Despite tightening regulations due to the economic downturn and in the wake of the high profile Madoff ponzi scandal, Luxembourg hopes to gain an advantage over even more highly unregulated investment centers, the chairman of a leading funds association there said.

If there is one lesson to be learnt from the financial crisis is that there is huge value in good and safe regulation, Claude Kremer, Chairman of the Association of the Luxembourg Fund Industry told Reuters in a Monday report.

Those exotic centres that are doing unregulated funds will necessarily see a shift of business toward regulated centres. And there Luxembourg can play a really important role.

Assets in Luxembourg managed funds have fallen by a quarter since their peak in 2007 of 2 trillion euros ($2.7 trillion).

The recent Bernard Madoff Ponzi scandal also resulted in a high profile loss of $1.7 billion mostly at the Luxalpha mutual fund.

In addition, the U.S. and Germany have been pushing nations with less stringent financial system regulations to boost their oversight.

The nation manages $1 trillion, or about 14 percent of the wealth held abroad. Much of that is from funds in France and Germany.

Recently French Finance Minister Christine Lagard asked the European Union to review the rules governing mutual funds in the wake of the Madoff scandal, a move which Luxembourg opposed, saying that incident was an isolated situation.

In March, the country allowed banks to give some tax-related client information to foreign authorities seeking to catch tax-evaders.

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