The hedge fund sector in Luxembourg saw phenomenally strong growth in 2005 as the country attracts large interest from global hedge fund gro...

The hedge fund sector in Luxembourg saw phenomenally strong growth in 2005 as the country attracts large interest from global hedge fund groups.

The sector recorded overall growth of 151 per cent – to €102 billion ($120.8 billion) of assets under management, according to the Association of the Luxembourg Fund Industry. The total figure combines both pure hedge funds and funds of hedge funds.

In 2005, ALFI reported that the number of hedge fund portfolios under administration in Luxembourg grew to 264 from just 39 in 2004.

“The increase in portfolios is significantly larger than the net growth in new vehicles, suggesting that most new business has come from existing clients,” according to the ALFI study on the hedge fund sector.

ALFI added: “Another point worth highlighting is that the percentage of portfolios both domiciled and administered in Luxembourg has grown steadily over the last two years to reach 75 per cent; indeed the net growth in new portfolios is entirely attributable to onshore products.”

Assets under administration in Luxembourg hedge funds grew by 130 per cent in 2005 to reach €29.7 billion. Onshore activity accounts for the lion’s share of this growth, with assets both domiciled and administered in Luxembourg growing by 153 per cent over the year to reach €26 billion or 87.6 per cent of all business.