Enticed by largely untapped and growing markets overseas, mutual fund companies are building assets in Europe, continuing a trend that began in the mid 1990's, according to a study released by a Luxembourg company that tracks European sales.

U.S. fund companies increased their assets domiciled in Luxembourg by $146.1 billion during the past five years, according to data released April 26 by Fitzrovia International. U.S. funds held $165.5 billion in Luxembourg-based assets in 2000 compared with $19.4 billion in 1995.

Luxembourg is a center for non-European fund companies because of its lax regulations on foreign companies that domicile their funds there. A company that bases its fund in Luxembourg can more easily gain permission to market its products in most European countries, said Ed Moisson, a spokesperson for Fitzrovia.

That ease of access has attracted many U.S. companies to Luxembourg, where U.S. firms increased their assets by $56.4 billion from 1999 to 2000 alone, and now hold 20 percent of the city's total fund dollars, he said.

Tax incentives and the distinction of being Europe's only other city to rival Luxembourg's loose regulatory policies has attracted many U.S. companies to Dublin as well. U.S. companies increased assets in that city by $58.2 billion in five years and now hold a total of $62.2 billion or 35 percent of all assets domiciled in Dublin, according to Fitzrovia.

"All of the major fund companies have launched major, major efforts to build global distribution and much of that is focused on Western Europe," said Burton Greenwald, president of B.J. Greenwald Associates of Philadelphia, a consulting firm to the fund industry.

With roughly 50 percent of all U.S. households invested in mutual funds, companies are looking to Europe's middle class as an untapped market, Greenwald said.

"In Europe - other than the U.K. - there's virtually no market penetration to speak of," he said. "That's a huge opportunity."

Technology, and particularly the Internet, continues to dissolve geographical barriers for companies making it easier to service accounts and market products abroad, said Greenwald. European families increasingly learn about investment opportunities on cable TV and on the Web and look to the U.S. for consumer investment products, he said.

UBS Fund Services is the largest administrator of funds of any company registered in Luxembourg in 1999, with some $85.3 billion in assets. J.P. Morgan Chase of New York followed with $71.6 billion administered there. UBS representatives were not available to comment and J.P. Morgan Chase representatives did not return calls. U.S. companies' growing presence in Europe is also apparent in that J.P. Morgan Chase is the largest custodian of assets in Luxembourg, with $87.5 billion, Fitzrovia said.

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