Luxembourg and Ireland in Global Financial Networks: Explaining the structure of European Investment Funds

Authors: Sabine Dörry*, Luxembourg Institute of Socio-Economic Research (LISER), Michael Urban, University of Oxford, Dariusz Wójcik, University of Oxford
Topics: Economic Geography, Quantitative Methods, Regional Geography
Keywords: Luxembourg, Ireland, financial centres, global financial networks, investment funds, financial geography
Session Type: Virtual Paper
Day: 4/10/2021
Start / End Time: 11:10 AM / 12:25 PM
Room: Virtual 36
Presentation File: No File Uploaded

Using a unique database on investment funds and the conceptual framework of global financial networks, this paper examines the spatial structure of the European investment fund industry, with particular focus on Luxembourg and Ireland. Grounded in financial and economic geography, the paper shows how these countries became the leading investment fund domiciles through a mixture of structural factors and agency enabling a fast and flexible implementation of the European Directive on the Undertakings for the Collective Investment in Transferable Securities (UCITS) of 1985, and the cultivation of the investment fund industry ever since. In the process, Luxembourg and Ireland have built on and developed their functions as offshore jurisdictions and international financial centers, both sustained by their governments and regulatory agencies. The analysis of the functional structure of investment funds and their networked geography reveals the increasingly dominant position of London as the investment management center for the industry, and increasing concentration of control in large asset management firms, with US firms in the lead. Stripped to its basics, the geography of European investment fund networks is about large US asset management firms in the lead, creating and managing funds in Luxembourg and Ireland, and investing money through London, with the creation, management and investment conducted primarily by their own subsidiaries. As such, the rise of European investment funds can be seen as an example of European financial integration through Americanization.

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