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Foreign Portfolio Investment in Luxembourg

Foreign Portfolio Investment in Luxembourg

Luxembourg is known as one of the largest financial centers in the world which is why it attracts a great number of foreign investors every year. This has also led to foreign investors to hold a large number of financial assets which contribute in a great measure to Luxembourg’s economy. These financial assets represent Luxembourg’s Foreign Portfolio Investment (FPI). The term is close to Foreign Direct Investment (FDI), however, the differences between them reside in the object of purchase of the investor.

Our lawyers in Luxembourg can offer more information on the difference between FPI and FDI. They can also inform foreign enterprisers about the legislation favoring foreign investments in Luxembourg.

What is Luxembourg’s Foreign Portfolio Investment?

The Foreign Portfolio Investment represents a group of financial assets which is purchased by an investor or group of investors in Luxembourg. The Grand Duchy’s FPI is mainly made up of:

  • –          stocks;
  • –          bonds;
  • –          securities;
  • –          cash.

The FPI is important for Luxembourg as it shows the interest of foreign professional investors for the country’s investment funds’ market. These funds are usually administered by managers. Another important aspect to consider is that the investor in a FPI is not involved in the management of the fund. The Foreign Portfolio Investment is registered in Luxembourg’s balance of payments on a yearly basis.

We invite you to watch our video on Luxembourg’s Foreign Investment Portfolio:

Why is Luxembourg’s FPI important?

Compared to other investments, the Foreign Portfolio Investment offers a high degree of liquidity, as most of the money goes into the Luxembourg Stock Exchange. The FPI also contributes to the economy, having a positive effect on Luxembourg’s economy. A high foreign investment portfolio usually triggers a quick economic development of the economy.

In 2016, the total income resulted from the Foreign Portfolio Investment rose by more than 100 billion US dollars, according to the Luxembourg National Bank. American investors represent the largest share of the total number of foreign investors purchasing financial assets in Luxembourg. European investors from Germany and Denmark are also representative for this share.

For details about the importance of the FPI, please contact our Luxembourg lawyers.