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    ALFI Newsdigest december 19, 2014    
          in this edition      
    1. Headlines
2. News from ALFI's Asia Representative office
3. Upcoming ALFI events
4. Past ALFI events
     
 
   

Season's Greetings

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1.

Headlines

First Luxembourg UCITS authorised to use the Shanghai-Hong Kong Stock Connect program

The first Luxembourg UCITS has received the authorisation to use the Shanghai-Hong Kong Stock Connect program that provides mutual trading access between the Shanghai and Hong Kong stock markets. A number of Luxembourg UCITS have shown interest for this pilot program.

The program, launched on 17 November 2014, enables foreign investors to trade Shanghai-listed shares via the Hong Kong stock exchange, and mainland investors to invest in Hong Kong shares via the Shanghai stock exchange. It also offers an opportunity for UCITS to invest into A-shares listed on the Shanghai stock exchange alongside the existing investment schemes (such as QFII and RQFII).

Camille Thommes, Director General of the Association of the Luxembourg Fund Industry, said: “Over the past years, the Chinese economy and financial markets have undergone a remarkable transformation and seen significant growth. More specifically, the Chinese equity market has grown to the second largest equity market in the world after the US. The Shanghai – Hong Kong Stock Connect program therefore represents one of the biggest developments for foreign investors wishing to access this market.”

However, there are a number of factors which require careful consideration and appropriate solutions for those Luxembourg UCITs considering accessing this market through the Shanghai Hong Kong Stock Connect. The Luxembourg UCITS, its management company (if any) and the depositary bank appointed by the fund must give due consideration to a number of factors and ensure that their risk management procedures adequately covering them.

(read more)

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Growth continues for Luxembourg domiciled REIFs

2013 was a good year for Luxembourg domiciled REIFs. 15 new Direct REIFs were launched, slightly down compared with 25 launches in 2012. Early signs for 2014 are very positive, with an additional 15 Direct REIFs launched in the first six months. These are some findings of the 2014 version of ALFI’S annual real estate investment fund (REIF) survey released at the occasion of the European Alternative Investment Funds Conference in Luxembourg.

“The sector has grown 276% since 2006, a compound annual growth rate of 21%”, ALFI chairman Marc Saluzzi, observes. “The continued growth in the number of REIFs in Luxembourg demonstrates that Luxembourg remains a favoured location to establish and maintain multi-national and multi-sectoral regulated real estate investment funds which continue to appeal to institutional investors and fund managers around the world.”

Read the related press release or download the entire survey here.

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AIFMD fuels strong growth in European fund domiciles

According to a report published by ALFI and carried out by Oliver Wyman, the introduction of the AIFMD has fuelled strong growth in European fund domiciles, with the number of alternative investment funds increasing by10% since 2010, and assets under management increasing by 13%.

When commenting these figures, ALFI chairman Marc Saluzzi said that whilst many were against the AIFMD when it was first introduced because of the fear of high compliance costs and additional complexity, this piece of regulation has brought significant benefits, allowing EU domiciled managers to market authorised funds across the EU. The introduction of the AIFMD thus increased the attractiveness of European onshore domiciles.

The study that examines those domiciles attracting the largest number of AIFs by number fund registrations and AuM, as well as key domiciles in the European Union (EU), has identified four main trends in the choice of domicile for alternative investment funds: a strong growth in European domiciles, a growing demand for alternative investment funds under mutual fund structures, a clear preference for domiciles offering “one-stop-shop” solutions and a confirmation of the dominant role traditional offshore domiciles play within specific AIF asset classes.

Read the related press release or download the entire survey here.

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Luxembourg fund assets exceed the threshold of EUR 3,000 billion

Assets under management of Luxembourg domiciled funds reached euros 3006.76 billion at the end of September 2014. This represents a 14.97% increase since the beginning of this year and is mainly due to net sales.

For ALFI chairman Marc Saluzzi, “it is encouraging both that investors have confidence in investment funds generally and that fund promoters continue to choose Luxembourg as a domicile.” 

Explaining the success of Luxembourg as a domicile for cross-border funds, Mr Saluzzi identifies a number of key factors: Luxembourg’s unrivaled expertise in the international, cross-border fund business, its large array of investment vehicles and legal structures that suit investors and fund promoters from around the world and, last but not least, its comprehensive market infrastructure with all the elements in the investment fund value chain, from service providers to fund administrators to depositary banks etc.

