections across the world, such as those in France, India, the UK and the US, which undoubtedly have had, and will continue to have, a knock-on effect on the financial world. Luxembourg, as Europe’s largest fund center, must continue to evolve to stay relevant in this competitive and changing environment. We hope that our annual guide will continue to help the industry navigate regulatory compliance in this unique period. This year is noteworthy as it celebrates the 20th anniversary of the SICAR Law, which provides a tailored legal framework for investment in risk capital, particularly in private equity and venture capital, and has been instrumental in positioning Luxembourg as a leading hub for innovative investment structures.”

To download a digital version of the Investment Funds in Luxembourg guide or order a copy, please visit www.ey.com/en_lu/investment-funds