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Understanding Investing 简体中文网页 Members section

- ALFI statements

On 2 February 2017, ALFI responded to the EBA discussion paper entitled “Designing a new prudential regime for investment firms”

Updated on 03/02/17
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- Press releases

From 10 to 13 January 2017, ALFI held its annual roadshow to Taipei, Tokyo and Hong Kong, a well acclaimed opportunity for senior professionals from Luxembourg and Asia to discuss cutting-edge issues affecting the asset management and investment fund industry.

ALFI Hong Kong Roadshow 2017

 

In Tokyo and Hong Kong, the delegation of industry players and representatives of the Luxembourg financial regulator CSSF was joined by H.E. Pierre Gramegna, Minister of Finance of the Grand Duchy of Luxembourg who made a keynote address on 2017 as a game changing year for Europe and the world economy. The local regulators – the Financial Services Agency of Japan (FSA), the Securities and Futures Commission of Hong Kong (SFC) and Luxembourg’s Commission de Surveillance du Secteur Financier (CSSF) – then presented their top priorities for 2017.

Another conference highlight was the asset flow panel focusing on key markets, emerging distribution channels, new products “Made in Luxembourg” and related structuring. The most recent key developments in the area of regulation and taxation (PRIPS, MiFID II and UCITS V) were on the agenda as well.

Moreover, in Taipei, an investment fund market review was presented by a local data intelligence agency, and in Hong Kong, a local economist shared with the audience an interesting outlook on future developments in Asia and their likely impact on Europe.

Topics covered in all the three cities were a multi-layered approach for investor protection and FinTech, with namely a presentation on BlockChain.

Updated on 27/01/17
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- Press releases

Launched on Monday, 5 December, the Shenzhen-Hong Kong Stock Connect provides international investors with another direct link to access China’s domestic A-shares market and especially the stocks listed on the tech-heavy Shenzhen market. This further opening of mainland China’s capital market gives Luxembourg investment funds access to new asset classes.

The Shenzhen-Hong Kong Stock Connect (“Shenzhen Connect”), the link between the Shenzhen and the Hong Kong stock exchanges, was launched on Monday, 5 December. Shenzhen Connect is another milestone in deepening mutual access between the capital markets in China's mainland and Hong Kong. Shenzhen Connect is the second link of its kind to boost the opening up of the mainland China's capital market after a similar link between the Shanghai and Hong Kong exchanges was launched in 2014. The market infrastructure arrangements under Shenzhen Connect replicate those provided for under the original Shanghai-Hong Kong Stock Connect (“Shanghai Connect”) pilot programme.

The Shenzhen Connect is aimed at giving global investors access to stocks in the tech-heavy Shenzhen market via Hong Kong Stock Exchange (“HKEX”), it provides access to China’s new economy. A total of 417 stocks on the HKEX are eligible for trading, and 881 stocks are eligible on the Shenzhen Stock Exchange (“SZEX”). The list of stocks that are eligible for Northbound trading is available in the Stock Connect section of the HKEX website and will be updated daily.

Before Shenzhen Connect went live, HKEX has completed three rounds of connectivity testing and market rehearsals to ascertain technical readiness of the market infrastructure and operational readiness of market participants.  One hundred forty-two China Connect Exchange Participants (CCEPs) are expected to be eligible to participate in the two Stock Connect programmes from 5 December 2016, while other Exchange Participants (EPs) can also apply to become CCEPs later upon satisfaction of relevant requirements[1].

Luxembourg investment funds have traditionally been exposed to the Chinese capital markets through different schemes and channels. Marc-André Bechet, Director Legal & Tax at the Association of the Luxembourg Fund Industry (ALFI) outlines that “China has emerged as one of the world’s leading economies following decades of growth that has hovered around 10% annually. The Shenzhen Connect provides international investors with another direct link to access China’s domestic A-shares market outside of the existing route of getting a foreign investor license through the Qualified Foreign Institutional Investor (QFII) and Renminbi QFII (RQFII) programmes. Practically, Stock Connect allows managers to increase their China A-Shares exposure via an alternative channel without having or using their own QFII or RQFII license or quota. Stock Connect also allows managers without a QFII or RQFII license to increase their China A-Shares direct exposure without having to rely on more expensive China A-Shares access products.”

