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After four years as chairman of the Association of the Luxembourg Fund Industry, Denise Voss talks about the success of Ucits, the type of fund that forms the backbone of the industry here, and reaching out to the next generation of investors and employees.
Denise Voss ended her tenure as chair and as a board member of the Association of Luxembourg Fund Industry after its annual general meeting in June, having reached Alfi term limits. But stepping aside is a “positive” thing, she told Delano. “It’s important to get new blood.” She spoke with Delano about her chairmanship in May. The interview has been edited for length and clarity.
Aaron Grunwald: Looking back at the past four years, from your perspective, what have been the biggest accomplishments?
Denise Voss: It’s difficult to actually figure out what was the biggest, [but] in terms of assets under management, we reached €4trn in three years versus €3trn [in 2014]. And also importantly, I think, the market share of Luxembourg in Europe is still very strong. And we reached new record assets under management at the end of March . We have €4.35trn. So I think, from that perspective, we’ve been doing well. We’ve obviously also focused quite a lot on alternative investment funds and we’ve been doing quite well there, in terms of the increasing percentage of investments into alternative funds.
How important are alternative investment funds to the industry in Luxembourg?
What else would you point to as a success?
We celebrated the 30th anniversary of Ucits and we celebrated the 30th anniversary of Alfi as an association, so obviously [the industry] having made it all happen from the introduction of the Ucits name, [and the anniversary] was obviously a time to reflect on the importance of all the work that the whole ecosystem has done since 1988, including the Luxembourg government and how important their support has been.
I guess if I wanted to be remembered for something, it would be, and people wouldn’t be surprised to hear that, my focus on investor education and financial education. So I was extremely happy the way that in the celebration of Alfi’s 30th anniversary, we didn’t focus on ourselves. Actually, we focused on Luxembourg and financial education in Luxembourg. Which is a bit unique for us because traditionally, you know, Luxembourg is a small country. We always look outside for business. And we’ve done something from the beginning and the result is where we are today, the second-largest fund centre in the world, but it’s also important to look in Luxembourg to ensure that [people here] understand what we, as a fund centre, do.
Where could you have made more progress?
Actually, there have been a number of regtech solutions that have been developed.
It’s not exciting stuff, but it helps to make our companies more efficient, basically. [For example] there are some projects like KYC, know your customer, data. [Currently] this is an exercise where everyone does it manually. So is there not a way to kind of mutualise a bit just the actual access to the documentation, so “passports”? I mean, obviously, in a secure environment. So that’s something that’s being worked on. But now, the technical part’s not a challenge, I think it’s more the governance part. Say you have a group of companies that want to actually be able to share KYC documentation. How do you do that from a governance perspective? That’s always the challenge. Do you create an ASBL [not-for-profit]? Do you create an economic interest group?
Why do you think Luxembourg’s funds sector will still be competitive 10 or 20 years from now?
What other challenges will your successors on the board face?
Alfi has been actually quite active already for the last decade in sustainable finance and, well, I would say ESG [environmental, social and governance] and responsible investing. And we have a good market share in that. But obviously, that’s a huge opportunity, looking at the European action plan for sustainable finance, based on the Cop21 Paris accord and the like. So I think that we’ve done some good work so far, but that will be a huge challenge for the next board.
Among investors, who is the most excited about green finance and sustainable projects? Is it--I don’t know, I’m making this up here--Dutch pension funds?
A lot of the pension funds in Scandinavia and in the Netherlands as well, France too… those are the ones who are investing.
Obviously, there’s a whole group of youths who are very excited [but] for the moment, from an investing perspective, it’s definitely at the institutional investor [level] and it’s definitely the pension funds.
How should the fund industry reach the younger generation of investors?
You mentioned to me earlier that younger people are enthusiastic about tackling climate change. Do you think that’s a good way to get them interested in investment funds?