Get the most recent fund industry figures and read ALFI’s full press release in English, German or French.

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The 5th European Microfinance Award goes to Kompanion Financial Group

Kompanion Financial Group from Kyrgyzstan has received the 5th European Microfinance Award for Microfinance and the Environment at this year’s European Microfinance Week held in Luxembourg in mid-November. For this year's award, 26 applications from 19 countries were received.

With Kyrgyzstan’s lands facing massive levels of environmental degradation due to decades of poor farming practices and land mismanagement, Kompanion’s Pasture Land Management Training Initiative provides a specialized "Credit for Conservation" loan linked to a training program for livestock farmers, which introduces sustainable land management practices and helps restore previously degraded lands.

With the prize money of 100,000 euros, Kompanion plans to develop a ‘mobile classroom’ to reach the herders in remote pasture lands and provide trainings in more villages across Kyrgyzstan, Olesia Paukova, Director Development Services at, Kompanion Financial Group, said. “We will also develop video materials to be used in public schools in remote areas. These materials will connect students in those areas with our livestock management experts who will present the best pasture land management practices.”

The European Microfinance Award was launched in 2005 by the Luxembourg Ministry of Foreign and European Affairs – Directorate for Development Cooperation and Humanitarian Affairs. It is jointly organised by Luxembourg’s Directorate for Development Cooperation, the European Microfinance Platform (e-MFP), and the Inclusive Finance Network Luxembourg (InFiNe.lu), in cooperation with the European Investment Bank (EIB).

Watch the videos presenting the 5th European Microfinance Award finalists and their projects.

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IFBL issues new training catalogue

IFBL, the Institute for professional training in banking, has issued its 2015 training catalogue.

The Institute offers more than 450 à la carte training modules, many of which are new, updated by its Quality Circles, as well as 25 professional qualification programs set up in cooperation with the financial center’s specific professional associations.

The catalogue can be downloaded on the Institute’s website (www.ifbl.lu), printed copies can be ordered by email (customer@ifbl.lu).

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UCITS inflows exceed 100 billion euros – once again

The third quarter of 2014 marked the third successive quarter that UCITS posted net inflows in excess of EUR 100 billion, the European Fund and Asset Management Association EFAMA reports in its most recent Quarterly Statistical Release. Net sales of UCITS increased during the third quarter to EUR 130 billion from EUR 126 billion in the second quarter. So far in 2014, UCITS attracted EUR 405 billion in net inflows, more than double the EUR 178 billion attracted over the same period in 2013.

The combined assets of UCITS and non-UCITS surpassed the EUR 11 trillion mark for the first time ever to end the quarter at EUR 11,057 billion.

Long-term UCITS, i.e. UCITS excluding money market funds, continued to register strong net inflows of EUR 117 billion, albeit down compared to EUR 148 billion in the second quarter. Demand for bond funds as well as for balanced funds remained high in the third quarter, while equity fund net sales fell to EUR 14 billion, from EUR 24 billion in the second quarter, owing to rising geopolitical and economic uncertainties during the quarter.

Money market funds posted net inflows of EUR 13 billion in the third quarter, against net outflows of EUR 22 billion recorded in the second quarter. Total net assets of UCITS increased by 4.3 percent during the third quarter to stand at EUR 7,807 billion at end September 2013. Total net assets of non-UCITS increased by 3.1 percent in the third quarter to stand at EUR 3,250 billion at end September 2013. Assets of special funds reserved to institutional investors grew by 3.3 percent during the quarter.

(read more)

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ALFI responds to ESMA’s consultation on EuSEF and EuVECA regulation

ALFI has responded to a series of specific questions listed in a Consultation Paper published by the European Securities and Markets Authority (ESMA) regarding ESMA’s Technical Advice to the European Commission on the implementing measures of the Regulations on European Social Entrepreneurship Funds (EuSEF) and European Venture Capital Funds (EuVECA).

You may access the document with ALFI’s responses here.

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ALFI responds to IOSCO’s Consultation on Principles regarding the Custody of CIS Assets

ALFI has replied to IOSCO’s Consultation report on principles regarding the custody of collective investment schemes’ assets.

