Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 199

What Luxembourg and UCITS now offer Australian investors

Luxembourg, a small European country nestled between France, Belgium and Germany, has become the second-largest investment fund centre in the world after the United States. This article explains how the country has reached this position and explains what it can offer to Australian asset managers and investors.

UCITS: a spectacular European success story

The European fund industry is characterised by the success story of a truly European idea: UCITS, the acronym of Undertakings for Collective Investments in Transferable Securities. What started in 1985 as a European Directive with the modest ambition of defining a single framework for investment funds within the European Union ended up as a strong global brand for investment funds that is now recognised around the world.

This directive gave a tremendous boost to the European investment fund industry. UCITS started to flourish in the late 1980s, in particular in Luxembourg, which was the first country to implement the directive into its national legislation in 1988. It was the start of a long and steady development. Today, assets under management by Luxembourg-domiciled funds have reached €3.7 trillion (AUD$5.3 trillion) in some 14,594 investment funds.

UCITS were initially intended only to be marketed across the European Union and saw the creation of a new concept called the ‘European Distribution Passport’, which implies that a fund domiciled in one European country can be sold easily to investors located in all the other countries of the European Union. Since then, a growing number of countries in Asia, Latin America and the Middle East have accepted UCITS because the framework provides a stable, high-quality, well-regulated investment product with significant levels of investor protection. For example, in Latin America, Chilean, Peruvian and Columbian pension funds invest heavily in Luxembourg UCITS. For them, this is the most efficient way to get international diversification while offering a high level of investor protection.

Investor protection within the UCITS framework is a key concern of European policy-makers, with rules on diversification, risk management and capital requirements.

To date, UCITS is the only such fund model to achieve this international recognition. About 65% of all cross-border UCITS registrations belong to Luxembourg funds, which are distributed in more than 70 countries around the globe. Luxembourg gained a first mover advantage and attracted international fund promoters, and a professional and diversified asset servicing industry developed which in turn attracted more promoters. From a South Korean promoter selling Luxembourg UCITS to Hong Kong to a Brazilian promoter gathering retail investors from several European countries, UCITS have become truly international.

A major new development for Australia

Australia’s investors can now get easier access to Luxembourg UCITS. The Association of the Luxembourg Fund Industry (ALFI), the official representative body for the Luxembourg investment fund industry, has successfully negotiated with ASIC an exemption from the obligation to hold an Australian Financial Services Licence (AFSL) to provide financial services in Australia. The exemption, which came into force in November 2016, applies to certain financial services providers regulated by the Luxembourg financial supervisory authority, the CSSF. It should increase the range of funds, including alternatives and global infrastructure, offered by overseas fund managers to Australians, circumventing the need to apply for an AFSL in Australia.

 

Pierre Oberlé is Senior Business Development Manager at ALFI. This article is general information that does not consider the circumstances of any individual.

About the AFS licence relief: The Australian financial services regulator, the Australian Securities and Investments Commission (ASIC) has issued ASIC Corporations (CSSF Regulated Financial Services Providers) Instrument 2016/1109 which sets out the conditions of this AFS licensing relief. It came into force on 16 November 2016. A copy of the Relief Instrument is available here.


 

Leave a Comment:

RELATED ARTICLES

Best and worst performing equity funds of 2020

Three areas SMSFs should consider outsourcing

banner

Most viewed in recent weeks

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Latest Updates

Investment strategies

4 ways to take advantage of the market turmoil

Every crisis throws up opportunities. Here are ideas to capitalise on this one, including ‘overbalancing’ your portfolio in stocks, buying heavily discounted LICs, and cherry picking bombed out sectors like oil and gas.

Shares

Why the ASX needs dual-class shares

The ASX is exploring the introduction of dual class share structures for listed companies. Opposition is building to the plan but the ASX should ignore the naysayers and bring Australia into line with its global peers.

The state of women's wealth in Australia

New research shows the average Australian woman has $428,000 in net wealth, 40% less than the average man. This takes a deep dive into what the gender wealth gap looks like across different life stages.

Investing

The two most dangerous words in investing

Market extremes are where the biggest investment risks and opportunities lie. While events like this are usually only obvious in hindsight, learning to watch out for these two words can alert you to them in real time.

Shares

Investing in the backbone of the digital age

Semiconductors are used to make microchips and are essential to a vast range of technology and devices. This looks at what’s driving demand for chips, how the industry is evolving, and favoured stocks to play the theme.

Gold

Why gold’s record highs in 2025 differ from prior peaks

Gold prices hit new recent highs, driven by a stronger euro, tariff concerns, and steady ETF buying – all while the precious metal’s fundamental backdrop remains solid amid a shifting global economic landscape.

Now might be the best time to switch out of bank hybrids

In this interview, Schroders' Helen Mason discusses investing in corporate and financial credit securities, market impacts of tariffs, opportunities for cash investments, and views on tier two and hybrid bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.