Paperjam Plus - Alfi 09/2018

PA P E R JA M . L U • S E P T E M B E R /O C TO B E R 2018

ALFI

and thriving

ALFI, building a global brand in 30 years How to attract new customers (and keep existing ones)?

Our contributors’ analysis of the fund distribution market

Stéphane Badey Partner, Arendt Regulatory & Consulting

Said Fihri Associate partner KPMG

Kai Braun Alternative advisory leader EY Luxembourg

Naturally different.

PHOTO / CHÂTEAU D’EAU DE LA CLOCHE D'OR / BUREAU D’ARCHITECTURE JIM CLEMES ASSOCIATES

Are you ideally placed to respond to new regulatory opportunities and challenges around the world ?

We are.

30 Offices

2 792 Lawyers linklaters.lu

EDITORIAL

Three decades of ALFI Denise Voss Chairman, ALFI

T

ILLUSTRATION Jan Hanrion (Maison Moderne)

he Association of the Luxembourg Fund Industry has been the face of the investment fund sector in the Grand Duchy for 30 years. It has been representing and promoting the sector since 1988, both at home and around the world, for the ultimate benefit of investors.

2010. ALFI helped to position Luxembourg early as a specialist domicile in this field, currently managing 45% of European RI fund assets.

SNAPSHOT OF THE INDUSTRY Many of today’s fund industry trends are brought about by regulatory and technological developments.

PRESENT IN LUXEMBOURG AND ABROAD Each year, ALFI hosts dozens of conferences and speciaCompliance with the framework of rules governing the list events. Most prominently among them feature three industry is a moving target that keeps everyone on their flagship events held in Luxembourg – the conferences on toes. Encouraging signs are initiatives aimed at further Global Distribution, European Asset Management and market harmonisation and lower distribution barriers, PERE are agenda items the fund community never misses. which ALFI welcomes.

Outside Luxembourg, the association has represenFinTech is evolving fast. The many uses of blockchain tative offices in Brussels and in Hong Kong. It also regu- and other innovative technologies in the fields of digital larly organises roadshows, travelling from continent to distribution and investment fund operations are changing continent with a busy seminar agenda that attracts fund the way investment funds work. Artificial intelligence is experts across the globe. advancing quickly and robo-advice has long ceased to be science fiction.

UCITS, ALTERNATIVES AND RESPONSIBLE INVESTING ALFI has accompanied – and has driven – the evolution ALFI IN THE FUTURE of the Luxembourg fund industry for over a generation The new generations of investors require new approaches now. It has seen UCITS rise to become the successful in asset management. ALFI is looking at the best ways to world brand that it is today, and Luxembourg become ensure financial literacy and investor education, making the largest cross-border fund hub; the domicile of choice these critical topics the main theme of its jubilee celebrations. for two out of three UCITS distributed internationally.

Our ambition of helping our members adapt to change The entry into force of the Alternative Investment Fund and thereby ensure Luxembourg investment funds can fulfil Managers Directive (AIFMD) in 2013 has led to further their potential of serving investors and the economy remains increasing assets in Luxembourg-domiciled alternative at the core of ALFI’s mission today and in the future.  investment funds. As such, the fund association is witnessing continued growth in the number of assets of private equity and real estate funds.

Responsible investment funds have established themselves firmly as a pillar of the industry, with assets under management of RI funds in Europe nearly doubling since September/October 2018 — ALFI —

—3

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CONTENTS

September/October 2018

OUR CONTRIBUTORS

32 Jim Fitzpatrick (NICSA) An evolution in distribution

36 KAI BRAUN (ey) From process re-engineering to digitalisation 34 Stephen bird (Citi) The future is open

40 MARC NOIRHOMmE (deloitte) Fund distribution opportunities for European asset managers in Asia

38 SAID FIHRI (kpmg) Transforming the fund industry into a digital hub

42 Raymond Groen In’t Woud (kneip) The manufacturers & distributors’ roles

52 ann doherty (j.p. morgan) With great growth comes great operational responsibility 46 Mario mantrisi (arendt) No ESG, no performance?

56 stéphane badey (arendt) Specific AML provisions for investment fund managers

54 laurent marochini (sgss) Banks and the challenge of technology

60 maxime aerts (fundsquare) Future-proofing the fund industry

62 silke bernard (linklaters) Substance – Quo vadis?

September/October 2018 — ALFI —

—5

Banque de Luxembourg, société anonyme – 14, boulevard Royal – L-2449 Luxembourg – R.C.S. B5310

“How do you manage the increasing complexity in the fund industry?

You don’t. We do.”

Please contact Germain Birgen, Head of Business Development, Professional Banking +352 49 924 4949.

CONTENTS

ALFI September/October 2018 Anouk Agnes

Building a global brand in 30 years One could easily think that Luxembourg was always destined to be the world leading hub for cross-border fund distribution, setting the pace in an European industry with €16trn assets under management. Yet it didn’t feel that way 30 years ago when the Association of the Luxembourg Fund Industry (ALFI) was founded.

Deputy director general Anouk Agnes makes an assessment of three decades of ALFI and fund distribution and their perspectives.

16 On the radar

Tips

30 years and the fund industry has never felt better.

Have a quick glance at Luxembourg’s investment funds key figures.

10 tips from independent director and attorney at law Charles Muller to attract new customers and keep existing ones.

30 years of success

08

Attract new customers…

24

Next steps

“Careful! Change of course!”

Keith O’Donnell, founding and managing partner of Atoz Tax Advisers, has answered the question “How do you see the immediate future of the Luxembourg industry?”

66

Agenda

Behind the scenes

Alfi Global Distribution Conference 2018

Muffled atmosphere

Have a look at the programme of the 27th edition of ALFI’s event, taking place on 25-26 September at the European Convention Center in Kirchberg.

10

The International Bank in Luxembourg let Paperjam in its trading room where 60 people are working in a muffled atmosphere.

30 September/October 2018 — ALFI —

—7

ON THE RADAR

30 years of success raif

a s s e t s m a n ag e m e n t

THE 10 LARGEST INVESTMENT FUND DOMICILES IN EUROPE With more than 4,000 billion euros of assets management in June 2018, Luxembourg retains its position as the leading fund domicile in Europe and holds 26.6% of the UCIs market shares.

15.3

2.1 United Kingdom 1,646,058

10.5

12.3 France 1,929,115

Total assets under management (Europe):

Luxembourg 4,159,614

Germany 2,038,192

3.5 Switzerland 550,799

2.1 Italy 320,767

15,623,131 million euros as of December 2017

substance On 23 August, the CSSF published a new circular which sets new requirements on investment fund managers that focus on substance, governance and organisation.

The aim is to provide further details on certain conditions of approval (shareholding structure, capital requirements, management bodies, central administration and governance arrangements). For instance, it states that a member of the GFI’s management can no longer hold more than 20 positions in regulated entities and operating companies.

brexit

+171% Between 2008 and 2018, net assets under management of Luxembourg-domiciled funds increased rapidly. They went from 1.580 billion euros to 4.227 billion in the space of 10 years. And the upward trend is still on.

“ Brexit has increased competition, particularly for risk and compliance roles. This does have an impact on salaries. Companies do have to pay more.”

Tom Théobald, deputy CEO of Luxembourg for Finance Tom Théobald has confirmed to Ignites Europe in mid-August that Brexit has a strong upward impact on wages in the investment fund sector.

According to the Ignites survey, some salaries have increased by 30%.

— ALFI — September/October 2018

PHOTO Maison Moderne (archives) SOURCE ALFI

net a ssets

cssf circul a r

13.0

26.6

7.1 Others 1,102,764

Denmark 300,824

5.4

366

Allowing a lighter procedure and a faster introduction to the market, the Reserved Alternative Investment Funds (RAIFs) have been an obvious success since their introduction in July 2016. In March 2018, they were already 366.

1.9 Netherlands 843,488

Ireland 2,396,089

8—

Sweden 335,421

Asset Management Wealth Management Asset Services

Geneva Lausanne Zurich Basel Luxembourg London Amsterdam Brussels Paris Stuttgart Frankfurt Munich Madrid Barcelona Turin Milan Verona Rome Tel Aviv Dubai Nassau Montreal Hong Kong Singapore Taipei Osaka Tokyo assetservices.pictet

AGENDA

A S O F 12

SEPTE

TU. 25/09

TH 27 S ’ I F L A GL OB A LT ION BU DIS T R IE R E NCE CONF NDA AGE MBER

Morning 3 DECADES OF GLOBAL DISTRIBUTION

08.00-09.00

10.30-10.55

COFFEE BREAK

REGISTRATION AND

BREAKFAST

10.55-11.40

09.00-09.25

LOOKING FORWARD TO ENHANCED CROSS-BORDER

OPENING

FUND DISTRIBUTION

One of the aims of the capital markets union project is to foster growth by reinforcing the role of capital markets, investment funds and asset managers, in the financing of the European economy, too dependent on bank financing.

In this context, the European Commission has made proposals to remove the remaining barriers to cross-border distribution of funds. How will these impact the distribution processes?

Will integration help the cross-border investment fund industry to seize the opportunity and contribute more effectively towards economic growth? If so, which are the products and who are the clients?

A debate between the Commission and the industry.

WELCOME AND INTRODUCTION Denise Voss, chairman, Association of the Luxembourg Fund Industry (ALFI) Nathalie Reuter, master of ceremony, TV presenter and journalist, RTL Télé Special appearance by: Jacques Santer, Luxembourg minister of finance (1979-1989), prime minister of Luxembourg (1984-1995), president of the European Commission (1995-1999) Interviewed by: Nathalie Reuter

Moderator: Said Fihri, associate partner, KPMG

09.25-09.30

Panellists: Paulina Dejmek-Hack, member of the cabinet of the president, financial advisor, European Commission Erich Gerth, partner, CEO, BlueBay Asset Management Adam Lessing, head of Central and Eastern Europe, Fidelity International

CHAIRPERSON’S

INTRODUCTION David Suetens, executive vice president, country head, State Street Bank

09.30-10.30 LOOKING BACK AT THREE DECADES OF THE UCITS GLOBAL

SUCCESS STORY

UCITS are recognised worldwide as stable, well-regulated and high-quality investment products with significant levels of investor protection. Distributed in 70 countries around the world, they are considered a true European export hit. Leading asset managers look at how the cross-border fund business took off 30 years ago on the back of the UCITS directive and at how it has developed and diversified since, and reflect on the importance of global funds for the economy.

Introduction keynote speech: David Wright, chairman, Eurofi

10 —

Panel discussion: Moderator: Michael Ferguson, vice chairman international affairs ALFI and wealth and asset management leader, EY Panellists: Ann Doherty, managing director, regional sales executive, investor services – EMEA, J.P. Morgan Sheila Nicoll, head of public policy, Schroders Investment Management Burkhard Ober, head of public policy, Allianz SE David Wright, chairman, Eurofi

— ALFI— September/October 2018

11.40-12.25 DELEGATION, “THIRD COUNTRIES”, BREXIT...

QUO VADIS, DISTRIBUTION OF EU FUNDS?

Delegation of certain asset management functions to a company’s headquarters, other group companies or specialist third-party asset managers, with the decision-making process and risk oversight remaining in the country from which delegation takes place, is a tried and tested practice in the European and international fund industry.

It is important to third-country asset managers of European funds and it benefits the end investor by providing access to local asset management expertise. Brexit, coupled with the “ESA Review” proposal, have put the delegation model at the core of heated discussions.

How are these perceived outside the EU? What is the way forward? A regulators debate.

Moderator: Freddy Brausch, partner, Linklaters LLP, and vice chairman national affairs, ALFI Panellists: Christina Choi, executive director, Investment Products, Securities and Futures Commission (SFC) Nick Miller, head of asset management, supervision, Financial Conduct Authority (FCA) Claude Marx, director general, Commission de Surveillance du Secteur Financier (CSSF) Kian Navid, policy officer – Investment Management, European Securities and Markets Authority (ESMA)

12.25-12.30 CHAIRPERSON’S WRAP-UP AND

CLOSING REMARKS 12.30-14.15

LUNCH

IN THE EXHIBITION AREA KINDLY SPONSORED BY EY

TU. 25/09

AGENDA

afternoon PROMISING AND FUTURE DISTRIBUTION MARKETS

13.30-14.00

15.15-15.30

17.05-17.15

SHORT & SHARP STAGE –

SERVING CLIENTS’ INTERESTS: THOUGHTS FROM A GLOBAL

MASTER OF CEREMONY AND CHAIRPERSON’S

PRIIPS ISSUES 9 MONTHS AFTER? YOU GOTTA BE KIDDING

Corinne Prinz, senior associate, Arendt & Medernach Ismaël Fadiga, manager, Arendt Regulatory & Consulting

14.15-14.20 CHAIRPERSON’S

INTRODUCTION Michèle Eisenhuth, partner, Arendt & Medernach

14.20-14.35 THE MAP OF HOT AND COLD SPOTS OF GLOBAL FUND

DISTRIBUTION

An overview of fund flows and market opportunities around the world Barbara Wall, director EMEA Insights, Broadridge Financial Solutions, Inc.

