Abstract

"The rise of the mutual fund global city network in the post war period (1945-1989)"

Valeria Giacomin, Bocconi University (valeria.giacomin@unibocconi.it), Matteo Calabrese, University of Luxemburg (matteo.calabrese@unibocconi.it)

As of December 2021, the value of the worldwide aggregate net assets of open-end funds amounted to USD 71 trillion, with the United States and Luxembourg as respectively the first and second larger issuers. This article concentrates on the origins of this industry in Europe and how mutual funds came to rely on a global city network centering on financial hubs such as Luxemburg and Belgium since the dawn of the second globalization. While a fund market progressively developed in Europe since the end of WWII, it then gradually re-shaped its organization in the next three decades by introducing new financial products and by forging stronger or new relationships with several international financial hubs. In this context, by the end of the 1980s, Luxemburg established itself as one of the most competitive platforms for investment funds in Europe. It achieved this position thanks to its long-term liberal approach to fiscal legislation of financial vehicles, and the international vocation of the city’s financial intermediaries. By using a body of Luxemburg’s auditing and banking data, and archival sources such as the Banque Lambert at the Belgian National Archives, this article reconstructs the emergence of a network of International Financial Centers (IFCs) and global cities involved in sales-purchases flows of funds’ shares between 1945 and 1989. It also focuses on the analysis of the emergence of tax avoidance linkages between the European fund market and a network of growing international Offshore Financial Centers (OFCs) such as Panama, Bahamas, and the Netherlands Antilles. So far, most studies in financial and business history concentrate on the history of individual funds or on the analysis of early mutual funds’ industries as they developed in the US and in the UK. This research, by using Luxembourg’s as a case study, applies instead a global perspective by investigating the understudied international ties between the rapidly growing European fund market and a global network of IFCs in the decades preceding the take-off of the second globalization.