10 interview
The last edition of the Alfi/NICSA Conference was the first to take place in the new Conference Center in Luxembourg-Kirchberg.
8 { Isn’t this economic aspect also a key question
Shariah compliant investment funds
Luxembourg: an ideal location Luxembourg is not a newcomer to the world of Islamic finance. As far back as in 1983, Luxembourg was the chosen domicile of the first Shariah-compliant insurance company in Europe. The Luxembourg Stock Exchange was the first European stock exchange to list a sukuk issue. Luxembourg is rapidly becoming a hub for Shariah-compliant investment funds, with promoters keen to harness the country’s strengths and expertise in cross-border fund distribution. The figures speak for themselves: Ernst & Young’s 2009 Islamic Funds & Investments Report ranks Luxembourg fourth as a domicile for Shariahcompliant investment funds, and it is the only non-Muslim country in the top 5. As Luxembourg continues to thrive as a jurisdiction for Islamic investment funds, Islamic awareness days were arranged by local finance industry bodies (IFBL, ALFI and Luxembourg for Finance) on 5 and 6 May with the aim of increasing knowledge and know-how on Islamic finance in the financial centre. This event was an overwhelming success with over 250 participants. Fernand Grulms, CEO of Luxembourg for Finance, addressed several messages from the Minister of the Treasury and Budget to an audience including local professionals as well as Islamic scholars and Islamic finance experts from across Europe, the
Middle East and Asia: - The Luxembourg Government is convinced that Islamic finance offers attractive scope for development. For this reason, in April 2008, Minister Frieden set up a task force bringing together key parties in Islamic finance. Its mission: to look at how Islamic finance can be further developed in Luxembourg. - The Government has asked the tax authorities to look into features specific to Islamic finance deals and come up with proposals to ensure the tax neutrality of these transactions compared with traditional banking and financial transactions. - Likewise, the Government is examining to what extent Islamic financial products, such as sukuk, could be used for funding purposes by the Government or by entities belonging to the Government. - The Government supports the Luxembourg Central Bank’s application to become the first non-regional associate member of the Islamic Financial Services Board, the inter national regulator of Islamic financial markets. The newly elected government made the development of Islamic Finance one of its priorities. This strong support from the authorities will certainly bring some interesting new developments to the local Islamic Finance scene in the coming months.
in the positioning of products and their market competitiveness? “In the future all products in fact need to be more competitive and better adapted to needs. Costs borne by investors need to come down. This is part of the priorities of the action plans we have established. Firstly we must build on all the economies of scales that are made possible by the implementation of the Ucits IV directive, which was ratified by the Council of the European Union, last June. The States now have two years to transpose it into their national legislation. The simplification of the notification procedure, the cross-border fund mergers or the master feeder principle are all measures that will enable fund promoters to envisage genuine economies of scale which they can then pass on to investors. In addition to product transparency, certain distribution or management costs may be reduced by these new mechanisms that will be put in place. These reductions will, evidently, benefit investors. In addition, we believe that a private placement regime for Ucits funds should be introduced; knowing that with the AIFM directive, there will be one for non-Ucits products. It is essential that a Ucits fund which, for legitimate reasons, does not wish to be registered in all Member States and wants to have a private distribution, can be subjected to specific harmonised rules for such a distribution without this triggering the need for a costly registration. How can you best satisfy, at the same time, the demands of investors who are increasingly turning towards new products that are currently very popular? “Indeed, we need to concentrate on these new investors’ requests, like Islamic finance, ETFs or socially responsible funds. At our level, we must think about how Luxembourg can position itself in the future as an ideal platform for welcoming these niche products. This is also true } 12 for pension pooling vehicles.
paperjam | September-October 2009 | Special ALFI & NICSA forum
04_6_14_Interview.indd 10
11.09.2009 16:55:08 Uhr