Luxembourg's hedge fund industry is expanding following regulatory changes made in response to growing investor demand.

The Association of the Luxembourg Fund Industry (ALFI) reports that recent regulatory changes include streamlined approval procedures for the domicile and administration of hedge funds.

The biggest improvement is allowing hedge funds to list on the Luxembourg Stock Exchange in direct competition with Dublin where hedge funds have been able to list for some time.

According to ALFI's chairman of new products committee Henry Kelly: "The authorities have sent a clear message that Luxembourg is a place to administer and domicile hedge funds."

Citco's fund services division is understood to be among those exploring the option to list funds on Luxembourg's stock exchange.

According to an ALFI survey, 42 hedge fund administrators are now active in Luxembourg, managing 56 billion euros at the end of June compared to 40 billion euros at the end of last year and 15 billion euros in 2001.

Assets managed by hedge funds in Luxembourg grew an average 30% per annum between 1998-2001. Since then growth has averaged 70% a year. These numbers compare with average annual growth of 25% since 1998.