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.

  •   27 April 2017
  •      
  •   

 

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

The ultimate superannuation EOFY checklist 2026

Here is a checklist of 28 important issues you should address before June 30 to ensure your SMSF or other super fund is in order and that you are making the most of the strategies available.

Noel Whittaker’s take on the budget

Marketed as a fix for inequality and housing affordability, the latest budget instead delivers a tangle of tax changes that leave everyday Australians worse off.

Australia has no death duties. Technically.

Australia may not levy formal death duties, but a growing web of tax measures is quietly shaping what wealth passes between generations. Now, the 2026 budget adds another layer.

Lithium's rally is real this time – but no-one trusts it

The lithium rally mirrors the early-2010s tech stock surge, with demand set to double by 2030. Supply has been slow to respond, creating a market deficit for future tech like humanoid robotics and solid-state batteries.

Welcome to Firstlinks Edition 662 with weekend update

The debate over the budget is increasingly shaped by frustration and perceptions of unfairness, rather than clear-eyed assessment of policy outcomes.

Two months into retirement

A retirement researcher's take on retirement and her focus on each of her six resource buckets to stay engaged during the transition and beyond.

Latest Updates

Are the government’s CGT changes better for young investors?

New CGT rules promise fairness, but could young investors lose out? A practical scenario reveals how changes impact deposit goals, investment choices, and long-term wealth building for the next generation.

Retirement

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

Investment strategies

AI can’t pick winning funds, but it can help you avoid losers

Machine learning has been touted a game changer investment management. But a new study overturns claims that AI can generate positive alpha in mutual funds. Here are some practical takeaways for investors.

Investment strategies

Inflation BIG picture: Boomers got lucky, next Gen not so much

A 150-year view shows inflation's upward bias, driven by shifting monetary regimes and war stocks. This marks an end to the low-inflation boom that enriched boomers and ushers in a higher-inflation era for younger investors.

Planning

Tax deductibility of financial advice improves affordability

A shrinking adviser workforce and rising costs are squeezing access to financial advice, just as demand surges. Expanded tax deductibility offers a modest but meaningful boost to affordability.

Retirement

Retirement in reality – 3 months in

A reflection on travel mishaps, smart decision-making, time pressures and rebuilding health habits. Three months in, here's how to navigate the surprising realities of life after work.

Taxation

Calculating the business cost of Australia’s new 'productivity tax'

Amid a national productivity crisis, new economic analysis finds the tax changes in the 2026 Federal Budget create Australia’s first-ever by design 'Productivity Tax', where young people will pay the biggest price.

Sponsors

Alliances

© 2026 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.