The so-called Fund Data Exchange platform (FDX) was a key topic at the Luxembourg Administrators Institute (ILA) conducting officers’ agenda at the end of 2022, Revel Wood, chair of said forum and co-founder of ONE group solutions, tells Delano. This tool could “revolutionise Luxembourg and help it lead in terms of market efficiency and standards,” says the originator of the project.
The is a free collaborative portal that allows Luxembourg players to work together on defining industry data standards. This way, fund administrators should be able to uniformise their reporting and KPIs. Consequently, the fund management industry could standardise controls and ultimately their reporting to the regulator, to the boards and to the auditors.
The fruit of frustration
The industry is going through changes: “it is moving from a place where margin and costs didn’t matter as much to a point where it’s really important,” explains Alis Exchange COO and FDX technology contributor James Spanjaard. Time and manpower spent on data are therefore of the essence, but, as Spanjaard puts it, “we have a language problem,” which weakens the industry.
There is an increasing narrative that the delegate model in Luxembourg is one of its strengths but with that comes an onus to demonstrate that standards are held up across parties.
Indeed, the current ecosystem, where companies share their data in different file formats and use the same words to signify different ideas, leads to market inefficiencies that aren’t compatible with expectations anymore. Frustration with “an incredibly inefficient” system led Wood to reach out to Spanjaard’s team to come up with a solution that would make the most of Luxembourg’s “unique status as a collaborative ecosystem.”
“There is an increasing narrative that the delegate model in Luxembourg is one of its strengths but with that comes an onus to demonstrate that standards are held up across parties,” Spanjaard explains.
A free platform, by the industry for the industry
, the website features a published repository of industry standards, links for compliance officers, business operators, those who work with the data as well as a data standard file format that works natively with these data standards “to make it really easy for firms to share data safely and efficiently,” says Spanjaard. “We also invested in a lot of development tooling to make it super easy for technology teams to work with this format.”
The main contributors and beneficiaries of the FDX should be the AIFM/Mancos (both in-house and third-party providers), fund administrators, depositaries, other delegates of the fund and AIFM/Manco and fintech providers, but even Luxembourg’s financial sector regulator CSSF could benefit from this “because data integrity is a core part of their mandate.”
The purpose is to solve a language problem, to help the industry start talking the same language. If we can do that, there are massive efficiency gains we can unlock.
A sense of industry ownership
Wood also mentions ESG standards; on top of saving printing paper and the use of obsolete office equipment, the platform could shave off about 40% of manpower and time spent on menial and mundane data processing task, estimates Spanjaard. The platform should also boost the sector’s cybersecurity as a uniform standard “will allow more firms to properly mutualise and govern their data” rather than rely on a jumble of ill-defined templates and transpositions.
Though it will take time, maybe five to ten years, to see the standards fully come into being, Wood and Spanjaard believe in their platform. “The purpose is to solve a language problem, to help the industry start talking the same language. If we can do that, there are massive efficiency gains we can unlock. But the only way that we get there is through a platform that is by the industry, for the industry and that carries a sense of industry ownership and definition,” concludes Spanjaard, who, in February will move his business from Boston to Luxembourg.
The platform is already being worked on within ILA, the North American bankers’ association and the Findel Group. In January, the Luxembourg association for investment funds Alfi will launch a call for interest, in the hopes of attracting contributions from its members to further mobilise the initiative across for benefit of the industry