Channeling the capital of others: How Luxembourg came to be asset managers’ “plumber” of choice

Abstract

This article analyzes the development and growth of the administrative practices and structures necessary for leading asset management companies and other firms to create and sell their “product” of choice: investment funds. To investigate this problematic, I turn to the Grand Duchy of Luxembourg, which currently serves as the domicile for over $5 trillion in fund assets. Since the 1980s, Luxembourg's “offshore” financial center has become a leader in providing the “plumbing,” to quote an interviewee of mine, for worldwide asset manager capitalism. On offer in Luxembourg to asset managers are the routine-but-essential tasks such as domiciliation, compliance, calculation of net-asset values, and distributions. After a brief history of the rise of asset manager capitalism and Luxembourg's role in it, I detail the strategies by which the Grand Duchy's financial-center professionals collaborate to devise ways to service the ever-increasing varieties of investment funds for sale today. Having used the Luxembourg financial center as a case study, I conclude the article by arguing that, in order to understand contemporary asset manager capitalism, researchers should pay as much attention to its “collaborating administrators” in locales like Luxembourg as they currently do to its “competing titans of industry” on Wall Street or in the City of London.