In its response, ALFI namely welcomes IOSCO’s statement that the ultimate regulatory and market risk of each domestic securities market remains and is beyond the control of the depositary: As IOSCO stresses, “where assets are held in foreign jurisdictions, there may be specific country risks that should be taken into account, e.g. the effectiveness of the local regulatory regime, whether a judgment can be enforced effectively and other factors that make it difficult to repatriate CIS assets” – factors for which clearly ALFI believes the depositary as well as any appointed third party have no influence on.

Hence, this is an element to be taken into account by the responsible entity in its investment decision process. In this respect, communication/ cooperation between depositaries and their responsible entity, including an appropriate escalation procedure, is of paramount importance.

Read IOSCO’s Consultation report and ALFI’s response.

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CSSF updates AML Circular

On 30 October 2014 CSSF issued Circular 15/595 drawing the attention of all entities under its supervision to the declarations published by the FATF on 24 October with regard to jurisdictions that may pose a risk to the international financial system. In particular, the list of jurisdictions with strategic anti-money laundering and combating the financing of terrorism deficiencies for which a call for action applies, and the list of jurisdictions with strategic AML/CFT deficiencies for which they have developed an action plan with the FATF have been updated by the abovementioned declarations. The Circular cancels and replaces Circular 14/590 of 1 July 2014.

Please click here to access the text of the Circular.

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PRIIPs Regulation published in the Official Journal of the EU

Regulation (EU) N° 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) was published in the Official Journal of the EU on 9 December 2014. It will come into force on 29 December 2014 and its provisions will apply as from 31 December 2016. UCITS and non-UCITS for which a document comparable to the UCITS KIID is produced are exempt at least until 31 December 2019, whereas other non-UCITS that are sold to retail investors will have to produce a PRIIPs KID as from the regulation’s date of application. The European Commission will conduct a review by end of 2018, based on which it will decide whether the transitional arrangements for UCITS should be prolonged or whether the UCITS KIID provisions should be replaced by or considered equivalent to the PRIIPs KID.

The European Supervisory Authorities (ESAs) recently published a first discussion paper in view of the adoption of Regulatory Technical Standards (RTS) by the Commission. This will be followed by a more technical discussion paper and two further consultations in 2015. In parallel, the Commission is launching a consumer testing exercise which will run until August 2015. The final level 2 measures will apply from 31 December 2016, just as the provisions of the regulation itself.

Work done and intended at ALFI level

ALFI will respond to the different discussion and consultation papers, also by contributing to the responses from the European Fund and Asset Management Association (EFAMA). Once the legislative process is enough advanced, ALFI will again – just as for the UCITS KIID – work on proposed answers to questions raised by practitioners with the aim to take a lead in helping the fund industry to understand how to implement the PRIIPs KID.

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EFAMA letter to US agencies on banking entity definition

On 16 October 2014, the European Fund and Asset Management Association (EFAMA) sent a letter to five US agencies requesting for relief under the Volcker Rule from potential designation as “banking entities” for certain European UCITS and similar non-U.S. funds that are excluded from the definition of covered fund. 

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EIOPA issues Guidelines on the use of the Legal Entity Identifier

The European Insurance and Occupational Pensions Authority (EIOPA) issued its Guidelines on the use of the Legal Entity Identifier (LEI) in all the official languages of the EU. According to them, national competent authorities (NCAs) should ensure that all institutions under their supervisory remit obtain a LEI code. The use of LEI will apply to all information collected by EIOPA including Solvency II reporting and registers.

Within 2 months, the NCAs should confirm to EIOPA their compliance or intention to comply with the Guidelines on the use of LEI that will become applicable on 31 December 2014.

With these Guidelines, EIOPA supports the adoption of the LEI system proposed by the Financial Stability Board (FSB) and endorsed by the G20, aimed at achieving a unique, worldwide identification of parties to financial transactions. EIOPA believes that the use of LEIs will enhance supervisory convergence and overall efficiency of the supervisory system while ensuring the high quality, reliability and comparability of data.

In addition EIOPA publishes the Final Report on the public consultation on the draft Guidelines related to the use of LEI, which contains the impact assessment of the Guidelines and EIOPA’s Feedback Statement on the public consultation.  The language versions of the Guidelines and other documentation can be viewed here.