Luxembourg acts as China ́s gateway to Europe and vice versa and is one of Europe ́s leading centres for international RMB business. In April 2015 the People's Bank of China granted a 50 bn RMB RQFII quota to Luxembourg[2]. Subsequently, increasing numbers of international asset managers are choosing Luxembourg as the domicile for their funds ranges that invest into China.

Access to a new asset class

Luxembourg UCITS are marketed in up to 70 different countries, so setting up a UCITS which invests in China through the Stock Connect links or through RQFII gives access to not only an asset class but re-inforces the interest of an international investor base for Luxembourg products, which is extremely beneficial regarding distribution. Luxembourg was the first European jurisdiction to authorise the use of an RQFII quota in the context of a UCITS fund back in 2013. After the launch of Shanghai Connect in November 2014 a Luxembourg UCITS fund has become the first to receive authorisation to use the Stock Connect programme and since that time over 125 additional UCITS have received authorisation. Supported by the continuous engagement by ALFI, the Luxembourg fund industry embraced the new access link and the first UCITS funds used Shenzhen Connect from the beginning. The CSSF confirmed that it accepts the new programme on a similar basis as the Shanghai Connect programme two years ago.

A number of Luxembourg UCITS have already seen the opportunity offered by this second link and sent their applications to the supervisory authority or are about to update their investor information and where necessary the legal and contractual documentation.

Factors to consider by Luxembourg funds

There are a number of factors which require careful consideration and appropriate solutions for those Luxembourg UCITS funds considering accessing this market through the Shanghai or Shenzhen Connect. The Luxembourg UCITS fund, the management company and depositary designated by the fund must give due consideration to a number of factors and ensure that their risk management procedures adequately cover them. These factors include:

  • accounts opened by the depositary of the UCITS with a sub-custodian in Hong Kong are segregated at the level of the UCITS' sub-funds or structured as UCITS client assets omnibus accounts of the Luxembourg depositary with that sub-custodian;
  • broker models limiting counterparty risk are to be preferred;
  • the prospectus, and most particularly the KIID, will contain a specific disclosure to inform investors of the specific legal risks linked to compulsory requirements of the local CSDs, HKSCC and ChinaClear for custody of securities on a cross-border basis.

Furthermore, as the market infrastructure arrangements under Shenzhen Connect align with those provided for under the original Shanghai Connect pilot programme, launched in November 2014, most of the disclosures needed for implementing Shanghai Connect are still valid and will also similarly apply for the Shenzhen Connect.

Moreover, as a general rule the prospectus shall provide an indication to which extent the new programme will reflect the investment strategy of a UCITS compartment or whether the new programme is simply added as one additional way of investing in Mainland China.

Given that Shenzhen Stock Exchange gives access to corporates of small and medium size and operating in other economic sectors than the entities listed on Shanghai Stock Exchange, the investment policy of the UCITS intending to invest through Shenzhen Connect must ensure that investor information is in line with this specific asset class and sector.

Finally, as a general principle, the UCITS, its management company, the appointed portfolio managers, its depositary must undertake and maintain their usual due diligence and suitability testings on the additional market framework and practices, on the assets to be invested as well as on the settlement and custody processes before considering investment. In particular, procedures for identifying and monitoring specific risks that may imply these investments must be in place or adapted accordingly before using the Shenzhen Hong Kong Stock Connect.

* * *

Download the press release here.

 

Updated on 06/01/17
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The Association of the Luxembourg Fund Industry (ALFI) held its annual European Alternative Investment Funds Conference between November 22 and 23. A number of major issues affecting alternative funds were discussed, but what were the core points?