14.35-15.15

FOCUS ON

LATIN AMERICA

Key developments in the region, including recent amendments to pension fund regulations, offer new distribution opportunities for UCITS and alternative fund managers, as well as improved choice for local investors.

A deep dive into local trends and regulatory changes.

Moderator: Olivia Moessner, partner, Elvinger Hoss Prussen Panellists: Jose Carlos Doherty, CEO, Brazilian Financial and Capital Markets Association (ANBIMA) Guillermo Arthur, president, International Federation of Pension Funds Administrators (FIAP) Tarik Ramirez, CIO, Sura Investment Management Mexico

WEALTH MANAGEMENT GIANT

WRAP-UP AND CLOSING REMARKS 17.15-17.35

DISTRIBUTION

Stephen Bird, chief executive officer, Global Consumer Banking, Citi

ACHIEVEMENT AWARDS BY BROADRIDGE (FORMALLY MACKAYWILLIAMS) ALFI is proud to host and looking forward to the second edition of this unique yearly overview of distributor-centric trends, dynamics and strategies.

Diana Mackay, managing director – Global Distribution Solutions, Broadridge Financial Solutions

15.30-16.00

COFFEE BREAK

AND VISIT OF THE EXHIBITION AREA

16.00-16.40

FOCUS ON

17.35-19.00

COCKTAIL

SOUTHEAST ASIA

KINDLY SPONSORED BY KPMG

The fund and asset management industries in Southeast Asia are growing significantly.

The panel presents new opportunities in the region, including in Thailand, Malaysia, Singapore and the Pacific.

Voravan Tarapoom, chairman of executive board, BBL Asset Management Nicholas Maton, managing director, HSBC Securities Services Luxembourg Anthony Simcic, CEO, Bank of Singapore Wealth Management

16.40-17.05 A DISCUSSION WITH

NICSA AND HKIFA

ALFI talks to its conference partners, NICSA and HKIFA, about important developments in their respective markets, amongst others, the progress of Asian passporting schemes or fintech in the US.

Moderator: Camille Thommes, director general, Association of the Luxembourg Fund Industry (ALFI)

Panellists: Sally Wong, CEO, Hong Kong Investment Funds Association (HKIFA) Jim Fitzpatrick, president, National Investment Company Service Association (NICSA)

September/October 2018 — ALFI —

— 11

WE. 26/09

AGENDA

08.00-09.00

Morning TOOLS TO MAKE DISTRIBUTION EASIER

10.15-10.45

COFFEE BREAK

REGISTRATION AND

BREAKFAST

10.45-11.25

DISTRIBUTION SUPPORT:

09.00-09.10

OPENING

WELCOME AND INTRODUCTION

THE PLAN AND THE REALITY

Nathalie Reuter, master of ceremony, TV presenter and journalist, RTL Télé

What improvements to the distribution processes are expected from recent regulatory and technological changes?

How do they compare to the realities on the ground and how is the role of the asset manager evolving in this context?

MiFID II and PRIIPS: first stock-taking Advice and/or robo-advice: is technology changing business models?

The digital evolution of fund distribution business How is the role of the asset manager evolving in this context?

09.10-09.15 CHAIRPERSON’S

INTRODUCTION David Claus, managing director & Luxembourg country executive, The Bank of New York Mellon

Moderator: Raymond Groen in’t Woud, product director, Kneip

09.15-09.35 TRANSFORMATIONAL

TECHNOLOGY

Panellists: Karine Szenberg, head of Europe and country head of France, Schroders Gebhard Giselbrecht, COO, Credit Suisse Asset Management Ugo Sansone, general manager – regional manager, Allfunds Bank International

Keynote speech on FinTech for distribution Frederik Gregaard, head of digital transformation, PwC

09.35-10.15

FINTECH SOLUTIONS FOR AML

AML is a challenge for distributors of investment funds, and fintech offers solutions to ensure compliance with applicable regulation, in particular client identification requirements.

What are the technologies that offer the most potential in this regard and how will they change the industry?

What are the existing obstacles to their implementation?

12 —

Moderator: Cristina Ferreira, head of regulatory solutions and innovation, State Street Bank Luxembourg SCA Panellists: Karine De Bondt, COO, i-Hub Daniel Couldridge, AML due diligence manager, Investec Asset Management Christian Gillot, CEO and founder, Tetrao

— ALFI— September/October 2018

11.25-12.15

DOES SUSTAINABILITY HELP YOU SELL?

According to the EU Commission’s recent proposals, client’s sustainability preferences need to be taken into account when offering a product. Consequently, the matching product needs to be identified and available.

How to go about this? Is a “green” or “social” product making things easier?

Panellists debate these (provocative) questions.

Moderator: Martijn Oosterwoud, head of SI investment specialists, UBS Asset Management Panellists: Ana Harris, global head of equity portfolio strategists, indexing, State Street Global Advisors Robert de Guigné, head of ESG solutions, Lombard Odier Investment Managers Mathieu Maurier, country manager, Société Générale Securities Services

12.15-12.20 CHAIRPERSON’S

WRAP-UP 12.20-14.00

LUNCH

IN THE EXHIBITION AREA KINDLY SPONSORED BY BNP PARIBAS AND DELOITTE

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WE. 26/09

AGENDA

afternoon

14.00-14.10

THE NEXT 30 YEARS

16.20-16.45

16.00-16.20

CHAIRPERSON’S

INTRODUCTION Daniela Klasen-Martin, managing director & country head Luxembourg, Crestbridge

14.10-14.30

WHERE IS THE

GLOBAL ECONOMY HEADING?

EUROPEAN FUNDS

OUT OF THE BOX:

HOW TO SELL YOUR STORY

THE NEXT 30 YEARS

A look into the crystal ball – from regulatory Big Bang to an expanding galaxy of stars – assessing the past and future of UCITS. Diana Mackay, managing director at consultancy MackayWilliams, part of Broadridge Analytics Solutions The UCITS directive was the spark that fired the European asset management industry into life, creating a trusted structure for retail and institutional investments alike. In their first 30 years of life, they have survived and thrived extreme market upheavals to become a global franchise, with assets expanding from 300bn to nearly 10trn. What are their secrets of success and are they sustainable for the next three decades?

Diana Mackay, managing director at consultancy MackayWilliams, part of Broadridge Analytics Solutions

A tutorial to improve skills and competences of sales professionals or of anyone who wants to acquire a modern commercial technique combining narration and improvisation.

Marina Baillon, co-founder, Smartside

Larry Hatheway, group head of GAM Investment Solutions and group chief economist, GAM Holding AG

14.30-15.30

FUTURE PRODUCTS AND THE FUTURE OF

PRODUCTS

16.45-17.00 MASTER OF CEREMONY AND CHAIRPERSON’S

WRAP-UP AND CLOSING REMARKS

Technology, energy, bitcoins… the target investments of funds are more and more diversified. Asset managers are led towards funding not only the real economy, but also the needs of society as a whole. New generations of investors have new expectations.

But looking beyond asset classes, asset managers are reviewing other features of the products: the risk/reward balance, the active/ passive management style, the pricing and fees, etc. Altogether, how much innovation is going on… and required?

17.00

THIS YEAR, ALFI IS CELEBRATING TH ITS 30 ANNIVERSARY

Moderator: Florence Stainier, partner, Arendt & Medernach Panellists: Kate Webber, managing director, head of product development, Calastone Alexandre Gerbaud, institutional ETF sales, Lyxor Asset Management Jan Brzezek, CEO and founder, Crypto Finance AG Hans Stegeman, head of research and investment strategy, Triodos Investment Management

15.30-16.00

COFFEE BREAK 14 —

Over the last three decades, the local fund industry has developed the know-how and infrastructure that make Luxembourg the leading global fund distribution hub. Join us to discover milestones of our activity and celebrate the success story that we keep on writing.

— ALFI— September/October 2018

A word from the government: H.E. Pierre Gramegna, minister of finance, Luxembourg Introduction Panel on investor education Announcement of investor education initiatives

Publireportage

ING LUXEMBOURG: EARLY ADOPTER OF HYPER-CONVERGENCE TO BECOME AN ARCHITECTURE OF CHOICE, PARTICULARLY FOR BUSINESSES CONSOLIDATING INFRASTRUCTURE AS PART OF A HYBRID IT STRATEGY.

FOCUS ON YOUR CORE BUSINESS

SERGE WEYLAND - CEO - Edmond de Rothschild Asset Management (Luxembourg)

Why is outsourcing vital for asset managers?

Faced with increasing margin compression, fund managers need to control their cost base. However, increasing investor requirements and complexity of regulation continuously drive up operating expenses.

In this context, reverting to business process outsourcing has many advantages: François Vrancken, CTO at ING in Luxembourg, and Pierre Henin, Managing Director at Dell EMC Luxembourg explain how ING and Dell EMC collaborated on this project.

Increased Control Ongoing ING Luxembourg, like most other organizations,Compliance was facing Efficiency Costs a familiar challenge: to provide agility and flexibility while maintaining control on costs. This would require a thorough transformation and modernization of the existing infrastructure.

More specifically, ING was looking for an infrastructure that could serve as a foundation for a successful cloud solution. This Service State-of-the-art Focus on core includes pooling resources, automating and ultimately providing Quality Technology competencies the right level of control, agility and visibility to the business by enabling new consumption models for applications.

What solutions are available to mid-sized Onlymanagers? hyper convergence made sense to address those challenges, asset as part of a hybrid IT strategy to allow connection to the ING Edmond Rothschild has developed Extended privatede cloud.

Hyper Converged Solutions, the newOutsourcing platform which Services (EOS), ranging from front to back office solutions will host more than 80% of the workloads, offers the following for portfolio management and risk management to a fully advantages: customized CRM solution for managing sales flows and • Starting small and scaling efficiently distributions networks.

• Simplified operations with software-driven automation and lifecycle management • Better overall business value and lower TCO (total cost of DISTRIBUTION EOS DISTRIBUTION NETWORK ANALYSIS ownership) MANAGEMENT SOLUTION • Modernizing the data center using standardized building blocks Powered

by Microsoft SALES PIPELINE ANALYTICS to provide the agility and lower cost of the public cloud within Dynamics Crm & Adjuto Fully integrated platform the customer’s data center TRAILER FEES MANAGEMENT • A step ahead into the DevOps world Dell-EMC was the obvious preferred POWERFUL hardware partner for CROSS ASSETS this project, as the Dell EMC environment had already proved PORTFOLIO MANAGEMENT SYSTEM its stability and availability as ING’s infrastructure for many EOS PORTFOLIO applications in the past. Together with service partner Data & RISK MANAGEMENT MANAGEMENT SOLUTION PERFORMANCE Essential, they are currently building a platform that will allow Powered by Simcorp Dimension ANALYSIS TOOLS a new class of applications, leveraging big and fast data, and Fully integrated platform native cloud infrastructure. One of the keys to success for REPORTING this

Concretely, what is behind EOS? EOS comprises the Edmond de Rothschild distribution management and portfolio management system. EOS has been tailored to meet the needs of project the asset wasmanager the good and is based on leading market solutions: communication between all involved parties, showing united picture to the SIMCORP a DIMENSION customer, as well as a clear Asset Management software vision and market leader and;path to achieve it.

François Vrancken, CTO MICROSOFT DYNAMICS the leading Sales at and software.

INGCRM Luxembourg is convinced this HyperConverged Infrastructure is François Vrancken, the ideal foundation for the CTO at ING in Luxembourg : “Software-defined With the EOS Distributionfuture Management Solution, models are changing our clients will not only benefit from the core the operating model of the data This new platform will enable functionalities of acenter. traditional CRM system, but us to simplify IT operations and to lower associated costs, while above all from the customization of the tool to the Asset Management and to distribution domain. at the same time offering moresales flexibility serve our rapidly Moreover, clientsAs will able tosolution choosebacked among changing business needs. anbe all-in-one by added value services, as order marking and a federation of industry leaders insuch software-defined converged trailer fee management. infrastructure, the proven technology of EMC coupled with VMware software innovation will answer our requirements for a Thanks to the EOS Portfolio Management Solution, growingin and future-facing addition to theenvironment. access to Simcorp Dimension PMS, The infrastructure team adopted the solution itsfront to our clients will quickly most of all benefit from afor real performance, the simplification of the infrastructure and back solution, maximizing efficiency, whilst the reducing modern operational features provided by hyper convergence.

The migration to and financial risk. this new platform was carried out very quickly and without impact on stability.”

Pierre Henin, Managing Director at Dell EMC Luxembourg confirms that the approach of this project has been as global as possible, NEED MORE INFORMATION? not focusing on the pieces of equipment but addressing all ALESSIA LORENTI customer expectations, leveraging collaboration within an extended Head of Business Development Edmond de Rothschild team of different partners, together bringing a unique added value Asset Management (Luxembourg) to ING Luxembourg.