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Compromise proposal regarding MMF Regulation

The Council of the EU has published a presidency compromise proposal for the Regulation on money market funds (MMF), dated 10 November 2014. The proposal can be accessed here.

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ESMA updates Q&As on AIFMD and EUSEF/EUVECA implementation

On 11 November 2014, the European Securities and Markets Authority (ESMA) updated the following Q&A documents:

  • Application of the AIFMD (Further Q&As on AIFMD reporting have been added as well as a new section on the calculation of the total value of assets under management.)

ESMA recently issued a call for evidence on the AIFMD passport and third country AIFMs, and a consultation on level 2 measures for the EUSEF and EUVECA regulations. Click here for more details.

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The Joint Committee of the ESAs publishes 2015 Work Programme

The Joint Committee of the European Supervisory Authorities (EBA, ESMA and EIOPA) has published its Work Programme for the upcoming year. Throughout 2015, the Joint Committee will continue to give high priority to consumer protection and cross-sectorial risk analysis.

In particular, the ESAs will carry on with their joint regulatory work in key areas such as packaged retail and insurance-based investment products (PRIPs), but also financial conglomerates, anti-money laundering (AML), benchmark setting processes and credit rating agencies. Furthermore, the ESAs will keep on closely monitoring legislative and regulatory developments both at European Union and international level, so as to provide appropriate follow-up as required.

Access the full Joint Committee 2015 Work Programme.

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IOSCO publishes strategic framework for Investor Education/Financial Literacy

The International Organization of Securities Commissions (IOSCO) has published a final report on the Strategic Framework for Investor Education and Financial Literacy, which describes IOSCO’s role in promoting investor education and financial literacy and its strategic approach to both. The strategic framework will guide the Committee on Retail Investors’ efforts in establishing investor education initiatives that produce meaningful results for investors.

IOSCO has long recognised investor education as a key strategy for enhancing investor protection, promoting investor confidence and fostering investor engagement in financial planning and decision-making. Investor education is complementary to the traditional tools of regulation, supervision and enforcement, and is recognised in IOSCO ́s guiding principles for securities regulation.

Some comments received during the organisation’s consultation process namely highlighted that partnerships between securities regulators and public, private, not-for-profit and community-based organisations may provide opportunities to maximise limited resources and leverage each other’s strengths.

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2.

News from ALFI's Asia Representative office

Taiwan's FSC-FSB tightens offshore funds regulation

According to a statement released by the Financial Supervisory Commission – Securities and Futures Bureau (FSC-SFB), offshore funds will have to reduce the percentage of Taiwanese investors from 70% to 50%. The statement also requires that offshore funds will be allowed to invest only 50% of their assets in Taiwanese securities, compared to 70% previously.

The official statement in Chinese can be found on the regulator’s website: http://bit.ly/1yGdMcK

The new rules will be effective from January 1, 2016.

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3.

Upcoming ALFI events

13-16 January 2015: ALFI Roadshow to Asia

Please forward the invitations to your contacts in Asia!

Programme & Invitation: click here

To Register: click here

Sponsorship opportunity for ALFI members. Contact events@alfi.lu

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12 February 2015: ALFI Roadshow to Amsterdam

Save the date!

Half-day morning seminar followed by lunch

Fund Industry Seminar including sessions on

  • regulated alternative funds under AIFMD
  • current distribution trends of traditional (UCITS) & alternative (AIFs) products
  • trends in responsible investing
  • real estate funds round table

Participation is free of charge

More details coming soon!

Sponsorship opportunity for ALFI members. Contact events@alfi.lu

Event webpage

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25 February 2015: ALFI Leading Edge Conference

"Depository Rules & other Custody Services Related Issues"

The programme gives you practical and technical details on :

  • Selection, initial due diligence and ongoing review on service providers by the Depositary;
  • Segregation and record keeping of assets;
  • Governance and prevention of conflicts of interests
  • Depositary/Custody Delegation and Sub-Delegation Operating Models
  • Liquidity oversight requirements and other controls
  • The role of the Management Company in light of the new Depositary Circular – Business as usual?