Alternatives in Luxembourg

AuM in alternative investment funds continue to grow, as investors look for new avenues to identify yields in the current low interest rate environment. “As a fund centre, Luxembourg is second only to the US. Luxembourg continues to lead Europe with a 36% share of AUM by UCITS funds. In the alternative sphere, Luxembourg represents 10.5% of the European market, or 568 billion euro.  235 AIF Managers have been authorised by the country’s regulator – the Commission de Surveillance du Secteur Financier (CSSF) and 605 AIFM’s have registered with the CSSF. Luxembourg is also more and more a centre of fund administration for non-Luxembourg funds, including alternative funds established in other European and non-European countries, especially for real estate and private equity.

The pan-EU marketing passport provided under AIFMD has been taken up with interest by fund managers and this is something that will benefit Luxembourg’s many thriving third party AIF and UCITS management companies,” said Denise Voss, Chairman of ALFI.

Denise Voss, Chairman of ALFI

Brexit

Brexit presents huge challenges for UK-based UCITS or AIFMs, who risk being unable to market to EU investors post-Brexit. Potentially devoid of single market access and passporting rights, UK managers of UCITS or AIFs selling to EU investors need to consider how their businesses are structured going forward. The most logical immediate response – given all of the vagueness and ambiguity surrounding any Brexit outcome – would be for fund managers to ensure they retain market access whatever the result. This can be achieved by working with a third party management company, an entity which can legally manage the fund but will delegate portfolio management back to the manager itself. Such ‘Mancos’ are in abundance in Luxembourg, having successfully serviced the UCITS industry for many years, so they are well positioned to help AIFs.

“On Brexit, Luxembourg considers London to be an important partner. When I visited the UK in July, my message was that I did not want to take business away from London, but rather ensure that it continued. I believe Luxembourg will provide a platform that will be necessary for UK managers to access the single market,” said Pierre Gramegna, Minister of Finance for Luxembourg. Despite the post-Brexit market upheaval, Luxembourg is on sound footing to deal with any fall-out. 

Pierre Gramegna, Minister of Finance for Luxembourg

Regulation

The Alternative Investment Fund Managers Directive (AIFMD) is widely credited with creating an industry-leading regulatory framework for non-UCITS. It is believed AIFMD can create a brand on a par with UCITS, a point made by Camille Thommes, Director General at ALFI. Brexit, however, has had a ripple effect throughout the EU policymaking apparatus and AIFMD is not exempt. The European Securities and Markets Authority (ESMA) has evaluated the regulatory regimes of 12 third countries and given a positive advice on five of them. Some of these markets were told that their regimes were equivalent to AIFMD but passporting will only be realised once approved by the European Commission, the European Council and MEPs.

Regulators across Europe, speaking at ALFI, said Brexit was probably going to result in the European Commission demanding greater reciprocity from third countries. At a very minimum, it will lead to delays in AIFMD passport extensions. Matthieu Lucchesi, Head of Asset Management Regulation at the Autorité des Marchés Financiers (AMF) in Paris, said it was likely that AIFMD equivalence discussions will be reopened with third countries and reciprocity would be on the agenda. Some doubt passporting rights will be granted at all.

Matthieu Lucchesi, Head of Asset Management Regulation at the Autorité des Marchés Financiers (AMF)

The European Commission will evaluate the status of AIFMD in 2017, but should we expect major changes from this review? This answer is probably no. Having enacted huge swathes of regulation post-financial crisis, many feel the authorities are at a saturation point. There is a general recognition that AIFMD is working well, and substantive changes are not necessary. Fund managers will be disappointed to learn that remuneration rules are unlikely to be tweaked in this review. IOSCO and FSB provisions around liquidity risk management and leverage will probably be on-boarded by the European Commission in any future iterations of AIFMD, added Lucchesi.

