, one of the world’s leading risk specialists, spoke to Delano’s sister publication Paperjam about the history, philosophy and objectives of Global Fund Risk.
Paperjam: How did the idea of launching an association like Global Fund Risk come about?
Luc Neuberg: In 2021, the Financial Stability Board identified the investment fund industry as the most important sector in non-bank financial intermediation. Since then, like during the 2007 crisis, the turmoil in credit institutions has shaken the confidence of investors and savers.
The global volume of investment funds, representing more than $70,000bn in assets under management--a level close to global GDP--is quite astonishing. By way of comparison, according to the Bank for International Settlements, this is almost equivalent to the global size of bank balance sheets.
It is therefore clear that investment funds have a major role to play in the global economy, and that ensuring investor confidence is crucial. The lessons of previous financial crises are clear: risk management has become a key element in the sustainability of the financial system, an integral part, more than an added value. Risk management has become part of the financial system’s DNA.
Is Luxembourg the right place to launch a global initiative?
Yes, absolutely. As a forerunner in the implementation of European fund regulation, Luxembourg has played a central role in opening up markets to the international distribution of funds and in giving European private and institutional clients access to international investments.
And with over $5,000bn in assets under management in investment funds by the end of 2022, risk management has been at the heart of the debate for many years, supported by a community of experts from all geographical horizons, but also from all fund business lines, and also supported by a regulator promoting best practice in risk management. The Luxembourg financial centre therefore has every right to promote this global initiative.
How can we strengthen the risk management culture for funds?
The aim of the Global Fund Risk association is to bring together fund industry players with an appetite for, and exposure to, risk management. This association will provide a worldwide certification programme, but above all it will enable the exchange and promotion of best practice in risk management for investment funds.
The GFR board alone represents more than a century of professional experience in finance. Serge de Cillia, François Chauvet and Michael Derwael worked with me to bring the project to fruition, supported by 18 founding members, representing the main players in the industry and from all the professions linked to investment funds: administrators, managers, risk managers, advisers, lawyers, as well as representatives of central government departments.
How has the market responded to your initiative?
The initiative has been very enthusiastically received, not only by fund industry players in Luxembourg but also by international players and academics. Honorary members of GFR include professor Philippe Jorion (University of California, and author of the FRM reference book), professor Marti Subrahmanyam (New York University), Professor Davide Maspero (Bocconi University) and Michael Roberge (Chairman and CEO of MFS, Boston, the group that set up the first fund in 1924). The GFR’s ambition is therefore global, aimed at all players in the fund industry worldwide.
How does one join the GFR?
To join the GFR, like becoming a chartered financial analysts (CFA) or financial risk manager (FRM, issued by the GARP), certification will be offered based on passing an exam based on a reference book, and thereby proving your fundamental knowledge of the field. This certification--“risk management for runds”--is aimed at all players, not just risk managers. As such, it’s not a purely technical approach, but a holistic vision of the discipline.
The book Risk Management for Investment Funds, recently published by McGraw Hill, is the reference work for GFR certification.
This community, beyond risk managers, will benefit members, academics, students and ultimately all players in the investment fund industry.
When do the certification exams start?
See you on 25 November for the first certification exam session! After that, the next sessions will take place in May and November 2024 in Luxembourg. Information is available on the association’s website: .
This article in Paperjam. It has been translated and edited for Delano.