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Asset managers facing 'unprecedented and unexpected challenges' in Asia and US

ESG ALFIAsset managers are facing unprecedented and unexpected challenges. This was the message from a panel discussion on day one of ALFI’s Global Distribution Conference in Luxembourg.

The panel discussion, moderated by Camille Thommes, director general, Association of the Luxembourg Fund Industry (ALFI), and featured panellists Jim Fitzpatrick, president & CEO, Nicsa, and Sally Wong, CEO, Hong Kong Investment Funds Association (HKIFA), investigated how asset managers can navigate pressing geopolitical challenges.  

The session saw Thommes explain to the audience that we live in a completely new geopolitical landscape, dealing with the aftereffects of the Covid-19 pandemic, tackling a demanding regulatory agenda with an ever-increasing focus on sustainable finance and facing soaring energy prices and higher inflationary trends and interest rates.

From this, the audience was posed with the question, “what can investment funds associations such as HKIFA, nicsa and ALFI do to support their respective members?”

The financial environment in Hong Kong.
Wong explained that the financial industry in Hong Kong has focussed on Covid-19 travel restrictions. “The policy is not conducive to engaging with clients,” explained Wong. Lots of talent from senior management to different levels were being “harmed”.

She continued to explain that the funds industry has seen substantial outflows. “January saw robust outflows. Equities and multi-asset are better, but bonds suffered substantial outflow this year,” she rued. Wong continued to explain that there will be a paradigm shift in how funds cater to specific needs in an inflationary environment.

The financial environment in the US
Fitzpatrick remarked that from a market perspective, the inflationary environment is at the forefront of concerns in the US. From a business perspective, ESG products dominate discussions in the country. “Europe is miles ahead of the US in this regard”.

The topic of digital assets was highlighted by Fitzpatrick, which is an area “where firms are spending lots of time assessing what products will fit”. Regulation will play a large role in what investors will do, commented Fitzpatrick. “Alternative investment space also evolved in this space”, stated Fitzpatrick. “People want access to that [alternative investment], mergers are looking for ways to push these products.

From a business perspective, talent is a central issue, remarked Fitzpatrick. The role of talent is an important concern for the funds industry, particularly after the challenges posed by the Covid-19 pandemic. A related concern he highlighted is that firms are pushing to get people back in the office.

ESG and sustainable finance. What are the challenges? 
Entity and fund levels are important regulations in Hong Kong, stressed Wong. “Green finance association are working hard and creating various funds since it’s a key area and everyone understands the importance”. Every market wants to be a sustainable hub, she explained to audience members. Seeing how to achieve close ties with global partners and achieve ISB certification are also important concerns, stated Wong. However, “ESG is still early with respect to investor education in Hong Kong”.

ESG challenges in the US 
Fitzpatrick detailed that there are disparate views regarding ESG in the US. “There are different points of view, which we see in the marketplace. Is ESG important? Relevant? How do we define it?” he asked. “The US is still behind the EU in ESG products,” he told audience members and detailed that ESG and sustainable investing are different things. Moving forward, the US “continues to learn from Europe as it continues to evolve”.

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