Regulation of complicated issues will result in complex regulation, said Luc Frieden, Luxembourg's Minister of Finance at the ALFI Global Distribution Conference on Tuesday.
In discussing the wave of regulation that has washed over the fund industry since the financial crisis of the late 2000s, Frieden remarked that there are no simple answers.
He said he has always been against over regulation of the fund industry but added that these new regulations, including the Alternative Investment Fund Managers' Directive (AIFM), present an opportunity for Luxembourg to expand as a fund centre.
Luxembourg, which has already made a name for itself with its Undertakings for Collective Investment in Transferable Securities Directives (UCITS), hopes that its early adoption of the AIFM will entice fund managers to domicile in the fund centre.
Earlier this month Frieden presented Luxembourg's parliament with draft legislation to transpose the directive into law and Frieden expects this to happen before the year ends.
Frieden hopes that a tax provision – that calls for carry not treated as a share profit or unit in a fund will be capped at 10.335 percent under the “miscellaneous income” tax rate – will provide an incentive for managers looking to domicile their AIFM compliant funds in Luxembourg.
He noted Asia as a key area for Luxembourg fund activity as Europe continues to experience low growth.
“My intention is to support you [the Luxembourg fund industry] to further develop internationally to compensate for the uneven growth we see in the world,” he elaborated.
“A few billion people live in areas that are growing faster than Europe so let’s make sure we can all benefit and help each other. The world is interconnected and the fund industry is well placed to benefit from that.”