Neil Wise, executive board member of Clearstream Fund Centre, wove in plenty of cinema metaphors in his opening remarks at the Clearstream Fund Summit, which took place Thursday at the movie theatre in Kirchberg (complete with popcorn).
“Just like the world of cinema, where every character, every scene and every frame is meticulously crafted, our financial journeys are shaped by dedication, vision and teamwork. In the reels of the financial industry, each one of you plays a pivotal role,” Wise told the audience of industry players, adding that he hoped the event would be a “blockbuster hit” for attendees.
The conference covered topics such as fund execution and distribution, digital transformation, data, ESG and artificial intelligence, and also provided opportunities to network and discuss the latest trends in the sector. Besides a , a and a , here are a few other highlights from the summit.
Ucits still a “gem” for industry, “big potential” of active ETFs
Philippe Seyll, CEO of Clearstream Fund Centre, and , chairperson of the Association of the Luxembourg Fund Industry (Alfi), talked about the future of Ucits funds and Alfi’s priorities.
“Currently the assets under management of the Luxembourg investment fund industry stand at roughly €5,200bn,” said Goy. “Out of these €5,200bn, €4,200bn--80%, a bit more than 80%--are Ucits. That really shows that Ucits are still, as [Seyll] said, a gem for our industry.” Ucits are one of the five focus points of attention for Alfi, as noted in a 2020-2025 ambition paper.
But active exchange-traded funds (ETFs) are also on the radar. “We have seen in the US, more recently, a trend towards launching active exchange traded-funds that do not track an index,” said Goy. “To me--and to Alfi--it’s only a question of time until these products will be launched outside of the USA, which is where they are typically launched today.”
To achieve that mission, we have to ensure also that the tax environment is attractive
“Alfi is devoted to ensuring that Luxembourg is an attractive and competitive jurisdiction for the launch of these products,” he continued. “To achieve that mission, we have to ensure also that the tax environment is attractive, because that is a key element that is taken into consideration by entities when they launch such products.”
“I’m thinking, in particular, of ensuring that active ETFs will be exempt from the subscription tax,” said Goy. “This is really an area where I see a very big potential of development for Luxembourg, and actually, also Europe as a whole.”
“Continuity” a key element of Alfi programme
Goy, who was , also touched on a few of the association’s priorities. The first priority is strengthening Alfi and ensuring that the association is representative of the entire industry, diverse and inclusive, he said. One step in this direction has been to add five seats to the Alfi board.
“Before that change, Alfi was sometimes criticised--and it’s not only targeting Alfi, but also other big associations,” said Goy. “They said, ‘It’s a little bit the same organisations that are always represented around the table in their function as Alfi board members. This is not an ideal situation… And we don’t like it.’”
“We heard those critical voices and now we think that the Alfi board is larger, so can also rely on more people, but also on the views of non-Ucits management organisations--so alternative investment fund managers, also on third party mancos, more on service providers.”
The second priority is enhancing dialogue at national and international levels, which includes working with Luxembourg’s new, incoming government and European authorities, associations and institutions. Alfi’s third priority is to continue to actively “promote Luxembourg as a leading centre for investment funds, and, in particular, for cross-border activities of investment funds.”
“Here I see a few interesting avenues of growth,” said Goy. “Sustainable finance is the obvious one.” But there’s also fintech, digitalisation, automation and artificial intelligence. “And we would also like to remain very active and involved in all the efforts concerning financial education and training.”
“The key takeaway for the new programme of Alfi is continuity,” said Goy.
“Incredibly important to be honest about the risks”
Mark Gem, chairperson of the risk committee at Clearstream, talked about micro-prudential regulations and systemic risks. For Gem, “managing to the regulations does not mean that we are successfully mitigating downside risk. We are not mitigating the risks of the impacts of exogenous shocks.”
Understanding risks and vulnerabilities requires knowledge of one’s firm and its management. “What it is about is making sure that you can manage your firm and manage your firm’s risk, as well as complying with the regulation,” said Gem. “It is incredibly important to be honest about the risks,” he emphasised.
“It means ensuring that you manage with trust, that you manage with diversity and transparency.” The pandemic, Gem said, has “given us a great leg up,” because it allows young people in particular to “speak up to senior management in a way that was impossible pre-pandemic.”
We need to look beyond the regulations
“We need to look beyond the regulations. And we need to say, what do we need to do to keep this infrastructure and our stakeholders safe, irrespective of what happens?” said Gem. Good governance, risk governance, a commitment to diversity and transparency in decision-making will be “absolutely key to navigating the next phase of this poly-crisis.”