Sponsorship Opportunity! Deadline 16 January 2015

General sponsorship: click here

Badge sponsorship: click here

Event webpage

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24 & 25 March 2015: ALFI Spring Conference

Last chance to have your logo on the invitation brochure !

Click here for all Sponsorship & Exhibition opportunities!

Event webpage

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24 March 2015: ALFI Gala Cocktail at Cercle Cité

A special evening with guest speaker and live music!

Sponsorship opportunity: click here   Deadline: Friday, 19 December 2014

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ALFI public events calendar

For an overview of all events scheduled or endorsed so far by ALFI in 2015, have a look at the ALFI events calendar.

Check out all upcoming events. Click on  "Search Events" to filter by event type.

Note: the event calendar allows to have events listed either chronologically or by event category. Click on the name of the event for detailed information.

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4.

Past ALFI events

1 December 2014: Solvency II - Impacts for Asset Managers and Servicers

ALFI organised a member only event on Monday 1 December 2014 on the impact of Solvency II on the fund industry, which was attended by 150 people.

A timeline for the implementation of Solvency II set the scene for the audience, which was followed by key note speeches from an insurance company and asset management perspective. The evening came to a close with a panel under the heading “vantage points to Solvency II”, where representatives from two custodian banks, two asset managers and one insurance company debated the challenges the insurance as well as the asset management and servicing world will be facing in terms of changing investment strategies within low interest yield environments and the major impact as regards reporting requirements stemming from the new solvency obligations that will need to be introduced as early as 2015 in most European jurisdictions.

The panellists highlighted specific issues they have faced and are still facing in light of the implementation of Solvency II and outlined the initiatives taken in their respective organisations to be compliant with this new regulatory framework.

The evening was a great success …

Visit our picture gallery on flickr.

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25 & 26 November 2014: ALFI European Alternative Investment Funds Conference

More than 600 fund industry professionals attended ALFI’s two days European Alternative Investment Funds Conference that was held at the New Conference Center in Luxembourg/Kirchberg at the close of November. Presentations and panel discussions covered a broad variety of topics reaching from alternative investment funds regulation to operating models for alternative investment management companies. As is tradition, parallel workshops were dedicated to hedge funds, private equity and real estate funds. Visit our picture gallery on flickr.

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21 November 2014 : ALFI Roadshow to Santiago de Chile

ALFI extended the the Luxembourg for Finance mission to Brazil by organizing a specific fund industry roadshow to Chile, one of the main markets for Luxembourg funds. On 21st of November 2014, ALFI hold a seminar in Santiago. This second edition of the event attracted close to 100 participants.

The seminar included two panel discussions, the first presented the evolution of the UCITS framework such as risk diversification requirements and use of derivatives. The second panel discussed the latest key European and international regulatory and tax developments such as UCITS V, FATCA, AIFMD and opportunities that may arise for Chilean asset managers and AFPs.

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21 November, 2014: Well attended ALFI breakfast discussion about AIFMD in Hong Kong

On Friday November 21, ALFI’s Asia representative office gathered 85 industry experts at the Hong Kong Bankers Club for a breakfast discussion themed around "AIFMD: Opportunities and Challenges for Asian Asset Managers".

Three presentations were on the program. First a legal update explained the current impact of AIFMD in Luxembourg and in other European countries as well as the benefits of the Directive for the Asian players in the future. This presentation was followed by a panel discussion on implementation issues and distribution planning under AIFMD. Last but not least, tax considerations and carried interest were discussed.

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14 November 2014: ALFI Leading Edge Conference in London

Now that the AIFM Law is in full force and effect, this one day event combined a thorough legal and regulatory analysis, highly topical research, practical insights and technical workshops that provided an ideal opportunity for all industry stakeholders to gain a deep insight on what the regulations mean for them in practice.

The conference attendees (220 people registered) heared from and exchanged views with industry leading experts on:

  • The Luxembourg evolving Alternative Investment Management Company Operating Models;
  • Fundamentals and practical aspects of setting up and structuring a ManCo;
  • Fundamentals of structuring an AIF;
  • Practical aspects on distribution of AIFs;

During the afternoon sessions, three main topics, that are still a lot debated, have been covered:

  • AIFM Reporting
  • Liability of the Depositary
  • Remuneration

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22 October 2014: ALFI TA & Distribution Forum

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