How has Luxembourg’s fund industry changed over the years?

The success of Luxembourg as an investment fund hub dates back to 1988, when the EU directive for cross-border distribution was established. In the aftermath of the 2008 financial crisis, we have seen the emergence of a new trend for Luxembourg: a focus on the private equity and real estate sector, which has become the core pillar of Luxembourg’s fund industry. Luxembourg is now the most attractive European country for the private equity and real estate industry.

What does the future hold for the private equity and real estate sector? 

Private equity and real estate projects are the rising stars among alternative assets, with the Luxembourg market expected to grow at least 10 % per year from 2020. In a low interest-rate market, it offers institutional players a different source of performance at low risk. The asset growth of the private equity and real estate industry is further driven by the government’s push to shift to individual retirement plans, as well as an increase in sovereign investors and high-net-worth individuals from emerging populations. Globally we expect the sector to reach EUR 19.02tn until 2025 (according to the PwC Private Equity Information Brief). 

What challenges does this growth bring about for 2020 and beyond?

The boom is desired, yet unexpected in terms of size, so private equity and real estate funds have to fully get ready for such growth. Luxembourg’s success partly lies in its strong and flexible regulatory framework and there’s now an increased need for standardised practices to match the general financial industry. Anti-money laundering (AML), security and reporting procedures should all be points of focus for the industry on a day-to-day basis. Another major challenge is to attract and retain highly-qualified talent with innovative HR policies – Luxembourg is a small country, so we have to look beyond its borders.

How could operating models be rethought to guarantee future success?

As there is an increasing need for standardised practices, it is important to have efficient systems in place to support and maintain asset growth. Industry professionals will need to be trained to handle important business volumes, while actors are expected to optimise and streamline operations by looking at lean solutions. Long-term goals for management are to identify cost-reduction opportunities, stimulate cross-departmental collaboration, implement straight-through processing (STP) for data maintenance and reduce human involvement on less value-added tasks.

How could digital tools be used to optimise operational efficiency? 

Digitalisation is a key driver for the industry, but a lot remains to be done in the field. The boom happened so quickly that players did not have the time to rethink IT systems and find the right tools to serve the industry. We created Docunify to remedy the weaknesses and inefficiencies of data management and document collaboration. Digital solutions will become ever more-relevant to guarantee efficiency in the future. 

To follow in the digital footsteps of Docunify, visit www.docunify.com