The Intergenerational Sovereign Wealth Fund of Luxembourg (FSIL), often described as the country's sovereign or future fund, published its 2025 results in the Trade and Companies Register on 16 April. However, the figures were not announced through a press conference or a press release from the Ministry of Finance.
The results do not suggest that the fund has anything to hide. The FSIL ended 2025 with a return of 2.61%, a modest result that is nothing to boast about, but not a failure either.
One reason for this performance lies in the fund's investment rules. The FSIL invests according to Socially Responsible Investing (SRI) and/or Environmental, Social, and Governance (ESG) criteria.
In practice, this means that certain sectors are excluded when selecting equities, while similar criteria are applied to bond issuers. The fund also gives preference to so-called green bonds.
In a year such as 2025, this focus inevitably came at a cost in terms of performance. At the same time, it also means that the politicians responsible for the FSIL are less likely to face difficult questions about where public money is being invested.
The shift towards more sustainable investments goes back to an initiative launched in the Chamber of Deputies at the end of 2020.
When measured against the loss of purchasing power, however, a 2.61% return leaves little room for comfort. According to Eurostat, inflation stood at 2.1% in December when energy and food were excluded.
If the fund's mission is to achieve either inflation around the European Central Bank's 2% target or the return on 10-year Luxembourg government bonds, the result is only just acceptable. In December, the state issued a 10-year bond at 3.125%.
A different strategy could have produced stronger results, particularly if the fund had placed less emphasis on ESG criteria. However, this is not a decision made by the fund managers themselves, as this approach has been required since summer 2020.
Another point of criticism could be the pace at which the fund reduced its bond allocation, which still stood at 43% at the end of the year.
The FSIL has since adopted a new allocation strategy, which will include private equity and Bitcoin. Under the new strategy, bonds are expected to account for only 32% of the fund's portfolio, down from 43% at the end of 2025.
Questions could also be raised about the duration of the bonds held by the fund. In a difficult year like 2025, bond-related losses were significant, and even a strong equity market was not enough to fully offset them, partly due to the fund's ESG and SRI preferences.
In 2025, the state transferred more than €62 million to the FSIL. The fund now holds over €784 million, meaning it is gradually becoming a more significant financial instrument. Its profit for 2025 stood at €20.3 million, down from €41.9 million the previous year.