Data Essential has played an instrumental role to enable ING to build +352 24 88 23the 12 platform that will allow new classes a.lorenti@edr.com of applications like Big Data and native cloud infrastructure.

INTERVIEW

PHOTOS Matic Zorman

ANOUK AGNES (ALFI)

16 —

Building a global brand in 30 years — ALFI — September/October 2018

INTERVIEW

People adjust quickly.

One could easily think that Luxembourg was always destined to be the world leading hub for cross-border fund distribution, setting the pace in a European industry with €16trn assets under management. Yet it didn’t feel that way 30 years ago when the Association of the Luxembourg Fund Industry (ALFI) was founded.

September/October 2018 — ALFI —

— 17

INTERVIEW

4,159,614

N

o doubt that multilingualism, a central location, a supportive government and an open-minded attitude have been crucial to Luxembourg’s ongoing success as a cross-­ border hub for the global investment fund industry. Yet for all this ALFI’s deputy director general Anouk Agnes recognises that “firstmover advantage, being the quickest to tap into the opportunities, was also crucial”. It enabled Luxembourg to become globally identified as the place to centralise the administration and distribution of funds, and this reputation remains strong.

The total assets (in millions of euros) under management in Luxembourg in 2017. The Grand Duchy remains the leading fund domicile in Europe, with a market share (26.6%) close to the combined total for Ireland (15.3%) and Germany (13%).

The European fund industry has experienced year-on-year growth in net assets since 2012, and 2017 was no exception. In fact, 2017 was remarkable, with net assets of UCITS and AIF surpassing the €15trn mark. There were €15,623.1bn in assets under management at the end of 2017 thanks to a 10.1% growth during the year, boosted by net sales of UCITS and AIF. Net sales reached their highest level ever (€949bn). UCITS accounted for 62.2% of this total, with the remainder being AIFs.

QUICK-TO-LOOK OUTWARDS

This sparked local and international interest, and local and international players started to probe the possibilities. It became clear to Luxembourg fund professionals that they needed a united voice in discussions with the authorities and to promote the country internationally. Thus the Association Luxembourgeoise des Fonds d’Investissement (Luxembourg Investment Fund Association, ALFI) was founded on 9 November 1988.

As well as being a spur to the European industry, the single market in funds attracted the attention of big players from the United 18 —

States. American and Luxembourgish professionals had a meeting of minds, as in countries it is second nature to base operations in one state and sell cross-border into others.

And so it was as Luxembourg enabled US fund players in the EEC. Indeed, of the 67 countries that currently use Luxembourg as a European and global hub, American asset managers are still the leading initiators of Luxembourg funds.

Hence, it was logical that ALFI’s first annual conference was organised in partnership with NICSA, their American counterpart. First held in autumn 1992, this Global Distribution Conference will see its 27th edition on 25-26 September, now also held in conjunction with the Hong Kong trade association HKIFA. This event was designed to spread knowledge to local and international players, spark debate about best practice, and act as a shop window for Lux funds.

FAST GROWTH

from Ireland emerged, adding to the credibility of UCITS and helping to spur Luxembourg to maintain its lead.

Ten years after the founding of ALFI, the industry had grown to ten times its original size. By the end of the millennium, Luxembourg had become the largest fund domicile in Europe, overtaking France, and second in the world behind the USA. However, in the first months of 2000, the industry had to face its most serious test to date, when the dotcom crash dragged global markets downwards.

Luxembourg lost its lead to France, but the eventual recovery was proof of the resilience of the country and UCITS. Net assets under management in Luxembourg hit €1trn for the first time in 2004, and the following year, the country regained its European lead, a position it continues to hold by a wide margin to this day.

BROADER FOCUS

On entering its second decade, ALFI realised Early growth was swift, if from a relatively it needed to grow with the industry. Origilow base. Net assets under management in nally membership was restricted to funds Luxembourg increased fivefold in the first and direct fund businesses, but it had become five years of the UCITS era, reaching nearly clear that service providers, consultants, €250bn by the end of 1993. The industry conti- lawyers and auditors were an increasingly nued to mature over the 1990s. ALFI organised important part of the story. In April 2000, its first spring annual conference in 1996. A the association opened membership to all further boost to the sector’s credibility came interested parties. It also changed its name with the establishment of the ALFI code of to the Association of the Luxembourg Fund ethics in 1998, helping to set guidelines for Industry: thus reflecting its new focus and how funds should be governed. Competition that most of its work was conducted in the

— ALFI — September/October 2018

SOURCE ALFI

EARLY STIRRINGS

European leaders have known for decades that most people are not saving enough for their retirements, and that not enough of what they do put aside is being reinvested directly into the economy. However, they also know that voters don’t appreciate being lectured on this subject. So they had the idea of using pan-European financial regulations to help encourage investment in shares and bonds. The result in December 1985 was the European Economic Community passing the Undertakings for Collective Investments in Transferable Securities (UCITS) directive.

This introduced the principle of enabling funds to be sold across borders, without the need to establish a company in each market.

The goal was to create a large single market to encourage greater consumer choice and help drive down costs.

However, nothing much happened for a couple of years. Large countries with their own domestically-focused fund industries did not consider this development to be sufficiently significant, and smaller member states did not immediately grasp the potential. By the mid 1980s, Luxembourg had developed a significant niche international financial sector based around eurobond listing and banking.

Some industry players saw the potential, and they encouraged the government to transpose UCITS into national law on 30 March 1988. The Grand Duchy was the first country to take this step.

BRAND VOICE

DATA MANAGEMENT

PUTTING ASSET MANAGERS IN CONTROL Digital transformation is coming to the fund industry, whether we like it or not.

Technology already exists and it is starting to be deployed in business cases to drive performance. For example, the new platform, supported by machine learning from KNEIP, is putting asset managers back in control of their data. Not only will this cut complexity and costs, it will also boost effectiveness, explains Lee Godfrey, KNEIP. CONTENT BY KNEIP

A

s well as bringing greater efficiency and effectiveness in the short term, there is also enormous strategic value for asset managers controlling their own data. As the digitalisation revolution unfolds, this information will help them better understand clients and improve how products are designed, marketed and distributed. At the moment, they are giving away this valuable asset.

Can you give examples?

L.G. An asset manager might want to launch a

fund in Germany. Historically, this required the fund registration team to compile the data and build reports, then external and internal legal would need to scrutinise it before sending it to BaFin, the regulator. Now, fund managers just have to drag their fund (from its

What is new about the KNEIP platform?

Lee Godfrey This revolutionary data management platform ingests unstructured data, then machine learning and artificial intelligence tools work to structure that information. This will remove duplication and hence waste, cutting complexity and costs dramatically when reporting to the regulator, communicating with clients, sending figures to data providers and more.

PHOTO Patricia Pitsch (Maison Moderne)

L.G. Cost-efficiency and accelerated time to market are the major benefits. We have one client who is now spending $65,000 on processes that used to cost them $2 million. But effectiveness is also key. For example, if there are any problems with a regulatory application dossier, these will be identified instantly and can be corrected. This means asset managers can be more confident when a new product will come to market, enabling them to prepare their marketing effort efficiently. It will also reduce the risk of reporting erroneous data.

L.G. 27 September. Anyone who would like more information should get in touch or meet us at the ALFI Global Distribution Conference just before the launch or contact KNEIP directly. ď ľ

L.G. Currently, asset managers have to process information from dozens of sources and to hundreds of destinations daily. This is a cumbersome, complex task. Our new platform will manage data through one single instance, thus reducing processing costs and quickly flagging inconsistencies. Then, the right information can be formatted and reported automatically to clients, distributors, supervisors, partners, etc.

L.G. To a large extent, fund managers have turned to outsourcing to cope with the regulatory burden. This solved a problem short term, but in the long term, it means they are relying on others to handle their valuable data. Our digital platform has intuitive tools that put asset managers directly in control.

What other benefits does this offer?

When will the KNEIP platform go live?

How will complexity and costs be reduced?

How will this give control to asset managers?

data is uploaded once, users just log on, click on what they require, and it’s finished in five minutes.

SEP

27 New KNEIP platform launch.

Get in touch for more information: www.kneip.com

domicile across a hub and spoke digital map similar to an inflight magazine) into their target market, and the data and documents are compiled automatically to suit the requirements of each national regulator. Similarly, with the myriad of templates requiring transaction costs under MiFID & PRIIPs: once the

Lee Godfrey KNEIP

19

INTERVIEW

language of global business. Then, in 2003, ALFI’s board of directors adopted a mission statement to “lead industry efforts to make Luxembourg the most attractive international centre for investment funds”. These steps pointed the way to the development of the one-stop shop multi-skilled ecosystem we see today. This necessitated looking outwards, both to develop new markets but also to help shape industry rules.

A key part of ALFI’s work is spreading the message of cross-border funds and Luxembourg’s capabilities. Around ten roadshows are now organised each year, with Asia and South America regular destinations, along with trips to meet traditional partners across Europe and in the States. Yet this activity only began in 2005, with a roadshow to London in June, followed by trips to Frankfurt and the US in October.

“We didn’t know what to expect in these early days, and the organisers of the London roadshow wondered if anyone would turn up,” Agnes remarked. In fact, about 100 attended the first London event, where the Luxembourg delegations main task was to explain the basics. Now, ALFI events in the UK capital regularly attract more than 1,000 guests. Most participants in the more familiar destinations now have sophisticated understanding of the cross-border fund industry and Luxembourg’s role. People now attend to hear about latest developments and potential future trends, even if when visiting new

“Helping our members adapt to a changing business environment will be one of our key roles in the next ten years.”

Anouk Agnes Deputy director general ALFI

20 —

— ALFI — September/October 2018

countries it can still be necessary to explain the fundamentals.

INTERNATIONAL OUTPOSTS

With the advent of the euro came a stronger economic logic and political desire to create a true single EU market in financial products.

The experience of working on UCITS III and other directives convinced ALFI that they needed to establish a permanent presence in Brussels. This office would be better able to gauge unfolding trends and help influence debate. Working together with colleagues in the Luxembourg Bankers Association (ABBL), ALFI founded this operation in the main EU capital in 2006.

The relevance of this move became clear as the EU began to work on UCITS IV and the first version of MiFID. However, after the 2007/8 global financial crisis, the workload became heavier as the EU member states sought to satisfy public clamour for regulation. AIFMD, UCITS V & VI, MiFID II, PRIIPs, BEPS and more, all had to be understood, digested and worked though with Europe’s political decision-makers.

By 2007, net assets reached €2trn, and UCITS had become a clear winner for cross-border operations, and the Grand Duchy was leading this drive. Indeed by this year, three-quarters of all UCITS registered in at least three countries were Lux funds.

They were also reaching a global market, with asset managers in Asia and the Americas using

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INTERVIEW

Last July, the responsible investment agency LuxFLAG announced that it had labelled 95 investment vehicles (31 microfinance, 6 environnement, 26 ESG, 5 climate finance funds), thus registering an almost 19% raise in comparison to its 2017 annual report in which LuxFLAG said it had issued labels to 80 investment vehicles worth over €31bn. This shows the growing interest trend of the investor toward ESG. Luxembourg remains the leading domicile for responsible investing funds with an EU market share of 39%.

European-based funds to serve local clients. Europeans still remain wary of investing in Indeed, Asia had become such a significant collective investment schemes. ALFI launched market for UCITS (attracting around 15% of its “Understanding Investing” website in 2015 net sales of UCITS in 2009) that ALFI realised to help provide knowledge of potential risks it needed permanent representation in the and rewards in an easy-to-understand format. region. Its Hong Kong office opened in 2010.

NEW CHALLENGES

MAINTAINING THE LEAD

Responsible investing was a trend moving towards the mainstream in the mid 2000s, and ALFI realised it needed to be leading the debate. The topic appeared regularly during ALFI’s two annual conferences, it organised dedicated events, and was a founding partner in 2006 of the responsible investing labelling agency LuxFLAG. This market has more than doubled in the 2010s, with Luxembourg in the lead, accounting for about a third of funds and assets under management. In May 2018, the European Commission announced plans to seek to make responsible investing easier to understand for investors, initially by establishing a common language. ALFI will be an important voice in these discussions.

The global financial crisis wiped a quarter off the value of Luxembourg fund assets, but in just over two years, these losses had been recouped. Total assets under management reached €2trn in 2010, then €3trn in 2014, and €4trn last year. By mid-2018, they were in excess of €4.25trn, being sold into more than 70 countries. Although impressive, these figures should be higher, as too many 22 —

One of ALFI’s key tasks now is ensuring this success does not lead to complacency. Finetuning national regulations is important to keep the country relevant to all types of actors. For example, the Reserved Alternative Investment Fund (RAIF) introduced in 2016 eased regulatory bottlenecks without compromising consumer protection. Also, after the Brexit vote, there was talk of EU regulators considering changes to the way the single market in funds operated. ALFI was the vehicle through which the Luxembourg industry could tell decision-makers not to try to fix something that isn’t broken.