That’s what some people say actually. It certainly can be, yes, you’re right. I like to use the comment that people would rather go to the dentist than know about investing in investment funds. But soon that has to change, because people will be more responsible for their own financial well-being and investment funds--pooling people’s money together and having that money being invested by expert portfolio managers--that’s a solution that the EU wants to continue to put forward.
[So] I think that is an interesting way to get to people. You know, make the planet a better place to be and [help] the human race to have a chance of actually existing after X number of decades, then, yeah, I think that can be an interesting way to get people’s attention and to make them not think an investment fund is the last thing they want to hear about.
It could be an interesting way to make the case, if you will, that you can invest for your own personal future, but at the same time, you’re doing good for the planet.
And what do you think it would take to make the case? I mean, do you need to sell Ucits via Facebook or totally change the business model?
That’s something else that the industry is working on. I would say that [today] our distribution framework is only basically through intermediaries, through banks or insurance companies or financial advisors, and asset managers are actively looking at how do we reach the next generation of investors.
I don’t necessarily see any results yet, but I know asset managers are working on it because I think they realised after maybe thinking “we don’t want direct investors, we don’t want people coming to us directly”, they’ve realised that, just by looking at the way their children interact with the world, they need to be able to do that.
So it’s whether it’s Facebook or Instagram or whatever. You’ve seen the developments of robo-advisors and those can be quite engaging. So it’s actually quite positive. I think those kinds of robo-advice and websites are an opportunity to be engaging and maybe through gamification even to help people learn about financial literacy and financial education. As opposed to a professor sitting in a classroom, you know. So I think digital is quite an opportunity. And one of the things I worry about, and I say, is I think we should not assume that, as an industry, we’re actually relevant to the younger generation. We shouldn’t assume it. Because we need them as investors, but we need them as employees as well.
In terms of developing talent, what needs to be done?
If I look at Luxembourg, we’re going from an environment where when you joined an asset management company, you start at the ground, you do your net asset value calculation or [at] a transfer agency, you’re inputting into the transfer agency system subscriptions or redemptions. That doesn’t happen in Luxembourg really that much anymore. Now, the people we need are the control people, we need compliance officers, we need internal auditors, we need risk managers, we need people running the management companies, we need lawyers, we need people generally with some experience. I mean, there are some entry-level jobs, but there may be fewer entry level jobs versus the past. So one concern is how you train the sort of expert leaders of the future, if you don’t have a training ground.
So where could they get experience? Or is it just better training?
There needs to be an element of training. Maybe what’s positive is we have an industry now which is, after 30 years, much bigger than it was even 20 years ago, so we have… a bigger pool of people that we can kind of train and retrain than we had in the past. But we have digitalisation. So I mean the thing is we have technology and we’re actually looking at transactions and even using robotics to take away some of the mundane tasks, if you will. [But] when we do that, we have to make sure though that we still understand how those tasks are done… and the rules around them.
Another element of talent that I mentioned was the fact that we do want to be attractive as employers to a younger generation. We need the leaders. And unfortunately, I think the younger generation thinks that--if they have an opinion about the investment fund industry--it’s just for rich people. So that’s obviously a barrier. I’ve been told this by more than one young person.
They don’t want to work in an industry like that?
Well, they’re not attracted by it. We have to explain what our industry is about, the values of our industry, what we stand for, and actually your point about combining saving the planet with investment funds is obviously one way to explain the value of our industry, what we can do, what we have the potential to do as an industry. But we need to do that. And I don’t necessarily see us doing it very well. Well, number one, we’re still a bit pale, male and stale in terms of our leadership. And that doesn’t help. We need to keep obviously moving forward in the diversity end of things.
Are you happy that, for four years, there were a lot of women in Luxembourg who saw that Denise Voss was the chair of Alfi?
Yeah, yeah, yeah. And I tell them… it’s important that you women, as women, raise your hands, that you be willing to get out of your comfort zone. Take a risk, which isn’t perhaps not necessarily what traditionally society told us to do.
Is the Luxembourg fund industry a good industry for women to work in?
Yes, definitely. But it’s true that it would be nice to see some more women in leadership positions.