HedgeWeek – In its decade-long rivalry with Dublin as the main European centres for cross-border border investment fund services, it’s generally acknowledged that Luxembourg missed a trick by failing in the mid- to late 1990s to spot the potential importance of hedge funds to an investment industry in which the Grand Duchy was already established as the continent’s leading service centre.
It was only when the stock market slump that began in 2000 made traditional asset classes distinctly less attractive to investors and aroused a much wider interest in alternatives, especially hedge funds, that the industry, regulator and authorities in Luxembourg launched efforts to restore its competitiveness in a market in which Ireland had been allowed to establish itself as the jurisdiction of choice.
The growth in the hedge fund industry during this decade has swelled business for a now tried and tested approach in which offshore hedge funds are domiciled in the Cayman Islands, and to a lesser extent the British Virgin Islands or Bermuda, listed on the Irish Stock Exchange and administered by a Dublin-based service provider. One of Luxembourg’s key challenges has been to provide an alternative to this approach, while building on greater interest among investors and promoters, particularly of funds of hedge funds, for structures subject to a higher degree of regulation than that applied in the offshore islands.