This is election year in Luxembourg, and ALFI intends to use this opportunity to have conversations about investment funds amongst voters and politicians, about how to maintain the country’s lead. “In cross-­border­ funds, we have 62% of the market. This is good, but just five years ago, we had 68%,” commented Agnes. “Competition is increasing and we have to respond. Helping our members adapt to a changing business environment will be one of our key roles in the next ten years,” she added.  S. E.

— ALFI — September/October 2018

ALFI also came of age in time to help shape the reform of UCITS. A first attempt at change in the 1990s failed, but it was the greater flexibility and consumer protection measures enshrined in the 2002 UCITS III that opened the way for the product to become a global standard.

ALFI played an important role in the design of these rules and the way they were implemented. Again Luxembourg was quick off the mark, being the first country to translate this directive into national law.

The association was active too at the national level, working with the government to help draw up the private equity compatible fund vehicle SICAR. The Specialised Investment Funds (SIF) law followed in 2007. These changes enabled Luxembourg to build capability for servicing private equity funds, real estate funds and hedge funds. Thus with the advent of the Alternative Investment Fund Managers Directive (AIFMD) in 2013, the country was able to take quick advantage of this new opportunity.

SOURCE ALFI, KPMG, LuxFLAG

95

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PRIVATE BANKING WEALTH MANAGEMENT INSTITUTIONAL BANKING ASSET MANAGEMENT

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TIPS CUSTOMER RELATIONSHIP MANAGEMENT

HOW TO ATTRACT NEW CUSTOMERS Charles Muller, independant director and attorney at law, provides his 10 tips to attract new customers, and most of all, to keep existing ones.

1.

Master your costs While retail consumers have a tendency to compare the price of milk in the supermarket, they are far less interested in the cost of their financial products, as long as the overall return is right. Nevertheless, under the influence of regulators and politicians, costs are coming more and more into the spotlight.

24 —

2.

3.

Be transparent Target your audience

With all the PRIIPs and other KIDs and financial information documentation flying around, it is very easy to get lost.

Produce clear, transparent and easyto-read documentation, just in case an investor might actually read it.

— ALFI — September/October 2018

Not only because this is a new requirement under MiFID II, but also because it is common sense. Too many customers are still being sold the “product of the month” rather than what really suits their needs.

PUBLI-COMMUNIQUÉ

La prochaine révolution économique a déjà commencé La prochaine révolution économique est en route et pourrait bien être le nouveau moteur de performance financière dans les trois années à venir et au­delà.

Le point avec Carolina Minio-Paluello, Directrice du pôle Solutions chez Lombard Odier Investment Managers Cette révolution est née du constat qu’il est urgent d’adopter un modèle de développement économique plus durable. Ce changement est une nécessité et il n’est plus question de savoir si nous y sommes prêts ou pas.

Les modèles d’affaire actuels en matière économique, sociale ou de gouvernance ne sont pas pérennes, à notre sens, à la lumière de nombre de tendances structurelles de long terme à l’œuvre dans le monde actuel.

Parmi elles figurent les bouleversements démographiques, environnementaux et technologiques, ainsi que des disparités croissantes dans nos structures sociales.

Nous avons puisé dans nos ressources naturelles à un rythme alarmant, alors même que la population mondiale continue chaque jour de croître. Les gens vivent plus longtemps dans un environnement économique de plus en plus marqué par les inégalités.

Il nous faut repenser en profondeur notre approche de nombreuses normes établies, qu’elles concernent les transports, les systèmes alimentaires et de santé, l’éducation, la gestion des données ou les infrastructures. Aucun

pays, aucun secteur, aucune entreprise, aucune classe d’actifs n’y échappera.

Dans ce contexte incertain, la transition vers un modèle économique plus durable va selon nous devenir une priorité de plus en plus affirmée au niveau mondial. Nous observons déjà un certain nombre de pressions de la part des régulateurs un peu partout sur la planète, notamment en raison d’une conscience sociale qui grandit et est de mieux en mieux informée. Nous pensons non seulement que le changement est en route, mais qu’il accélère et qu’avec lui arrivent de grandes opportunités.

Les investisseurs ont déjà fait preuve de leur volontarisme à participer à cette transition vers un modèle plus durable.

Une étude récente de McKinsey & Co estime qu’environ 26% des actifs mondiaux sont désormais investis selon des principes ESG (environnement, social, gouvernance).1 Afin d’identifier les entreprises suscepti­ bles de bénéficier des opportunités significatives que représente la révolution durable, nous avons adopté une approche d’analyse de nos investissements qui repose sur trois piliers.

Le point de départ de tout investissement est la viabilité financière de l’entreprise.

C’est là notre premier pilier – la durabilité du modèle financier de l’entreprise. Les sociétés doivent démontrer leur efficacité capitalistique, générer du cash et être capables d’équilibrer leurs comptes sans recours externe. Nous analysons aussi la qualité de la dette lorsque nous examinons le crédit.

Notre second pilier d’analyse concerne la durabilité des pratiques professionnelles de l’entreprise. Nous croyons que, pour qu’une entreprise délivre de la valeur sur le long terme, elle doit se concentrer sur son écosystème de parties prenantes.

Cela comprend les actionnaires, mais ne s’y limite pas, loin s’en faut. Les régulateurs, les employés, les clients et fournisseurs, l’environnement physique de l’entreprise et les communautés avec lesquelles elle interagit sont également des parties prenantes importantes, toutes pouvant avoir un impact significatif sur la viabilité d’une entreprise sur le long terme. Ainsi, nous pensons que la manière dont une entreprise prend en compte cet écosystème élargi dans sa gestion peut avoir un impact direct sur ses performances financières.

Notre conviction : les entreprises porteuses de performance sur de longues périodes seront celles combinant :

1

Un modèle financier durable

Analyse de la viabilité financière et du potentiel de performance

2

Des pratiques d’entreprise durables

Analyse de l’écosystème de parties prenantes

3

Un modèle économique durable

Analyse de l’exposition aux évolutions structurelles de long terme

Les approches ESG classiques ne perçoivent pas, selon nous, l’impact réel des entreprises sur le monde environnant. “ Nous croyons fermement que la durabilité sera le moteur le plus important de l’économie mondiale dans les années à venir. Tout comme nous nous attendons à ce que les entreprises s’adaptent face à cette révolution, nous pensons que notre rôle en tant que gérant d’actifs est de repenser notre approche de l’investissement et d’apporter à nos clients des solutions innovantes pour leur permettre de saisir ces nouvelles opportunités au sein de leurs portefeuilles.”

Carolina Minio-Paluello Enfin, considérons la durabilité du modèle économique de l’entreprise. Il s’agit ici de mesurer sa capacité à tirer parti des opportunités que présente la transition.

Cela commence par l’identification des “mégatendances” qui vont façonner l’économie et la société de demain, à savoir : la démographie, le changement climatique, les ressources naturelles, la révolution digitale et les inégalités. Au sein de chacune de ces mégatendances, nous pouvons évaluer le chemin probable que prendront les évolutions à venir, pour mieux comprendre quels secteurs seront impactés, et comment ils le seront. Cette analyse prospective nous permet d’identifier quelles entreprises sont bien positionnées pour aborder les opportunités et les défis que la transition vers un monde plus durable va faire naître.

Ce faisant, nous sommes mieux à même de convertir ces tendances structurelles en thèmes d’investissement.

1 McKinsey & Co, octobre 2017. Article “From ‘why’ to ‘why not’: Sustainable investing as the new normal” https://www.mckinsey.com/industries/private-equityand-principal-investors/our-insights/from-why-towhy-not-sustainable-investing-as-the-new-normal

Découvrez notre approche lors de la conférence ALFI Luxembourg : mercredi 26 septembre 2018, 11:20–12:10 Robert de Guigné, Directeur des Solutions ESG, partagera son expertise lors de la conférence ALFI le mercredi 26 septembre sur la thématique de l’investissement durable. Cette présentation est exclusivement réservée aux investisseurs munis de leur accès à la conférence ALFI.

INFORMATION IMPORTANTE Cette communication est exclusivement réservée aux investisseurs professionnels.

Ce document est publié par Lombard Odier Asset Management (Europe) Limited, autorisée et supervisée par l’autorité de surveillance des services financiers (Financial Conduct Authority ou FCA) et enregistrée sous le numéro 515393 dans le registre de la FCA. Les informations figurant dans le présent article ne sont fournies qu’à titre illustratif et ne sauraient constituer une recommandation d’investissement dans, ou une énumération complète de tous les facteurs ou considérations potentiellement pertinentes à un investissement ou service.

Il n’est pas destiné à être distribué, publié ou utilisé dans une juridiction où une telle distribution, publication ou utilisation serait illégale.

Ce document contient les opinions de LOIM, à la date de publication. Les informations et analyses qu’il

contient sont basées sur des sources considérées comme fiables. Toutefois, LOIM ne garantit ni l’actualité, ni l’exactitude, ni l’exhaustivité des informations figurant dans le présent document et ne pourra être tenu responsable d’éventuels pertes ou dommages résultant de leur utilisation. Toutes les informations et opinions exprimées ici, ainsi que les cours indiqués, peuvent être modifiés sans préavis.

Si vous n’appartenez pas à la catégorie de personnes autorisées, nous vous demandons de bien vouloir soit retourner ce document à LOIM, soit le détruire et vous êtes expressément averti(e) de ne pas vous fier à son contenu ni de prendre en considération les sujets traités dans ce document pour des investissements ni de transmettre ce document à aucune autre personne. Les performances passées ou estimées ne sont pas un indicateur fiable des résultats futurs. © 2018 Lombard Odier IM. Tous droits réservés.

TIPS

4.

Consider sustainability It is a bit of the hype of the moment but I think that law-makers will make this a permanent topic and consumers will more and more ask questions in this respect as, in addition to a decent return, they want to “do good” with their money.

Be compliant I know it is difficult to keep on top of all the new pieces of regulation but what you certainly want to avoid is the reputational risk of being outed by a regulator as being non-compliant (and perhaps fined for wrongdoing).

26 —

6.

Join the community Being a member (and participating in working groups) of a trade body such as EFAMA, ALFI, LPEA… helps stay informed of the latest trends and opportunities, also in terms of new products and markets.

— ALFI — September/October 2018

7.

Go direct

I am still amazed at how difficult it is to buy certain funds directly, without going through a distributor who will take a (lion) share of the commission. With new technologies, platforms and robo-advice, getting direct access to end customers is becoming easier.

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5.

International business is full of pitfalls.

Better to touch down with experienced legal support.

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Tips

8.

9.

10.

LFF, ALFI and LPEA are all organising roadshows, often in the presence of the finance minister and/or the CSSF. This attracts an interesting audience that you will want to tap into. Obviously, speaking, sponsoring and having a booth can further increase your visibility.

While the EU Commission is regularly signing trade agreements with third countries and promoting European products, financial services and especially investment funds are not on their priority list.

It would be nice if this could change.

Now this might be a bit of a surprise advice for you, but Luxembourg has given itself in June 2018 a brand-new action plan relating to human rights that could also affect you, your subsidiaries and investments.

Help lobby Brussels

Respect human rights

Further details available on https://www.ohchr.org/EN/Issues/ Business/Pages/National ActionPlans.aspx

ILLUSTRATION Maison Moderne

Join roadshows

28 —

— ALFI — September/October 2018

BEHIND THE SCENES

30 —

— ALFI — September/October 2018

BEHIND THE SCENES In addition to its trading room in Luxembourg, the BIL has another one in Zurich, Switzerland.

MUFFLED ATMOSPHERE

T

September/October 2018 — ALFI —

PHOTO Patricia Pitsch (Maison Moderne)

echnology has undeniably changed the atmosphere of the trading rooms. Far are the days when traders were handing two phones at the same time to place orders quickly in an effervescent atmosphere.

The job is the same, but everything has become more muffled. A change due to the advent of the Internet at the dawn of the 21st century and of the trading platforms between 2005 and 2008.

In the trading room of the International Bank in Luxembourg (BIL), 60 people are still busy placing orders for different financial institutions, private customers, businesses or for their own account. Their main mission is to process transactions in all areas of the bank’s activities on the financial markets.

— 31

CONTRIBUTIONS ASSET MANAGEMENT INDUSTRY

An evolution in distribution Product, distribution and data analytics have become high-impact themes for the global asset management industry. As a result of NICSA’s forward-looking evolution as a trade organisation, we have made meaningful strides to broaden our focus within these topics.

N

ICSA (National Investment Company Service Association) recently announced the formation of two new committees – a product & distribution committee, and a data analytics committee – with the mission of addressing key trends and challenges resulting from evolving business environments.

