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      Fund Management

      When referring to the "management" of an undertaking for collective investment (UCI), the law means portfolio management (in line with the investment policy defined in the asset management rules and in the exclusive interest of shareholders), risk management as well as the administration and distribution of the fund.

      For the purposes of this page, however, the expression "management" is taken to mean the asset allocation of the investment portfolio and risk management, while the other two aspects (administration and distribution) are covered under other headings. The rules are not the same for each.

      For example, in contrast to the central administration of a UCI which must be situated in Luxembourg, portfolio management can be undertaken by an entity based in another jurisdiction. Hence a UCI investing in Japanese equities may subcontract the management of its portfolio to experts based in Tokyo rather than doing this from the fund domicile.

      In Luxembourg there are active fund managers (where investment decisions are based on a rigorous asset analysis and selection process) and passive asset management (where the portfolio simply reproduces a financial index).