But AIFMD is only one component of the regulation that has impacted fund management. One of the biggest challenges faced by fund managers is dealing with conflicting regulatory initiatives or reporting requirements. “We have reporting requirements under AIFMD’s Annex IV, but also Form PF with the Securities and Exchange Commission (SEC). There is a degree of overlap and similarities but there are also divergences. It is particularly challenging for firms when they have to report similar information on their funds at different times to different regulatory bodies. The information is constantly changing and we have to regularly adjust our data sets,” said Martin Parkes, Director at Blackrock. However, it is clear that the regulatory reporting is having a disproportionately harsh impact on small to mid-sized firms, adding to their barriers to entry, a point made by Paul Carr, Chief Executive Officer at East Capital Asset Management.

Martin Parkes, Director at Blackrock

Fund Structures and Innovations

The introduction of the Reserved Alternative Investment Fund (RAIF) is another complement to Luxembourg’s range of fund structures. The RAIF must be managed by an authorised AIFM that can be located in Luxembourg or in another EU country. The fund itself is not subject to regulatory approval and is indirectly supervised via its manager.

“The RAIF will enable fund managers to launch their products and get to market in a shorter time-frame,” said Jérôme Wittamer, Chairman of the Luxembourg Private Equity & Venture Capital Association (LPEA) and Managing Partner at Expon Capital. Dr Angelina Pramova, Head of Business Development at GAM in Luxembourg, agreed. “The RAIF’s main advantages are its flexibility and its brief time-to-market,” she confirmed.

Jérôme Wittamer, Chairman of the Luxembourg Private Equity & Venture Capital Association (LPEA) and Managing Partner at Expon Capital

In addition to its flagship UCITS, the EU has created a number of fund products including the European Long Term Investment Fund (ELTIF), the European Venture Capital Fund (EuVECA) and the European Social Entrepreneurship Fund (EuSEF). Their success has not yet rivalled UCITS, said Silke Bernard, Partner at Linklaters in Luxembourg. “Only 28 EuVECAs and four EuSEFs have been launched. There is no publicly available information on ELTIFs, but we estimate there to be four in operation,” she said. The objective of these funds is to enable the transfer of non-bank capital into the real economy. ELTIFs, for example, are heavily focused on investing in infrastructure. But this has not yet translated into investor appetite.

Silke Bernard, Partner at Linklaters

Part of this inertia is due to their structure and investment criteria. Dr Marc Wicki, Managing Director and Co-Head of Structuring Services at Partners Group in Zug, acknowledged the high investment thresholds and ELTIF aggregate exposure limits discouraged retail investors from putting their money into these funds.  Others said it was too premature to write off ELTIFs. “We certainly have not written off ELTIFs and we are looking at them closely,” said Parkes of Blackrock.

FinTech

Fintech comes in many guises and its impact will be thoroughly felt in asset management. Automation is being embraced by alternative asset managers as a means by which to streamline regulatory reporting and tired operational processes. “The real estate industry continues to rely on operational processes that are customised and hands-on. It would be good if the industry could automate some of these processes, such as expense authorisation instead of sourcing data from spreadsheets. This would help us make decisions more quickly,” said Michael Fitsum, Director – Head of Operations – at M&G Real Estate in Luxembourg.

Digitisation and automation could also make regulatory reporting more palatable, a process which is renowned for being data heavy. “Digitisation should make it easier for firms to report to regulators, and provide more accurate data,” said Jean-Marc Goy, Counsel for International Affairs at the CSSF.

Blockchain was also a prominent topic of discussion. The implications this technology could have on reconciliations and regulatory reporting are huge, and if adopted by service providers and fund managers, could incur cost savings. However, enabling blockchain technology is not entirely plain sailing, and this is recognised by the industry.

“There are no business standards around Blockchain. The lack of standards is a hurdle for Blockchain and smart contracts. Furthermore, firms need to recognise that replacing technology with Blockchain could add to costs in some cases, and this is obviously not welcome. Identifying standards and the correct business uses for Blockchain is critical,” said Olivier Roucloux, Head of Product Marketing at Finoryx.