Deepening our association’s engagement among distribution and data analytics executives complements NICSA’s historical mission of advancing leading practices among technology, compliance and operations professionals within the asset management industry. Given NICSA’s growing commitment to supporting product and distribution teams within our community, I am particularly pleased to join ALFI this September in Luxembourg for an in-depth discussion around the global distribution landscape.

Fee compression, shrinking shelf space and technology advancement are top of mind for global asset managers facing an evolving competitive environment. The US asset management industry has seen exceptional asset managers excel in a challenging environment by focusing on several key areas: eva-

32 —

— ALFI — September/October 2018

luating strategic intermediary partnerships; realigning portfolios and product structures; bringing data analytics to the front office; developing technology-inspired service models designed for the digital era. A vision for the future and a focus on execution have been essential to developing strategic advantages for these thought leaders.

STRATEGIC PARTNERSHIPS ARE KEY

Fewer distributors and increased scrutiny are placing pressure on asset managers trying to establish themselves on fund lineups. As distribution partners reduce the number of products as part of rationalisation efforts, it is becoming more important to identify opportunities to collaborate on creating solutions that meet the needs of the client. Smaller-tier asset managers are particularly challenged by product rationalisation efforts. These asset managers are keenly focused on the uniqueness of their product offerings in order to meet those needs.

The intermediary assessment process is no longer a one-size-fits-all exercise. Asset managers are increasingly using metrics to

CONTRIBUTIONS

“Technology is having a great impact on the asset management industry’s service offerings.”

Jim Fitzpatrick President NICSA

evaluate strategic partnerships with firms that distribute their products. Some are developing segmentation strategies to align with certain firms and using metrics to look at the size of the opportunity and the depth of the relationship. Data is being weighted and scored to allow assessments of the relationship and drive strategy for allocation of resources. As shelf space shrinks, many firms are realigning their coverage to adjust to changes in sales, asset mix and product development. Data is progressively driving segmentation and relationship models. This metrics approach is helping asset managers to determine where to focus their partnerships efforts.

The ability to analyse data, via a business intelligence team, is an example of a business strategy representing a big step forward in our industry. Alignment via a BI team allows both sales and marketing a seat at the strategy table. Firms that have invested in centralised business intelligence and integrated marketing and sales technology platforms are finding success in measuring effectiveness, which goes a long way toward aligning front office goals.

THE CLIENT EXPERIENCE

Technology is having a great impact on the asset management industry’s service offerings.

Asset managers and financial services firms are encouraging more direct-end user engaDATA ANALYTICS COME TO THE FRONT OFFICE gement via the digitisation of the customer Big data is making its way toward the front experience. Technology is helping to reduce office. Many asset managers are investing delivery costs for both advice and asset manain data systems to address misalignments gement products by improving efficiencies between sales and marketing. By utilising in what can be overly complex transactions. analysis-driven insights, they can support As asset managers continue to look to synergies between business functions. Sharing differentiate themselves in the digital age data-driven insights can be a critical ingredient by streamlining the delivery of services, that fosters communication between teams. traditional value propositions may struggle.

Firms that have continued to increase their digital presence have emerged with distinction among their peers as having adopted more innovative strategies that appeal to the next-generation client.

A LOOK TO THE FUTURE

As distribution opportunities within the global financial industry continue to mature and change, firms will be challenged to shed legacy business models and develop new strategies that are aligned with evolving client needs and expectations.

As an organisation in support of global asset management industry, NICSA is always searching for ways to explore best practices and share thought leadership among participants. We strive to meet the challenges of investment fund and financial services companies by advancing the exchange of information. To that end, we are looking forward to the ALFI Global Distribution Conference where the world’s leading fund distribution community will come together to discuss these important issues. 

September/October 2018 — ALFI —

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CONTRIBUTIONS DIGITISATION

The future is open We are living through what is perhaps the most profound period of disruption in human history. Digitisation is by far the most powerful, disruptive force transforming the way we live, work, engage, consume and communicate.

We are in a new reality, an epochal shift.

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ever before has a technology been adopted at the speed of the smartphone.

The world at large has done its systems conversion. It has chosen smart devices, fast networks, brilliant apps and cloud computing as the new solution stack. According to the World Economic Forum, 52% of companies in the Fortune 500 have disappeared as a result of digital disruption since 2000. No industry is immune from its impact – music, media, retail, transportation, travel and, of course, banking.

personal client experience, realise operational efficiencies and support the growth of an effective, stable and competitive global financial system.

In the new world that is upon us, only the most adaptable will survive. Today, our clients – more than 100 million worldwide – are engaging on digital platforms and in social ecosystems every minute of every day. Becoming their “always on” life partner depends on the quality of the experience we provide and our open engagement with the broader FinTech ecosystem. At Citi, we have been at the “A PHENOMENAL OPPORTUNITY” forefront of open banking for several years, The FinTech explosion is a global phenom- moving towards an open architecture which enon with challengers coming in all shapes facilitates collaboration and partnerships that and sizes from every corner of the world. As benefit customers across the globe. an industry, our comparatives are rapidly changing. Best-in-class service leaders are AN API-ENABLED ECOSYSTEM using new technologies to enable phenomenal The future of banking is evolving into an speed and simplicity and redefine customer API-enabled ecosystem with deeper inteexpectations. The new economy is about gration into consumers’ lives – areas like frictionless transactions, curated experiences, commerce, communication and transportaseamless service and higher value. And the tion – empowering them to bank anytime and bar rises every day. anywhere they choose. In 2016, we launched While considered by many to be a threat, a global API developer hub, one of the most I believe FinTech is a phenomenal oppor- comprehensive in the global financial services tunity for consumers and the financial industry, to connect with developers and enaservices industry alike. New technologies ble new streams of value for clients, partners enable us to deliver a simpler, better, more and developers faster than ever before. Since 34 —

— ALFI — September/October 2018

its launch, we have expanded functionality to incorporate 16 countries with Application Programming Interfaces (APIs) across eight categories. More than 400 app prototypes have been built using our APIs and more than 4,400 developers have registered.

Not only are we deploying new capabilities on our own digital and mobile channels at the speed of Silicon Valley, we are putting our APIs to work across the franchise and around the world to benefit our customers, embedding our services in the most popular social and e-commerce platforms in the world, like Amazon as well as WeChat and Alipay in China, where more than 75% of Citi China clients engage with us on these platforms. We’re also exploiting the competitive advantage our global network gives us. On the ground in regions that are leapfrogging traditional technologies, we are face to face with our customers, co-creating new solutions with them and understanding their needs to shape the digital bank of the future.

As banking moves beyond the bank, we must recognise the world has changed and forge a new path forward, one that embraces the imperative to deliver simpler, human, more immediate experiences, helps customers navigate this new paradigm and embraces the power of “open.” 

CONTRIBUTIONS

“As banking moves beyond the bank, we must recognise the world has changed and forge a new path forward.”

Stephen Bird CEO, Global Consumer Banking, Citi

September/October 2018 — ALFI —

— 35

CONTRIBUTIONS DRIVING OPERATIONAL EFFICIENCY

From process re-engineering to digitalisation

Kai Braun Alternatives advisory leader EY Luxembourg

Over the past years, Alternative Investment Fund Managers (AIFM) have put their focus on compliance matters, shaping their operating models to match the regulatory frame­ work of the AIFM Directive (AIFMD).

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eyond their core activities of fund raising and investment management, managers have applied for licences with national authorities, implemented risk management and compliance procedures and built tools and enablers to support the performance and documentation of their regulated day-to-day activities.

Most European and international managers have by now completed their efforts and embraced AIFMD requirements as standard practice. They are therefore tackling the next wave of organisational reforms in a drive to invest money more efficiently and in a more standardised and harmonised way in a truly global way, i.e., throughout several jurisdictions.

The need for efficiency mainly stems from ever-­ increasing amounts of capital being allocated to alternative investments as well as high competition and hence tough margins on the investment side. Overall, driving performance is becoming more difficult because higher asset values make it harder to achieve a good rate of return.

performing tasks the exact same way, no matter whether execution is done in Luxembourg, Madrid or Krakow. However, where there are regulatory differences between countries, managers might have to add an extra loop into the process to capture those.

Another trend in the alternatives industry that calls for a certain alignment while taking good care of the subtle differences is that many managers are increasingly operating funds across a number of different sub-asset classes (private equity, real estate, debt, hedge funds).

This requires them to take a view of operational efficiency that includes each of the sub-­asset classes and the way that processes play out across the different aspects of the business, for example in investment structuring or valuation, so that people in different parts of the company have access to the same level of information.

In order to build an efficient operating model, managers need to look into the way they are organised on a global or pan-European level, but equally importantly into their ALIGN THEIR OPERATING PLATFORMS processes. This is especially true when they Many large players with offices in several juris- span over several functions or even jurisdicdictions are increasingly looking into aligning tions. To really understand and ultimately build their operating platforms on a pan-European out how tasks should be performed, managers level. Even though AIFMD aims at providing a can apply the RACI matrix by defining for each level playing field among the different Euro- process step who is responsible, accountable, pean Union countries, certain local differences consulted and informed. This helps diminishing pertain and are mostly due to pre-existing pain points and providing a clear vision to the local laws, tax rules and customs. Aligning people and functions involved in the process processes on a European level generally means as to their role and responsibility. It might also

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— ALFI — September/October 2018

lead to crystallising the need for organisational changes such as centralising a certain function in a centre of excellence.

IT CHANGES

Once all processes and organisational elements are properly designed, IT changes can be carried out and implemented. There are two types of major IT enablers managers are looking at. The first is the classic enterprise resource planning (ERP) system, which covers front-, middle- and back-office operations and allows managers to gradually move away from extensively using Excel. Those packages also often allow for proper process and workflow management which helps an organisation improve the way in which its people are complying with the initially designed processes. The second is smart technology solutions like robotic process automation and artificial intelligence which help navigate in an environment of high dependency on manual execution. Identifying key data points within hundreds of pages of contracts or automating payments for cascading cash-flows are good examples for the use of such technologies.

In times where the alternative investment industry is facing such tremendous growth rates in terms of capital deployment, managers need to make sure they can cope with the increased processing volumes that come with it. Having the right organisation, processes and IT systems is therefore not only a nice-to-have but a prerequisite for survival and success. 

Private Asset Services

by European Fund Administration

European Fund Administration strengthens its Private Asset Services team

CĂŠdric Jauquet

Fabrice Freilinger

Tomasz Szubartowski

Head of Private Asset Services & Member of the Executive Committee

Deputy Head of Private Asset Services & Head of Private Asset Investor Services

Head of Private Asset Accounting Services

www.privateassetservices.eu 2, rue d’Alsace | L-1122 Luxembourg www.efa.eu

CONTRIBUTIONS LUXEMBOURG’S CHALLENGE

Transforming the fund industry into a digital hub Said Fihri Associate partner, head of fund distribution services and head of digital ledger services KPMG

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— ALFI — September/October 2018

CONTRIBUTIONS

automate manual and repetitive tasks, thus increasing efficiency. Blockchain technology, for example, could be applied to the processing of fund orders and corporate actions, or to account management (fund registers). It could also drastically decrease the need for reconciliations, as trades would be shared amongst interested parties instantly, or it could be used to power web front-ends or mobile apps so that users have real-time access.

New technologies not only increase efficiency but also bring product and service opportunities for asset managers and their clients. For instance, asset managers could develop new saving products where small amounts are invested on a recurring basis, based on an automated operational process that uses blockchain technology.

MUTUALISING ITS MARKET INFRASTRUCTURE

Beyond new technologies, the industry can increase its efficiency by mutualising its market infrastructure costs, explorations into which are already underway for AML/KYC checks and order management processing. For AML/KYC, a single platform could collect distributor documents, giving access to asset managers (or transfer agents) entering into distribution agreements.

Each entity could then assess the distributor based on their risk appetite, thus ending the current “spaghetti model” between distributors, asset managers and transfer agents where the same documents are sent several times. And costs could be mutualised for order processing if orders were processed in a blockchain-powered network managed by a market infrastructure.

New regulations are also challenging the status quo, in some places inspiring innovation. For example, the new payment directive PSD II requires banks to allow third parties to retrieve customer data and collect payment via API, which could be used by asset managers to ease payment collection from investors.

Other regulations, such as MiFID II, are radically changing fund distribution business models: MiFID II incentivises asset managers with no captive distribution network to reach the final investor more directly. This also represents an portfolio management, two-minute inves- opportunity for Luxembourg actors to support tor on boarding, real-time information on asset managers wishing to develop a direct-toportfolio positions, and “one-click” orders. consumer approach.

Luxembourg’s fund industry currently strugIn order to remain a leading hub, Luxemgles to match such levels of immediacy, with bourg’s fund industry needs to digitalise many of its operational processes having been itself and become a modern and tech-driven designed for low numbers of large trades by infrastructure for both retail and institutional batches. Managing a high volume of trades end-investors. Such a transformation will take in real time would require big changes to the both efforts by individual entities and operacurrent operational model. tional process mutualisation, which together However, interesting possibilities for will enable the development of new, enticing middle-and back-offices have emerged that products. 

