Magazine Issues » September 2018

ALFI CONFERENCE: Three decades and counting

LuxembourgThe ALFI Global Distribution Conference takes place on September 25-26. Here, we highlight some of the key agenda items and speak to Luxembourg fund players about the topics being discussed.

The 30 years of success enjoyed by the Ucits funds industry will form the basis of the first panel discussion of the ALFI Global Distribution Conference, following a keynote speech on the topic given by David Wright, chairman of Eurofi, a European think tank that focuses on financial services.

The speech and panel begin at 9.30am on Tuesday, September 25, the first day of the event. Wright also joins the panel, which includes Sheila Nicoll, head of public policy at Schroders, and Ann Doherty, a managing director from JP Morgan’s investor services business.

Erich Gerth, chief executive officer at BlueBay Asset Management, then joins a panel on how to enhance cross-border fund distribution from 10.55am-11.40am. The panel, which also includes Adam Lessing, head of Central and Eastern Europe at Fidelity International, will cover the Capital Markets Union, the EU project to reduce Europe’s reliance on bank finance.

Following straight on from this will be a panel featuring Nick Miller, head of asset management supervision at the Financial Conduct Authority, awnd Christina Choi, of China’s Securities and Futures Commission, who will discuss delegation of Ucits functions to third countries. This topic is bound to make this a well-attended panel, given the perception that Brexit threatens the current status quo. The panel lasts from 11.40am-12.25pm.

The afternoon of the first day features a focus on Latin America between 2.35pm-3.15pm and a focus on Southeast Asia between 4pm-4.40pm.

From the big picture on the first day to the nitty-gritty of fund processes on the second day: on Wednesday, September 26, the first panel considers anti-money laundering (AML)fintech solutions and includes Daniel Couldridge, AML due diligence manager at Investec Asset Management. The panel, which looks at technology that could change the industry and obstacles to implementation, takes place from 9.35am-10.15am.

A panel looking at improvements in the distribution processes arising from recent regulatory and technological changes takes place from 10.45am-11.25am and includes Gebhard Giselbrecht, the chief operations officer of Credit Suisse Asset Management.

Does sustainability help you sell? This is the question considered by Ana Harris of State Street Global Advisors, among others, in a panel taking place from 11.25am-12.15pm.

Similarly, the needs of society are also among the considerations of a future products panel taking place from 2.30pm-3.30pm. This considers how technology, energy and even bitcoin might help – particularly at a time when new generations of investors have new expectations.


CAMILLE THOMMES, DIRECTOR-GENERAL, ALFI

The Ucits fund structure has been a success for 30 years. What are the most vital developments needed for Ucits to continue to be successful?
Over 30 years, the successive versions of the Ucits directive have successfully managed to safeguard the Ucits’ unequalled recognition as efficient, high-quality investment products with significant investor protection features.

Ucits also are the only largely used, true cross-border investment fund vehicle. Ucits allowed investors to gain access to expert portfolio management from managers around the globe thanks to a tried-and-tested business model based on delegation. Today, Ucits are indeed held by investors resident in over 70 countries worldwide, including markets in Europe, Asia, Africa, the Middle East and Latin America.

Initiatives at the EU level in the framework of the Capital Markets Union offer opportunities for Ucits to develop even further. The ambition to remove remaining barriers to cross-border fund distribution is a welcoming step in the right direction. With the increasing need for individuals to take responsibility for their own long-term financial security, Ucits are prominent savings vehicles as they provide appropriate risk diversification, potential for return and high investor protection.

Finally, ALFI is convinced of the benefit of enhanced investor education efforts to contribute towards ensuring that Ucits, and investment funds in general, continue to fulfil their potential of serving the investor and the economy.


MICHAEL FOX, HEAD OF CUSTODY AND FUND SERVICES LUXEMBOURG, JP MORGAN

What more needs to be done in order to enhance cross-border fund distribution?
Significant progress has already been made in improving mutual fund administration to support global distribution of mutual funds; 90% of mutual fund orders are via STP channels and we benefit from more efficient settlement mechanisms at international central securities depositories.

While the market assesses whether distributed ledger technologies become relevant for large-scale mutual fund distribution, there are a range of existing technologies that can be adopted, including de-materialised application forms and use of digital signatures, use of investor KYC/AML utilities and integration of web solutions for servicing an increasing community of direct investors.

Regulators have a part to play in supporting digitalisation by reducing barriers between jurisdictions. When products can be marketed cross-border in an innovative and responsible way, the potential pool of investors is opened beyond those served via traditional distribution networks to provide investments solutions to a wider community.


PATRICIA KAVEH, HEAD OF DISTRIBUTION AT BANQUE DE LUXEMBOURG INVESTMENTS (BLI)

What would fund firms like you wish to see in order for cross-border distribution to be enhanced?
In the past, asset managers have sold investment funds; nowadays, we all offer service-oriented solutions. Additionally, our whole industry and in particular fund distribution is facing major changes: constant regulation and implementation pressure, an increasing speed in clients’ needs reshaped by new dynamics such as demography, digitalisation, globalisation and massive cultural changes of our society.

The challenges in our business are to reconcile these different dimensions by approaching our own cultural ‘revolution’: agility, proactivity, responsibility and engagement are key elements in order to rethink our business model and our purpose.

This will be possible by putting together our efforts as a responsible and sustainable industry and as a citizen of these enormous changes towards a new paradigm.


ALATER DOMUS

To what extent do you find the theme of sustainability being incorporated into private equity investment funds and will this help sell them?
The European responsible investing fund market has almost doubled in size since 2010, reaching €476 billion of assets under management managed by 2,413 funds at the end of 2016.

A recent report published by LGT Capital Partners in June 2018 found that 58% of private equity firms are rated as either ‘excellent’ or ‘good’ in terms of ESG integration, compared to just 27% in 2014, suggesting that this has been made a priority by private equity managers.

ESG developments provide significant challenges for both the investor and issuer; for the investor, identifying appropriate benchmarks for analysis, and for issuers, additional areas of disclosure may be necessitated.

As large LPs such as asset managers backed by insurers, or other public-exposed bodies, have themselves committed to follow such an approach, market demand is there and increasing. Managers need to adapt for those who would not be at the forefront.

While ambiguity remains regarding the ultimate degree to which ESG impacts investment returns, there is acknowledgement that due to societal demands, these areas are likely to remain on the public’s agenda and, whether by market evolution or regulatory mandate, will grow in importance.

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