Luxembourg’s fund regulator found managers slow to correct abnormally high charges. Wider evidence suggests the most serious governance failures may be isolated even as active funds carry a broader cost premium. Data from Fitz Partners meanwhile shows that in particular administration fees in Luxembourg stand out in compared to Ireland.
The CSSF’s 2025 annual report published on September 4 said it examined a limited number of managers selected because their funds had “abnormally” high costs compared with similar products. Most had conducted insufficient reviews and delayed corrective action.
ALFI chief executive Serge Weyland cautioned against drawing conclusions about the wider market. He described the cases as “a few outliers” and said he was “not overly concerned” by the CSSF finding. “The setup we have in Luxembourg is sound,” he told Investment Officer.
The CSSF said its intervention resulted in contract renegotiations and significant fee reductions. Some funds were merged with cheaper products or liquidated. The regulator did not identify the managers, quantify the charges or say whether investors were compensated. Costs and fees remain a supervisory priority in 2026.
Active premium
London-based consultancy Fitz Partners, at the request of Investment Officer, compared 2,290 Irish and Luxembourg retail funds on a like-for-like basis. It found consistently higher administration fees in Luxembourg. For equities, average administration charges were 0.225 percent in Luxembourg and 0.139 percent in Ireland. For bonds, they were 0.157 percent and 0.098 percent. The difference is “not negligible,” said Fitz Partners director Hugues Gillibert.
Higher administration expenses did not translate into uniformly higher overall costs. Luxembourg equity funds had average ongoing charges 11.5 basis points above their Irish peers. Luxembourg bond funds were 9.1 basis points cheaper because their lower management fees more than offset the administration premium.
Morningstar found a wider pricing difference. Its analysis covered 84,812 share classes across 23,698 EU funds. Median ongoing charges for active Luxembourg funds were 1.15 percent, against 1 percent elsewhere in the EU. On an asset-weighted basis, Luxembourg stood at 1.11 percent, compared with 0.85 percent elsewhere.
“Overall, Luxembourg funds are over-represented among the most expensive funds within their Morningstar categories,” Eugene Gorbatikov, analyst in manager research at Morningstar, told Investment Officer. At fund level, 31.3 percent were in their category’s most expensive quartile and 13.6 percent in the highest-cost decile. Luxembourg active funds remained approximately 17 basis points more expensive after Morningstar controlled for category, size and investor base. No meaningful premium was found among passive funds.
Weyland said domicile comparisons can still obscure differences in products and clients. Luxembourg is heavily oriented toward actively managed funds sold to retail investors through wholesale networks, while Ireland has more institutional business and ETFs. “When you compare Ireland to Luxembourg, you are comparing apples to pears,” he said.
ESMA data show the grand duchy is indeed more retail-focused than Ireland. Luxembourg held 2,392 billion euros in retail UCITS assets at the end of 2024, against Ireland’s 915 billion euros. Active funds represented 86 percent of Luxembourg’s retail assets and 31 percent of Ireland’s. ETFs accounted for 12 percent and 64 percent, respectively.
Cross-border distribution adds another layer. ESMA estimates that distribution represents 48 percent of investors’ total UCITS costs. ICI found that cross-border equity UCITS charged an average 1.31 percent in 2025, against 1.18 percent for single-country products. For fixed-income funds, the figures were 0.89 percent and 0.78 percent. Weyland added that fixed operating expenses must be spread across fewer assets when a fund contracts. “As assets shrink, the total expense ratio is higher,” he said.
Investor test
Complexity can explain higher charges. It does not by itself make them proportionate. ESMA said managers should compensate investors when costs are found to be undue. Sébastien Commain, senior research and policy officer at Brussels NGO Better Finance, said repaying a fund may not fully compensate investors because the money removed could no longer generate returns.
Weyland said fee scrutiny should not obscure the larger cost of Europeans remaining in cash. Using an illustrative investment return of 6 percent and a savings rate of 0.5 percent, he put the annual opportunity cost at 550 basis points. The comparison does not account for investment risk. “The biggest cost by far is that they did not invest,” he said.