Over the last decade, Luxembourg has strengthened its position as Europe’s fund industry hub. With more than 4,000 billion euros in assets, the Grand Duchy’s fund industry is mainly dedi­ cated to fund administration, custody and transfer agency services, as well as com­ pliance and risk management activities.

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oday, however, if the industry hopes to keep its leading position, then it must transform itself by addressing challenges like evolving investor needs, the digitalisation of operational process and new regulations.

Despite the industry here being more focused on back and middle office activities, it has nevertheless directly felt the impact of swiftly changing investor needs. New generations are tech-savvy and tend to prefer personalised experiences when investing. Hence, robo-advisors: platforms that offer automated

September/October 2018 — ALFI —

— 39

CONTRIBUTIONS ASIAN MARKETS

Fund distribution opportunities for European asset managers in Asia Distributing in Asia on a cross-border, multi-jurisdictional basis can be a complex and challenging strategy to develop, implement and maintain, especially when retail investors are key targets.

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sia is a fragmented region with highly diverse nations due to contrasting economic, cultural and political systems. Unlike Europe, local markets are not as harmonised and have their own regulatory frameworks and tax systems to navigate. Understanding the local factors driving fund distribution, sales, product preference and distribution channels is key to a successful fund strategy.

Some local markets such as Singapore have large open, mature and sophisticated financial centres, accessible by foreign, European funds, including UCITS. Some markets are at the early stage of development, whilst others, including Australia, are highly localised, making fund distribution more challenging.

Across the region, a number of regulatory initiatives are being implemented to increase customer choice and product transparency, decrease costs, broaden the channels of distribution and improve the financial skills of investors.

liquidity and product transparency, combined with strong brand recognition and a tailored marketing approach. Local target investor segments are usually well researched or specifically requested by local distribution entities, working with the fund promoters’ distribution, sales or market teams.

REGULATORY AUTHORISATIONS AND PRIVATE PLACEMENT

The market entry chosen needs to be primarily based on the local investors to be targeted, the methods by which the engaged distributors intend to approach these segments and the type of product to be sold.

Offering funds to local investors in Asian jurisdictions can be obtained either through regulatory authorisation, generally, when retail investors are targeted, or via a private placement. The latter usually requires no authorisation and is used to target institutional and professional investors. Local ongoing compliance and reporting requirements, as well as costs, may vary based on the entry type selected.

Marc Noirhomme Director Deloitte Luxembourg

to their third-party platforms. Fund distribution in Hong Kong and Singapore is highly concentrated in banking networks where around 75% of sales occur (Securities and Futures Commission (2015), as well as Singapore Financial Services and the Treasury Bureau (2016)). In Korea and Japan, on the other hand, the majority of sales are executed via brokerage firms, with online platforms gaining more and more traction.

Notwithstanding the continuing rise of online distribution platforms, independent, locally based distributors often support the marketing of UCITS in Asia. These entities have a commercial connection to the fund, an appropriate market presence, a strong brand, a sufficient client base aligned with the products to offer or are in line with the values and culture of the UCITS promoter.

ALTERNATIVE FUNDS IN ASIA

Cayman fund products have been successfully distributed in Asia, especially in Japan, Hong INVESTOR SEGMENTS Kong and Singapore. With the introduction of Foreign asset managers wishing to target AIFMD, European AIFs are being increasingly retail, high net worth individuals and instidistributed to institutional investor segments, tutional or professional investors should UCITS MARKETING CHANNELS ACROSS ASIA especially in Hong Kong and Singapore. adopt a fitting strategy. It is rarely seen Across Asia, the types of local distribution chanAs markets across Asia enter a phase of that Asian fund distribution success comes nels to market European funds vary consid- substantial growth and increasing maturity, from a “one-size-fits-all” strategy that could erably, which drives the need for a localised Deloitte Luxembourg is preparing a report to also be applicable to Europe or the United rather than regional distribution strategy. be released in autumn this year on the signifStates. For ­example, reflecting their conser- Banks play a large role in fund distribution and icant opportunities this growth offers to both vative approach, Japanese retail and institu- can ensure long-term success by supporting global and regional investment managers to tional investors have a strong preference for distribution strategies and providing access expand their Asian business.  40 —

— ALFI — September/October 2018

Evaluate the challenge, think, analyze the facts, find the right strategy. And act.

Think and Act wavestone-advisors.com

CONTRIBUTIONS MIFID II

The manufacturers & distributors’ roles Raymond Groen In’t Woud Product director Kneip

Managing MiFID II com­ pliance and leveraging its potential commercial opportunities require manufacturers and distributors to embrace automation more enthu­ siastically, and disen­ tangle themselves from antiquated manual processes.

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— ALFI — September/October 2018

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CONTRIBUTIONS

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t Kneip, we offer a single operating platform underpinned by the latest digital technology, which is capable of facilitating frequent target market information sharing between distributors and manufacturers, allowing managers to benefit from richer data analytics. Our distribution oversight product can help you to set up and manage intermediaries and their documentation. The platform also reduces your financial risk with integrated business rules to help ensure accuracy, enhance your sales, compliance, product and financial reporting to benefit both manufacturers and distributors.

“A failure to implement a thorough distribution oversight policy could prove costly for manufacturers.”

EASIER THAN YOU MIGHT THINK

It has been over six months since MiFID II became EU law, and accompanying it has been a series of new, occasionally laborious obligations, which have been imposed on the investment fund industry. Chief among them was a consumer protection requirement asking manufacturers to perform distribution oversight and ensure their funds are being sold to the correct target market audience.

Manufacturers must now regularly monitor the activities and practices of their underlying distributors to prevent product mis-selling.

Validating client suitability was previously the role of distributors and intermediaries.

But with manufacturers now shouldering responsibility as well, many are being forced to implement changes to their business operating models. The reform process has, however, been slow with 83% of market participants telling an industry study in September 2017 that they were less than halfway ready to meet the requirements to provide data on target client groups. Even today, many firms are still yet to build proper target market solutions.

So what do investment managers need to do in order to avoid falling foul of MiFID II’s target market requirements? Firstly, manufacturers need to properly define who the target market is for their various fund ranges and share those findings with their distribution partners. The next step then will be for manufacturers and distributors to develop data exchange channels, so the latter can impart target market information with managers, and flag instances where mis-selling may have occurred.

The TISA best practice guide goes into more detail on this topic when it comes to responsibility and risk ignoring the feedback of data from the distributor. They state that “certain distributors may believe that it is easier to provide a manufacturer with more information as this means they can just take a data download from their systems with no additional manipulation or filtering, and at the same time are passing on all of the risk of identifying potential issues to the manufacturer.”

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TISA go on to say that “whatever information manufacturers receive, they must be able to digest, aggregate, analyse and act on it, as well as retaining evidence that they have done so. Information may be received from a very large number of distributors across multiple jurisdictions, across different timeframes and reporting periods.”

“Opinions are divided amongst distributors and manufacturers between the preference for full reporting or exceptions-based reporting. And they are divided for different reasons as well.

In essence, this comes down to a trade-off between doing the work and taking the risk.”

As manufacturers typically use multiple providers across Europe to distribute their products, the standard of target market data distributors receive is inconsistent, and may actually be of very poor quality in some circumstances and hence increasing the risk.

Certain distributors, for example, may only communicate intermittently with manufacturers or merely when they observe a negative target market event. Such disclosure time lags could delay manufacturers’ responses to mis-selling incidents, potentially leading to regulatory fines.

To date, the European authorities have adopted a pragmatic and flexible approach towards MiFID II compliance, conscious that the rules are highly complex, and taxing on an industry, which has dealt with its

— ALFI — September/October 2018

fair share of intricate regulations over the last 10 years. Nonetheless, a failure to implement a thorough distribution oversight policy could prove costly for manufacturers, especially if esoteric or higher-risk products find themselves in the portfolios of unassuming retail investors.

THE BENEFITS OF MIFID II

Very few regulations have commercial upsides to them, although MiFID II appears to buck this trend. In an environment where managers are continuously trying to acquire a competitive edge over their rivals by wading through vast swathes of alternative data sets, the collation, collection and analysis of target market data by distributors will provide manufacturers with enhanced transparency and understanding about their end clients, which could prove advantageous in future asset-raising efforts.

If target market data is granular and delivered on a frequent basis, managers will be well placed to introduce material changes to their distribution processes. Well-packaged, comprehensive target market data can help managers identify investor and geographical trends and localised risk appetites, allowing manufacturers to build products that are more aligned and tailored to their customers’ preferences. In short, this will enable managers to customise their sales strategies which should support AUM growth. 

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CONTRIBUTIONS

SUSTAINABILITY ENGAGEMENT

No ESG, no performance?

Mario Mantrisi General manager LuxFlag

For a long time, there has been a general market perception that sustainability underper­ forms. Market research proves current beliefs wrong. Mind­ sets are changing and tra­ ditional asset managers are now seeking the opportunity to develop ESG (Environmen­ tal, Social, Governance) prod­ uct lines. What if, in the future, investment funds perform less if ESG factors are not taken into account?

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— ALFI — September/October 2018

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CONTRIBUTIONS

T

he pressure for short-term performance has been hampering forward-looking investments in the financial industry. There was and still is this myth that sustainable investments, favouring a long-term perspective, are not bringing more money in your pocket but allow you to invest according to your values in exchange for returns. If there are still a number of people who believe it is the case, they might not yet have addressed the topic to a full extent. Doing well financially and doing good are often seen as two separate accounts in our investment decisions. However, philanthropic and financial actions should not be perceived as mutually exclusive but rather as a well-suited combination. The impression of underperformance of sustainable investments is often due to short-termism and the misperception that such investments are focused on exclusions only. Indeed, Modern Portfolio Theory points out that limiting your investment universe may result in less efficient portfolios as diversification is reduced. However, sustainable investing strategies are today much more than negative filters but imply positive screening and active approaches. The market evolved very quickly in the past years. Thereby, ESG analyses allow nowadays a deep dive into a company’s credentials. Strong corporate governance can be an indicator of the future soundness, resilience and efficiency of a company. In the long run, sustainable companies could even become the most successful and efficient ones in light of changing mindsets and generational shifts.

“ESG investing might even become the new way of reaching high performance.”

ESG IS PERFORMING

It has been a long way to achieve sustainable thinking in corporate and investment behaviour. The industry seems now to be ready for change. Every other day, the latest sustainability engagement of a large company makes it in the headline news. According to GRI (Global Reporting Initiative), over 80% of the world’s largest companies already issue standardised sustainability reports. The quality of ESG data and metrics is improving, which helps identify future-proof companies that might be overlooked by traditional analysis. ESG investing might even become the new way of reaching high performance.

Corporations with a strategic sustainable approach seem to gain high traction on capital markets. Engagements of a sustainable nature already give positive signals to the stock market. Recent announcements like Starbucks’ ban on plastic straws or Adidas’ pledge to use only recycled polyester by 2024 made both stocks jump up.

Even though the responsible investing market is still young, there is ample market research showing that ESG creates 48 —

market-rate returns. It can even lead to outperformance as empirical evidence proves.

A meta-study conducted by Friede, Busch and Bassen aggregated evidence from more than 2,000 empirical studies. The large majority of the analysed studies finds a non-negative relation between ESG and corporate financial performance. More importantly, most of them even report positive findings that are stable over time. ESG portfolios are keeping pace with traditional ones. Even though it cannot summon up for a generalised statement, we experience some compelling examples of how sustainability and performance are combined when we look at investment funds which hold a LuxFLAG label.

Alexandre Jeanblanc, Sustainability Centre, BNP Paribas Asset Management, underlines: “There have been numerous academic studies on the impact of practices regarding ESG. More than 80% of them show that

— ALFI — September/October 2018

sound ESG standards result in the long run in a lower cost of capital, better operational performance and enhanced stock price returns. Consequently, all stakeholders, from corporate managers to investors and asset managers, should include sustainability parameters in their strategic decisions. This will likely be supported by a push by public authorities and regulators to increase companies’ transparency and performance on environmental and social matters as well as improve corporate governance and corporate social responsibility.”

Indeed, this does not only prevail for ESG funds but can also apply to more specialised investment strategies. Even though the green bond market is still at its early stages and findings are based on a short-term horizon, the argument seems to be valid here as well.

Bram Bos, lead portfolio manager of the LuxFLAG labelled NN(L) Euro Green Bond fund,

www.saumur.lu 13, Rue Dicks Luxembourg

CONTRIBUTIONS

500bn According to a study co-edited by KPMG and the ALFI at the end of 2016, the sustainable funds represented 500 billion euros of assets under management out of a total of more than 3,700 billion. The 2017 figures will probably be higher.

indicates: “We researched how yields of green bonds compare to yields of non-green bonds.

