Luxembourg is the uncontested leader in the cross border distribution of undertakings for collective investment (UCI). Three out of every four four undertakings for collective investment in transferable securities (UCITS) sold into at least three countries are domiciled in Luxembourg.
Distribution channels vary from one promoter to another. Typically, UCI are distributed by bank branch networks, independent financial advisers, life assurance companies or directly by their management company.
Equally, a UCI can hand over the distribution of its units or shares to a distribution agent. Situated in Luxembourg or elsewhere, these professional distribution agents offer a range of service levels.
If the distribution agent acts as a simple intermediary between the investment fund and the investor, its role is limited to the purchase and redemption of shares and units.
They may also offer a nominee service, acting on behalf of the investor. In this case, they take full responsibility for the relationship between the fund and the share-/unitholder, including communications with the latter.
Other distributors act as market makers and buy shares with a view to reselling them directly to their clients. In this case, the sale and repurchase of shares is transacted with the professional intermediary.
In Luxembourg, a distributor of UCIs must obtain the status of Professional of the Financial Sector (PSF).
In this context it is worth noting that the regulatory authority has published a certain number of rules concerning the marketing of investment funds, notably in the area of documentation and the sales prospectus.
A large number of Luxembourg UCIs are quoted on the Luxembourg stock exchange.