The Association of the Luxembourg Fund Industry (ALFI) believes that the European ETF market holds significant potential for growth and development. As the largest center for actively managed funds and the second-largest domicile for ETFs in Europe, Luxembourg is looking to capitalize on the rise of active ETFs and active ETF share classes. To achieve this, it has introduced several measures to make the creation of these vehicles more attractive.
According to ALFI, active ETF share classes offer managers the opportunity to expand their range of traditional products, enabling investors to access established strategies with the added benefits of the ETF format.
In recent months, Luxembourg’s investment fund industry has worked closely with lawmakers and regulators to develop various initiatives aimed at enhancing the country’s appeal for ETFs.
First, on December 11, 2024, the Luxembourg Parliament approved Bill 8414, which exempts active ETFs from the subscription tax, starting in 2025. “The new law extends the subscription tax exemption, which currently applies to passive ETFs, to active ETFs,” ALFI highlights.
Second, on December 19, 2024, the CSSF published an FAQ allowing the deferral of the disclosure of an active ETF’s portfolio composition. According to ALFI, this information must be disclosed at least monthly, with a maximum delay of one month. They consider this new transparency regime to provide a safe harbor for actively managed ETF strategies while implementing an efficient approval process for ETF products.
“The new transparency and tax regime for ETFs domiciled in Luxembourg provides asset managers with an exceptionally attractive framework in Europe. The active ETF market is growing rapidly, and Luxembourg, Europe’s largest cross-border investment fund domicile, is well-positioned to leverage this momentum,” says Jean-Marc Goy, ALFI President.
In the opinion of Corinne Lamesch, ALFI’s Deputy Director and General Counsel, “Luxembourg has a proven track record in launching active ETF share classes within existing UCITS funds. By incorporating active ETF share classes into already established active strategies in Luxembourg, asset managers can diversify their distribution channels and expand their reach in global markets.”