The average yield of a green bond was 0.01% lower and we think this is an insignificant difference. If we compare the performance of the Bloomberg Barclays MSCI Euro Green Bond Index to the Bloomberg Barclays Euro Aggregate Index, we even find proof that a portfolio of green bonds outperforms the regular market.” This gives clear hints that sustainability and financial performance go hand in hand.

AN INCOMPARABLE TOOL TO MANAGE FUTURE RISKS

scores tend to have a lower risk of suffering from reputation incidents.

Identifying those ESG issues that have a material effect for a company considering their stakeholder groups can be very help­ ful to establish a roadmap that addresses future threats and reveals opportunities.

Ophélie Mortier, responsible investment strategist at Degroof Petercam Asset Mana­ gement, points out: “Integrating ESG criteria into investment portfolios is about identifying additional risks and opportunities. A very concrete example of risk mitigation can be found in our sustainable OECD and emerging market government bond portfolios. In this portfolio, indicators linked to transparency and democratic values constitute an important pillar of our scoring model because research has shown that the quality of a country’s institutions is material for the quality of its policies and welfare on the long term.”

ESG criteria are developing into an incompa­ rable tool for risk management and mitigation.

“ESG will also require asset managers to consider climate risks and social risks in their risk management framework. This will give a new prism to assess the risks related to the portfolio held and will increase the assessment of the reputation risk when investing in some companies” highlights Guillaume Brousse, member of the LuxFLAG ESG eligi­ MOVING FORWARD bility committee and director at Deloitte. As Time will give even more track record to the a matter of fact, companies with higher ESG sustainable investment market which might 50 —

— ALFI — September/October 2018

facilitate communication on its soundness.

Knowledge, demand and investments have already grown tremendously in the past years.

A clear understanding and reporting on which sustainable investing strategy is used and if measurable environmental or social impacts are created is fundamental. Particularly, because there can be many different strategies and levels of sustainability pursued. Investors need definitions and proofs to make an infor­ med decision. This is not new to the financial industry. Education and communication on several levels will be key to help the market to further growth which is also the target of the foreseen regulatory measures of the EU Action Plan on sustainable finance. The sustai­ nable value proposition needs to be spread to a higher granularity, including not only asset managers, but also administrators, distributors, banks and financial advisors. Millennials make no secret of their willingness to integrate sus­ tainable aspects into their investments which gives high hopes for the market’s future. Evi­ dence is building up – the business case for sustainable investments has never been more compelling. It’s high time to invest! 

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CONTRIBUTIONS LUXEMBOURG: A MATURE MARKET WITH OPPORTUNITIES

With great growth comes great operational responsibility Traditional fund management represents the main vehicle for growth and the key to Luxembourg’s status as a hub for the global fund industry. However, in line with J.P. Morgan’s strategy to provide services to all asset classes, one in particular has experienced an exponential rise in recent years and has found a fruitful home in Luxembourg – private equity.

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— ALFI — September/October 2018

CONTRIBUTIONS

portfolio management analytics have never been more important. When added to the regulatory requirements and the responsibility of transparency for investors, these factors are becoming central to the industry and many firms are now choosing to outsource these functions in order to boost efficiency, reduce the technology spent and focus on their core business of investing.

LUXEMBOURG, A STRATEGIC HUB

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rivate equity has been the jewel in the crown of the alternative investments space in recent years. Strong growth and solid returns have led to a new level of market maturity, with PwC expecting the asset class to represent almost half ($10.2tn) of the growing alternative assets market, likely to reach $21.1tn by 2025.

J.P. Morgan has helped institutional investors and broker-dealers optimise efficiency, mitigate risk and reduce costs through custody and asset servicing for many years and remains a leading provider of these services in Luxembourg. Given the firm’s outstanding client relationships with private equity clients in the country, the future is bright.

But how can these firms, and the Grand Duchy itself, ensure growth stays strong and

Private equity is not the only industry facing these kinds of challenges. Asset managers of other asset classes are also dealing with complex, long-term and fundamental sector changes. Businesses will need a clear strategy with an intense focus on addressing efficiency, product complexity, globalisation, technology and data as well as regulation and with the pedigree of servicers at their disposal; Luxembourg is now a strategic hub for the asset management community.

Ann Doherty Driven by Luxembourg’s strategic imporRegional sales executive EMEA, investor services tance, large firms are beginning to move a wider J.P. Morgan range of functions to the country, including senior staff. As global levels of cross-border activity rise for investment and distribution, Luxembourg is perfectly placed to benefit.

Global asset management firms are recognising this and we are reaching a tipping point as they view Luxembourg as a viable strategic centre point. As the gravitational force of the country continues to grow stronger, J.P. Morgan is working with asset managers to not only meet their future state demands but also to share our expertise in managing high-impact strategic change programmes, as they transform their business and their operating model.

Luxembourg remains a country-of-choice for many global institutional investment firms.

For this to remain, the industry and the country will need to continue to invest to stay ahead of global competition. If the industry and the country continue to embrace this challenge, and there is every chance that they will, Luxembourg will remain at the forefront for what factors should the industry be thinking private equity and asset management firms about? to house structures that they can then use as Luxembourg has become a vibrant and a springboard to grow their business. That’s exciting place for private equity funds to why J.P. Morgan has invested heavily in its thrive, contributing to the industry’s success Luxembourg franchise and has been a hub up to this point. Thanks to its unique range of for our Custody and Fund Services business fund solutions, solid governance and stable since 1973. It has a long history of supporting tax environment, a growing number of the and servicing all assets, including private world’s leading PE firms are choosing to domi- alternative assets from both the asset manacile their structures, move infrastructure and gement and asset owner perspective. As the investing and fund-structuring world has people into the jurisdiction.

To maintain this momentum, the industry become more complex, our services focused must look beyond the current market dynamics on fund administration, depository, investand not underestimate the growing role of data, ment analysis, performance analytics and data management and its impact on operatio- data management have proved invaluable to nal efficiency. Due to the huge amounts of data our clients, and we have now established the triggered by the pace and complexity of today’s convenience of one legal entity for all Euromarket, data management, risk mitigation and pean Economic Area clients to work with.  September/October 2018 — ALFI —

— 53

CONTRIBUTIONS FINANCIAL INDUSTRY’S TRANSFORMATION

Banks and the challenge of technology Laurent Marochini Laurent Marochini Head of innovation Head ofGenerale innovation Societe Securities Services SGSS Luxembourg

54 —

— ALFI — September/October 2018

CONTRIBUTIONS

panies hold more than 95% of the world’s data (source: lemonde.fr) and have learned how to manage it, especially the ability to monetise it. For example, AWS, Amazon’s data centre, saw its sales increase by 45% in the last quarter of 2017 (source: zdnet.com).

Blockchain also offers an opportunity.

Considered the greatest invention after the Internet, it is quite promising, especially when it comes to operational efficiency and knowing their customers. The ability for stakeholders to collaborate is essential to making the most of this technology. Achieving operational efficiency remains the main objective according to the Long View survey.

Taking into account their distributed and “open” characteristics, these new technologies require us to completely rethink our way of working in order to discover this new world. The environment and the capacity to create new business models are the key elements in transforming companies. This transformation will require more collaboration with competitors and new stakeholders.

Today, a single company may be on the cutting edge of technology, but it will not necessarily have a competitive advantage.

“The best way to predict the future is to create it.” This quote by Peter Drucker, a renowned professor of business manage­ ment at New York University, is more rele­ vant than ever with regard to the new tech­ nologies available in the financial industry.

M

ost financial institutions have become aware of the impact of digitalisation on their services. The unfortunate case of Kodak now serves as a counterexample for many companies, and has spurred them to do everything possible to anticipate this change.

Today, flexibility and innovation are the keys to understanding trends and to having the ability to reinvent oneself. Therefore, banks are increasingly being compared to technology companies.

SO WHAT ARE BANKS DOING TO STAY COMPETITIVE IN THIS ENVIRONMENT?

advances. Many banks have already tested these technologies through trial runs (proof of concept). The challenge here lies in industrialisation in order to achieve an unprecedented production and customer experience.

To better understand the major changes that are currently underway, Société Générale Securities Services has conducted a prospective survey of more than 100 of its largest clients in Europe (asset managers, alternative asset managers and asset owners) called Long View.

For instance, an interesting insight from WHAT ARE THESE TECHNOLOGIES? AND HOW DO the survey is that 39% of surveyed asset manaTHEY IMPACT THE WORLD OF FINANCE? gers still face the challenge of using data betVarious studies on the impact of technology in ter. Banks are sitting on gold mines and it’s in the banking system have unanimously iden- their interest to manage data wisely. tified blockchain, artificial intelligence and For informational purposes, the GAFA open banking as the most groundbreaking (Google, Apple, Facebook, Amazon) com-

For several years, banks have understood the interest of interacting in this new world, especially when it comes to collaborating with “FinTech” start-up companies. Although these were seen as a potential threat to the well-established banking model, these companies are now welcomed with open arms.

The amount of start-up funding available is a great indicator to demonstrate the growing enthusiasm in this regard. In particular, the KPMG study revealed that France raised as many funds in the first quarter of 2018 as it did in 2015 and 2016 combined. Moreover, this trend is more or less identical in major financial world hubs such as London or Berlin.

This idea of “co-creation” – that is, cooperation between start-ups and major banking institutions – will, for example, make it possible to completely redefine the customer experience in a world where consumer habits are constantly changing. Within this context, Société Générale Luxembourg has decided to continue its digital transformation by opening an innovation laboratory and by welcoming both internal and external FinTech start-up companies. This collaboration will be essential to understanding and developing the digital professions and uses of the future. All this while keeping in mind the fact that data security and its use by customers should be carried out efficiently and securely.

Alone, we progress faster, but together, we progress further! 

September/October 2018 — ALFI —

— 55

CONTRIBUTIONS CIRCULAR 18/698

Specific AML provisions for investment fund managers The recent CSSF Circular 18/698 is subtitled “Specific provisions regarding the fight against money laundering and terrorist financing appli­ cable to investment fund managers (IFM) and entities carrying out the activity of registrar agent”, which is a strong statement that fighting money laundering and terrorism financing is close to the heart of the CSSF.

T

he circular also addresses a point often raised by professionals that the existing rules were not tailored for the investment fund industry. So, what is the news?

A CLARIFICATION OF THE APPLICABLE RULES

Stéphane Badey Partner Arendt Regulatory & Consulting

56 —

— ALFI — September/October 2018

The circular starts by safely confirming that each IFM is subject to the AML/CTF Law (Law of 12 November 2004 on the fight against money laundering and terrorist financing), the CSSF Regulation No. 12-02 and the regularly published CSSF circulars on AML/CTF including for example the 11/519 on the risk analysis.

In addition, it is reminded that each IFM is also subject to the Law of 27 October 2010 relating in particular to the implementation of United Nations Security Council resolutions and acts adopted by the European Union containing prohibitions and restrictive measures in financial matters against certain persons, entities and groups (in the context of the fight against terrorist financing, as well as Articles 33 (1) and 39 (1) of CSSF Regulation No. 12-02 concerning the duty of constant vigilance in this context ). It is also reminded that European Union regulations directly applicable under national law, or through the adoption of ministerial regulations, also apply to each IFM. Finally, should anyone have a doubt, the circular states that IFM must follow “guidelines for the securities sector” which are soon to be issued by the Financial Action Task Force (FATF) and must also comply with CSSF

CONTRIBUTIONS

Circular 17/661 adopting the joint guidelines issued by the three European Supervisory Authorities (ESA): European Banking Authority (EBA), European Securities and Markets Authority (ESMA) and European Insurance and Occupational Pensions Authority (EIOPA) on money laundering and terrorist financing risk factors, in particular chapter 9 of title III which covers providers of investment funds.

“The circular is a reminder that the registrar agent in the context of investment funds is a delegate of the IFM and the latter remains responsible from an AML perspective, whether it is having a direct relationship or not with its investors.”

A CLARIFICATION OF THE SCOPE

The circular reaffirms that each IFM must implement due diligence measures regarding, in particular, clients, initiators of UCIs, portfolio managers to which they delegate the management and investment advisors and is also required to apply due diligence measures regarding the assets of the UCIs which it manages. For a market principally driven

by UCITS funds, due diligence on assets was not high on the agenda of compliance officers, considering that investments are principally made in listed companies on regulated markets which require transparency rules. Not that nothing was done, but this was limited compared to the necessary due diligence required of buyers and sellers in the private equity and real estate world. With the increasing importance of the alternative markets and the potential AML risks associated to these types of underlying investments, the affirmation of this requirement was somehow expected.

CLARIFICATION OF THE AML OBLIGATIONS OF THE IFM

The circular makes a distinction between four situations.

Case a) and case b) contemplate the situation where the IFM is in a direct relationship (i) with intermediaries who carry out marketing and which act on behalf of clients and/or (ii) with direct investors, with the difference that in case a) the IFM assumes the function of registrar agent and in case b) it does not.