Conclusion

The times are critical for the funds industry. It faces challenges, but also opportunities. Dealing with Brexit will keep the industry busy for a while. While regulation has challenged the industry, rules such as AIFMD have clearly presented opportunities and fund managers are leveraging this. Digital innovation, new product and other developments - the asset management industry is proving once again its ability to embrace change and adapt.

Updated on 08/12/16
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- Press releases

“Will Luxembourg be the domicile of choice for London based international cross-border fund management groups reassessing their business models in light of Brexit?” was the central question at ALFI’s recent Leading Edge conference on the potential implications of the UK’s planned withdrawal from the European Union.

 

Fund industry experts from both Luxembourg and London agreed that Luxembourg does indeed have a lot to offer to UK asset managers, including:

  • the quality of the ‘Luxembourg brand’ - whether for UCITS or alternative funds - and its worldwide recognition
  • its unequalled cross-border fund distribution footprint
  • the country’s political and economic stability
  • the entire, comprehensive fund industry ecosystem
  • the sophisticated product toolbox, including the ‘Société en Commandite Spéciale ScSP’ (Limited Partnership) and the newly created Reserved Alternative Investment Fund (RAIF)
  • extensive risk management expertise
  • and much more.

Speakers agreed that the number of Luxembourg domiciled investment funds and management companies set up by UK asset managers are very likely to grow in the years to come. The Luxembourg regulator, the CSSF, confirmed by video message that they have been approached on this topic by industry players from the UK.

“As soon as the CSSF hears about UK firms’ interest in Luxembourg, we invite them to meet and discuss their plans,” says Claude Marx, Director General of the CSSF.“ The most important topic these meetings cover is delegation or outsourcing back to the UK.”

Indeed, asset management firms or banks that want to establish operations in Luxembourg in the context of Brexit do not necessarily wish to move a large proportion of their operations and staff out of the UK.  Delegation and outsourcing therefore are  important subject matters.  The CSSF does allow outsourcing back into the group both within and outside the EU. However, there has to be some substance within Luxembourg: the authorised management e.g. must be in Luxembourg, key functions must be in Luxembourg, and there must be a developed IT system in Luxembourg that produces daily balance sheets.  People who can answer questions regarding the accounts should also be onsite in Luxembourg. 

The CSSF also applies proportionality, meaning that, when firms start to set up operations in Luxembourg, less substance is required. Substance needs to develop according to an agreed plan as the business develops in Luxembourg.

Participants in the discussion at the conference did not envisage a massive flow of financial sector employees from London to Luxembourg, although, as was discussed in detail, Luxembourg’s infrastructure does allow the accommodation of additional workforce in substantial numbers.

However, the Brexit process is only at its very beginning. Two agreements will have to be reached: First of all, the UK and the EU will have to agree the terms upon which the UK will withdraw from the European Union, and in a second step, an agreement has to be found regarding the future relationship between the UK and the EU.

Whilst a number of scenarios can  be imagined with more or fewer concessions for the UK as regards the basic principles of the common EU market and accordingly, with more or less preferential treatment of the UK after Brexit, it is widely understood that there will most likely be no direct ‘passporting’ for UK domiciled funds. This means that financial products directly exported from the UK to the EU have no predictable future.

Bilateral negotiations between the UK and other EU countries on future relations however are just as unpredictable. The uncertain outcome of the upcoming elections in major EU countries France and Germany further increase the general uncertainty.

Denise Voss concludes: “Altogether there is a lot of uncertainty – which is poison for business! Asset managers can’t – and won’t – wait and see before contemplating their future operating model. In order to eliminate uncertainty, they are moving … and they’re moving now!”

 

ALFI Leading Edge conference: Brexit: time to action!

Updated on 02/12/16
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The Association of the Luxembourg Fund Industry (ALFI) held its annual European Alternative Investment Funds Conference between November 22 and 23. A number of major issues affecting alternative funds were discussed, but what were the core points?

