FSIL's yield stood at just 2.61%

The Luxembourg Intergenerational Sovereign Wealth Fund (Fonds souverain intergénérationnel du Luxembourg – FSIL) has published its financial statements for 2025, which recorded a return of 2.61%. These figures appeared in the Trade and Companies Register without the usual accompanying press conference from the Ministry of Finance. The fund’s total assets rose to €784 million, but annual profit fell by more than half compared with the previous period, amounting to €20.3 million against €41.9 million in 2024.

The main factor behind the modest results was the strict investment rules adopted at a political level back in 2020. The fund is obliged to invest exclusively in accordance with the criteria of socially responsible investment (SRI) and environmental, social and corporate governance (ESG). In practical terms, this means completely excluding entire sectors of the economy when selecting shares and prioritising ‘green’ bonds. Given the market conditions of 2025, such a strategy inevitably led to a loss of potential returns. Nevertheless, this policy protects those in charge from criticism regarding the unethical use of public funds.

The fund’s return of 2.1% is only marginally higher than the core inflation rate in the eurozone. Consequently, the real growth in the purchasing power of the fund’s assets was minimal. Furthermore, the FSIL’s yield lagged behind that of Luxembourg’s ten-year government bonds, which were trading at 3.125% at the end of the year.

An analysis of the portfolio reveals an excessive allocation to bonds, which stood at 43% at the end of the reporting period. Given the volatility of the debt market, losses on bonds were significant, and even strong performance in the equity market was unable to fully offset them due to ESG constraints.

In response to these challenges, FSIL’s management has approved a new asset allocation strategy. The plan is to reduce the proportion of bonds to 32%. At the same time, the fund intends to diversify its portfolio by including private equity and Bitcoin. Despite the current difficulties, the fund continues to grow: during 2025, the state transferred more than €62 million to its accounts, which is gradually transforming FSIL into a significant instrument of the country’s financial system. The gradual accumulation of capital and changes in risk management approaches should help the fund fulfil its long-term mission of ensuring financial stability for future generations.