Case c): the IFM is not in a direct relationship (i) with intermediaries who carry out marketing and which act on behalf of clients nor (ii) with direct investors and does not assume the registrar agent function.

Finally, case d), where the IFM does not exercise either the supplementary function of marketing UCIs which it manages or the function of registrar agent which can be the case for AIFM. The circular places a number of obligations on the direct relationship between the IFM and the intermediary or the investor. Some of these obligations echo the more detailed provisions applicable to all delegates and the organisation of the marketing function. If anything, the circular is an acknowledgment that the AML risk is intimately linked to the distribution appetite. The more adventurous you want to be, the more risks you will take.

58 —

Additional clarification will however certainly be required when it comes to the right AML measures to be applied on the scenarios a), b) or c) for the IFM to be in compliance with the circular.

For example, a common agreement on what is the definition of a “direct relationship” will be welcome. The ESA has provided a definition of what a customer is, that a direct relationship, distinguishing between i) a natural or legal person directly investing for its own account, ii) a financial institution acting under a discretionary mandate, iii) a financial institution acting on its own name but acting for its clients (i.e. nominee type) and iv) a financial institution customer where the financial institution is acting as an intermediary but is not the registered owner (i.e. third-party introducer type).

One would then think that a direct relationship is established when the investor is registered directly in the UCI registrar but case c) exposes the scenario where the IFM is not in a direct relationship with direct investors. Regardless the oxymora, it is a fact that a UCI with a good track record could receive unsolicited subscriptions and hence not be in a direct relationship with the investors prior to the subscription. This would also be true when there is an intermediary acting on behalf of its clients with whom the IFM has no relationship.

In these latter cases, the AML/KYC framework must be detailed in a contract established between the registrar agent and the IFM so that the IFM can comply with its obligation as if it had established a direct relationship.

With this in mind, the circular is a reminder, if need be, that the registrar agent in the

— ALFI — September/October 2018

context of investment funds is a delegate of the IFM and the latter remains responsible from an AML perspective, whether it is having a direct relationship or not with its investors.

The circular also tackles the recourse to intermediaries who carry out marketing and which act on behalf of clients. This is the situation commonly referred to as “nominee” account.

In a nutshell, ESA guidelines seemed to indicate that when a financial institution is acting on behalf of clients, two scenarios must be considered. Either (i) the financial institution has a discretionary mandate over the client assets and, in such cases, the financial institution must be considered as the client or (2) the financial institution is acting upon client instruction and in this instance, information on the client of the financial institution must be escalated to the IFM to do the AML due diligence. The forthcoming FATF guidelines seems to stick with another recommendation on such “nominee” accounts which proposes to do enhanced diligence at the level of the financial institution without necessarily having access to the information of the underlying clients.

The circular seems to have opted for a position similar to the ESA requiring verifications and periodic assessments according to the risk to ensure that the intermediary complies at all times with the subscribed commitments, notably with respect to the communication, without delay and upon request, of the relevant identification data of its clients.

Further analysis will certainly be required on that specific point to articulate in practice the different recommendations made by the ESA, the FATF and the CSSF. 

T N IO H S T A LI D SL G N EN IDE A V R O T O IN PR

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Au-delà de l’acte de créer, l’entrepreneur se démarque par un besoin régulier de faire des choix : renforcer une activité plus qu’une autre, ou au contraire, cesser une activité pour redéfinir son core-business.

En d’autres termes, transmettre une partie de son activité pour redonner de l’élan à sa société ou, au contraire, reprendre et intégrer un business existant pour consolider son entreprise.

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CONTRIBUTIONS DATA AND INFORMATION EXCHANGE

Futureproofing the fund industry

Wide-reaching change is coming to the European fund distribution chain and it will be built on data and information exchange in an innovative ecosystem.

60 —

— ALFI — September/October 2018

T

he European investment fund industry stands at the very beginning of a muchanticipated digital transformation.

In an industry that has its share of inefficiencies and outdated practices, primarily it is the need to reduce costs that is driving change. At last year’s ALFI Global Distribution Conference, the focus was very much on overheads and how, as the president of NICSA stated, technology “could enable huge efficiencies and make the industry far less capital intensive than what it is today.”

However, all fund industry players know that success in the future depends not just on cost reduction, which is only one half of the equation, but also on the ability to seize the many and varied opportunities for new business that will arise.

On the other hand, success is not automatically assured, and it is not just in Europe that this will play out. International competitive challenges will be significant. Emerging regions are attempting to replicate the very successful UCITS passporting model and this is happening in countries whose share of global GDP has been steadily increasing over the years.

Responding appropriately to demographic and social change will also be essential. An ageing population requires low-cost and safe collective investment while a younger generation, regardless of the service or product, now sees transparency and instant access to information as a given.

DIGITALISATION BRINGS DOWN COSTS AND CREATES OPPORTUNITIES

According to a recent survey from State Street (State Street Multi-Market Growth Insights Fund Strategy Survey Key Findings, July 2018), 88% of asset managers say that data related to distribution is a challenge for their business. The same survey found more than half who agreed that “the pace of industry disruption will increase, as new technology-­ driven challengers threaten incumbents’ distribution models.”

Steps towards future-proofing the fund industry, in particular fund distribution, involve bringing change to three main areas.

They are investor experience, order management and transparency throughout the fund distribution chain. Assuming it is based on an innovative, industry-wide infrastructure and an interoperable ecosystem, the digitalisation of the distribution chain can offer efficient solutions to these issues. In this digitalised world, data, data quality and, crucially, information flows and exchange between all stakeholders will be fundamental.

Digitalisation responds to the need for cost cutting and, at the same time, creates the right conditions for future growth; by brin-

CONTRIBUTIONS

“In this digitalised world, data, data quality and, crucially, information flows and exchange between all stakeholders will be fundamental.”

Maxime Aerts COO Fundsquare

ging fund buyers and fund producers closer together, by streamlining the fund distribution chain and by offering a strategic and realtime overview of the business. This results in fund producers being able to meet fund buyers’ needs and to expand their investor base via products and services innovation, while doing so competitively.

sight of the complete fund distribution chain are a tangible goal, but it is one that will not be realised without adapting the existing systems.

In the short to medium term, incumbents’ legacy systems, hybrid systems and fully digitalised ones will exist side by side, but all need to interact together. Here, the issue of interoperability will need to be addressed. An interoperable ecosystem, however, depends AN INTEROPERABLE ECOSYSTEM IS KEY on significant cooperation and creative Real-time data exchange, control and over- competition between stakeholders.

Underlying such cooperation is the idea that going forward with an interoperable ecosystem means that actors must work together on a common goal: improving the entire chain for the benefit of the industry as a whole, including investors.

To sum up, digitalisation and interoperability can provide real benefits for the European investment fund industry. We are at the beginning of the journey and taking the right first steps is crucial.

September/October 2018 — ALFI —

— 61

CONTRIBUTIONS CSSF CIRCULAR

Substance – Quo vadis?

On 23 August 2018, the CSSF issued its long-awaited circular 18/698 on the substance of Luxembourg management companies. After a relatively short but (as it seems) intense consultation process, the CSSF has made public what can be seen as a new cornerstone in the Luxembourg regulatory landscape.

O

n 101 pages, the CSSF summarises its positions and expectations regarding the establishment, approval and running of Luxembourg management companies.

Looking at the volume of the circular and its great level of detail, one may wonder what it means for Luxembourg and Luxembourg-based management companies. Is this the start of a new era? Or is it a mere transcript of the regulatory practice that has been applied by the CSSF over years?

IT’S NONE OF BOTH

At first sight, the circular is indeed a compilation of current regulatory practice. Those active on the Luxembourg market will identify many of the CSSF’s positions taken over past years and will find it helpful to see such practice reflected in a circular and thereby “officialised” for all Luxembourg actors. We hear from industry players that they welcome the circular as it gives a great amount of comfort to the market – including to potential new market entrants. They now have a clear picture of how they have to organise and what they are expected to do. By its new circular, the CSSF has put an end to something it was sometimes (rightly or wrongly) blamed for, that was an alleged lack of transparency of its regulatory practice, especially for persons outside the 62 —

Silke Bernard Investment Funds partner Linklaters

Luxembourg financial market. One should, is required to take place every three years. however, not stop reading here.

This may mean quite some additional work, e.g. for actors providing third-party manaCLARIFICATIONS AND REQUIREMENTS gement company services.

Although large parts of the circular do reflect These are only a few examples, and evecurrent (written and unwritten) CSSF prac- rybody should read carefully what precise tice, it contains a few clarifications and expectations one will have to comply with. requirements that were so far not common So, does this mean Luxembourg becomes regulatory practice. By writing them down a place where management companies are no in a circular, they have now become (sub- longer welcome? ject to any derogations) generally appliMy answer is: No, quite to the contrary. cable rules. Some of these aspects may Luxembourg has always been a place where easily be overseen – they fit so nicely into supervision has been taken seriously. The the description of the regulatory practice CSSF has always tried to understand business which sounds very familiar... But they are models, to make sure proposed set-ups can important and it is advisable to read the work in practice and are sound and robust to circular carefully to spot these points. make the Luxembourg funds market a strong One that has already been largely discussed and reliable place for investors. is the new (numerical) approach to the numThe new circular confirms such regulatory ber of mandates that can be exercised by direc- approach. It provides a great level of transpators. But there are others. For instance, the rency, reliability and comfort to the market circular now clearly states that a Luxembourg while at the same time keeping a considerable management company with less than three level of flexibility that will allow the CSSF to full-time equivalent fee earners is consi- adjust its individual regulatory assessment dered being a letter-box entity (with the to specific situations. consequences we know). Also, there are claMy hope would be that the new circular rifications on delegation arrangements and will make Luxembourg an even more welthe obligations of the delegating management coming place for asset managers and that it company. The reception of regular reporting will provide investors and markets with a high from delegates will no longer be sufficient level of trust into the Luxembourg regulatory but a full renewal of the initial due diligence environment. 

— ALFI — September/October 2018

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INDEX

COMPANIES LEADING FIGURES ADVERTISEMENTS

A - B - C

G - H - I - J

AERTS MAXIME 60 AGNES ANOUK 16 ALFI 16, 24, 43, 50 ALIPAY 34 AMAZON 34 ARENDT 56 ATOZ TAX ADVISERS 29, 66 BADEY STÉPHANE 56 BANQUE DE LUXEMBOURG 6 BANQUE HAVILLAND 23 BANQUE PICTET 9 BANQUE PRIVÉE EDMOND DE ROTHSCHILD 15 BIL 4, 30 BIRD STEPHEN 34 36 BRAUN KAI CITI 34 CSSF 24, 56

GSK HKIFA J.P. MORGAN

KEYTRADE 68 19, 42 KNEIP KPMG 38, 50 2 LINKLATERS LOMBARD ODIER 25 FUNDS EUROPE LPEA 24 LUXEMBOURG BANKERS ASSOCIATION 16 LUXFLAG 16 LYXOR 13

D - E - F

M - N - O - P

DELOITTE LUXEMBOURG DOHERTY ANN EFA EFAMA EY LUXEMBOURG FIHRI SAID FITZPATRICK JIM FUNDSQUARE

40 52 37 24 36 38 32 60

S - T - U - V - W 27 16 52

K-L

SAUMUR SOCIÉTÉ GÉNÉRALE SECURITIES SERVICES WAVESTONES WECHAT

49 38 41 34

MANTRISI MARIO 40 MAROCHINI LAURENT 38 MULLER CHARLES 24 16, 32, 60 NICSA 40 NOIRHOMME MARC O’DONNELL KEITH 66 PWC 52

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NEXT STEPS

KEITH O’DONNELL

“Careful!

Change of course!”

K 66 —

eith O’Donnell thinks “the fund industry is undergoing a change of course. While active management funds do provide some advantages, the current trend seems to be leaning towards a growing interest in passive investment funds, mainly due to reduced management costs. In my opinion, we should be looking to find ways to deal with the consequences of this directional change, underestimated by both the government and the industry itself.”

— ALFI — September/October 2018

PHOTO Patricia Pitsch (Maison Moderne)

Each month, a representative of the sector covered by Paperjam Plus is asked to share their impressions on its future. Keith O’Donnell, founding and managing partner of Atoz Tax Advisers, answered the question: “How do you see the immediate future of the Luxembourg fund industry?”

NN Investment Partners Investisseur Responsable ISR : 10,9 milliards € d’encours

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Disclaimer This document, publication or website has been prepared solely for information purposes. The contents are based upon sources of information believed to be reliable. No guarantee, warranty or representation—expressed or implied—is given by NN Investment Partners Luxembourg S. A. as to the accuracy, adequacy or completeness of the information made available. It does not constitute an offer or a solicitation to buy or sell any investment referred to herein nor to participate in any trading strategy. The information presented is subject to change without notice.

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