Alternatives in Luxembourg

AuM in alternative investment funds continue to grow, as investors look for new avenues to identify yields in the current low interest rate environment. “As a fund centre, Luxembourg is second only to the US. Luxembourg continues to lead Europe with a 36% share of AUM by UCITS funds. In the alternative sphere, Luxembourg represents 10.5% of the European market, or 568 billion euro.  235 AIF Managers have been authorised by the country’s regulator – the Commission de Surveillance du Secteur Financier (CSSF) and 605 AIFM’s have registered with the CSSF. Luxembourg is also more and more a centre of fund administration for non-Luxembourg funds, including alternative funds established in other European and non-European countries, especially for real estate and private equity.

The pan-EU marketing passport provided under AIFMD has been taken up with interest by fund managers and this is something that will benefit Luxembourg’s many thriving third party AIF and UCITS management companies,” said Denise Voss, Chairman of ALFI.

Denise Voss, Chairman of ALFI

Brexit

Brexit presents huge challenges for UK-based UCITS or AIFMs, who risk being unable to market to EU investors post-Brexit. Potentially devoid of single market access and passporting rights, UK managers of UCITS or AIFs selling to EU investors need to consider how their businesses are structured going forward. The most logical immediate response – given all of the vagueness and ambiguity surrounding any Brexit outcome – would be for fund managers to ensure they retain market access whatever the result. This can be achieved by working with a third party management company, an entity which can legally manage the fund but will delegate portfolio management back to the manager itself. Such ‘Mancos’ are in abundance in Luxembourg, having successfully serviced the UCITS industry for many years, so they are well positioned to help AIFs.

“On Brexit, Luxembourg considers London to be an important partner. When I visited the UK in July, my message was that I did not want to take business away from London, but rather ensure that it continued. I believe Luxembourg will provide a platform that will be necessary for UK managers to access the single market,” said Pierre Gramegna, Minister of Finance for Luxembourg. Despite the post-Brexit market upheaval, Luxembourg is on sound footing to deal with any fall-out. 

Pierre Gramegna, Minister of Finance for Luxembourg

Regulation

The Alternative Investment Fund Managers Directive (AIFMD) is widely credited with creating an industry-leading regulatory framework for non-UCITS. It is believed AIFMD can create a brand on a par with UCITS, a point made by Camille Thommes, Director General at ALFI. Brexit, however, has had a ripple effect throughout the EU policymaking apparatus and AIFMD is not exempt. The European Securities and Markets Authority (ESMA) has evaluated the regulatory regimes of 12 third countries and given a positive advice on five of them. Some of these markets were told that their regimes were equivalent to AIFMD but passporting will only be realised once approved by the European Commission, the European Council and MEPs.

Regulators across Europe, speaking at ALFI, said Brexit was probably going to result in the European Commission demanding greater reciprocity from third countries. At a very minimum, it will lead to delays in AIFMD passport extensions. Matthieu Lucchesi, Head of Asset Management Regulation at the Autorité des Marchés Financiers (AMF) in Paris, said it was likely that AIFMD equivalence discussions will be reopened with third countries and reciprocity would be on the agenda. Some doubt passporting rights will be granted at all.

Matthieu Lucchesi, Head of Asset Management Regulation at the Autorité des Marchés Financiers (AMF)

The European Commission will evaluate the status of AIFMD in 2017, but should we expect major changes from this review? This answer is probably no. Having enacted huge swathes of regulation post-financial crisis, many feel the authorities are at a saturation point. There is a general recognition that AIFMD is working well, and substantive changes are not necessary. Fund managers will be disappointed to learn that remuneration rules are unlikely to be tweaked in this review. IOSCO and FSB provisions around liquidity risk management and leverage will probably be on-boarded by the European Commission in any future iterations of AIFMD, added Lucchesi.

But AIFMD is only one component of the regulation that has impacted fund management. One of the biggest challenges faced by fund managers is dealing with conflicting regulatory initiatives or reporting requirements. “We have reporting requirements under AIFMD’s Annex IV, but also Form PF with the Securities and Exchange Commission (SEC). There is a degree of overlap and similarities but there are also divergences. It is particularly challenging for firms when they have to report similar information on their funds at different times to different regulatory bodies. The information is constantly changing and we have to regularly adjust our data sets,” said Martin Parkes, Director at Blackrock. However, it is clear that the regulatory reporting is having a disproportionately harsh impact on small to mid-sized firms, adding to their barriers to entry, a point made by Paul Carr, Chief Executive Officer at East Capital Asset Management.

Martin Parkes, Director at Blackrock

Fund Structures and Innovations

The introduction of the Reserved Alternative Investment Fund (RAIF) is another complement to Luxembourg’s range of fund structures. The RAIF must be managed by an authorised AIFM that can be located in Luxembourg or in another EU country. The fund itself is not subject to regulatory approval and is indirectly supervised via its manager.

“The RAIF will enable fund managers to launch their products and get to market in a shorter time-frame,” said Jérôme Wittamer, Chairman of the Luxembourg Private Equity & Venture Capital Association (LPEA) and Managing Partner at Expon Capital. Dr Angelina Pramova, Head of Business Development at GAM in Luxembourg, agreed. “The RAIF’s main advantages are its flexibility and its brief time-to-market,” she confirmed.

Jérôme Wittamer, Chairman of the Luxembourg Private Equity & Venture Capital Association (LPEA) and Managing Partner at Expon Capital

In addition to its flagship UCITS, the EU has created a number of fund products including the European Long Term Investment Fund (ELTIF), the European Venture Capital Fund (EuVECA) and the European Social Entrepreneurship Fund (EuSEF). Their success has not yet rivalled UCITS, said Silke Bernard, Partner at Linklaters in Luxembourg. “Only 28 EuVECAs and four EuSEFs have been launched. There is no publicly available information on ELTIFs, but we estimate there to be four in operation,” she said. The objective of these funds is to enable the transfer of non-bank capital into the real economy. ELTIFs, for example, are heavily focused on investing in infrastructure. But this has not yet translated into investor appetite.

Silke Bernard, Partner at Linklaters

Part of this inertia is due to their structure and investment criteria. Dr Marc Wicki, Managing Director and Co-Head of Structuring Services at Partners Group in Zug, acknowledged the high investment thresholds and ELTIF aggregate exposure limits discouraged retail investors from putting their money into these funds.  Others said it was too premature to write off ELTIFs. “We certainly have not written off ELTIFs and we are looking at them closely,” said Parkes of Blackrock.

FinTech

Fintech comes in many guises and its impact will be thoroughly felt in asset management. Automation is being embraced by alternative asset managers as a means by which to streamline regulatory reporting and tired operational processes. “The real estate industry continues to rely on operational processes that are customised and hands-on. It would be good if the industry could automate some of these processes, such as expense authorisation instead of sourcing data from spreadsheets. This would help us make decisions more quickly,” said Michael Fitsum, Director – Head of Operations – at M&G Real Estate in Luxembourg.

Digitisation and automation could also make regulatory reporting more palatable, a process which is renowned for being data heavy. “Digitisation should make it easier for firms to report to regulators, and provide more accurate data,” said Jean-Marc Goy, Counsel for International Affairs at the CSSF.

Blockchain was also a prominent topic of discussion. The implications this technology could have on reconciliations and regulatory reporting are huge, and if adopted by service providers and fund managers, could incur cost savings. However, enabling blockchain technology is not entirely plain sailing, and this is recognised by the industry.

“There are no business standards around Blockchain. The lack of standards is a hurdle for Blockchain and smart contracts. Furthermore, firms need to recognise that replacing technology with Blockchain could add to costs in some cases, and this is obviously not welcome. Identifying standards and the correct business uses for Blockchain is critical,” said Olivier Roucloux, Head of Product Marketing at Finoryx.

Conclusion

The times are critical for the funds industry. It faces challenges, but also opportunities. Dealing with Brexit will keep the industry busy for a while. While regulation has challenged the industry, rules such as AIFMD have clearly presented opportunities and fund managers are leveraging this. Digital innovation, new product and other developments - the asset management industry is proving once again its ability to embrace change and adapt.

Updated on 06/12/16  
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- Press releases

Net assets stood at EUR 3,602 billion, a 1.02% increase in comparison with July, due to both financial markets and positive net sales.

Updated on 18/11/16
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- Press releases

ALFI has successfully negotiated an AFS licence relief for financial services providers regulated by the CSSF.

The Association of the Luxembourg Fund Industry (ALFI) has announced that it has successfully negotiated an exemption from the obligation to hold an Australian financial services (AFS) licence to provide financial services in Australia. The exemption applies to Chapter 15 Management Companies and UCITS Self-Managed SICAV regulated by the Luxembourg financial supervisory authority Commission de Surveillance du Secteur Financier (CSSF).

This relief will enable Australia’s institutional investors, including superannuation funds, to get easier access to Luxembourg UCITS.

As a rule, a foreign financial services provider (FFSP) needs to hold an Australian financial services (AFS) licence to provide financial services in Australia, unless relief is granted.

The Australian Securities and Investments Commission (ASIC) can exempt a foreign financial services provider from this requirement on the twofold condition that the financial services are provided to wholesale (institutional) clients only and that these financial services are regulated by an overseas regulatory authority.

The regulatory regime overseen by the relevant overseas regulatory authority needs to be ‘sufficiently equivalent’ to the Australian regulatory regime and effective cooperation arrangements must also exist before relief is granted. ASIC and the CSSF have signed such an MoU on mutual cooperation and the exchange of information related to the supervision of regulated entities in September 2013.

An application for a licence relief has to be made through an industry association, such as ALFI, for a group of FFSPs regulated by a particular overseas regulatory authority. When granted, the relief will then apply to all these financial services providers. In this case, the relief will cover all CSSF regulated Chapter 15 Management Companies and UCITS Self-Managed SICAV.
Welcoming this development, ALFI Chairman Denise Voss explains that ALFI has launched the negotiations on behalf of its members in light of their growing interest to do business with Australian institutional players.

“This relief is a further step in strengthening the relations between our two financial centres”, Denise Voss says. ”ALFI is currently planning a roadshow to Australia next March. We intend to organise seminars in Sydney and Melbourne and will travel with a delegation from our member firms. It will be a good occasion for Luxembourg and Australian players to meet and build even stronger relations.”

Download the press release in English.

About the AFS licence relief:

The Australian financial services regulator, the Australian Securities and Investments Commission (ASIC) has issued ASIC Corporations (CSSF Regulated Financial Services Providers) Instrument 2016/1109 which sets out the conditions of this AFS licensing relief. It enters into force on 16 November 2016. A copy of the Relief Instrument is available here.

 

 

Updated on 17/11/16
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- ALFI statements

On 24 October 2016, ALFI responded to the EU Commission consultation “Review of the EU macro-prudential framework”.

ALFI limited its response to the following question: “Would you consider it appropriate to expand the macro-prudential framework beyond banking?”. ALFI pointed out that asset management and fund related activities do not entail structural vulnerabilities and that the sector is already highly regulated by regulations such as the UCITS Directive, AIFMD, Solvency II, MiFID, EMIR or the Securities Financing Transactions Regulation, dealing with both transparency of information and supervision of the asset management industry. Moreover, ALFI stated that investment funds contain characteristics that differentiate them from banks. Therefore, ALFI believed there should be little distress to the wider financial system in the event of the default of an individual asset manager given the high degree of competition and substitutability within this sector. Overall, ALFI was of the view that it is inappropriate to expand the macro-prudential framework beyond banking to asset managers and investment funds.

Updated on 25/10/16
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- ALFI statements

On 17 October 2016, ALFI responded to the IOSCO Consultation Report on Good Practices for the Termination of Investment Funds. Topics addressed in this paper are among other the disclosure at time of investment and treatment of “non contactable investors”, the need for a termination plan and the communication to investors throughout the termination process.

To access the ALFI response please click here.

Updated on 19/10/16
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