When Luxembourg’s financial regulator exhorted institutions to send their staff home in March, the CSSF was able to practice what it preached. “We were well equipped for the lockdown because all staff had been issued with laptops,” head of fund regulation Marco Zwick told delegates on the fourth day of the ALFI Rentrée virtual conference. Of around 900 staff, 98% worked from home, with just IT and HR personnel in the office.
The regulator was accommodating about reporting deadlines, but Mr Zwick says most firms met them anyway. “Only 68 of 350 companies requested a delay in publishing 2019 reports, and 73% of ManCos filed on time,” he said. Nor were fund suspensions a major issue; the UK had three times as many.
Mr Zwick joined his CEO, Claude Marx, and industry leaders urging caution about changing EU rules on fund delegation. “People are asking where the issue is,” he said. “As a priority, we need to agree on the problem before trying to find a solution.”
BNP Paribas Asset Management’s Isabelle Boursier notes that in two decades European exchange-traded fund assets have grown by an annual average of 15.5% to nearly $1trn; while redemptions shot up amid March’s market turbulence, they were quickly recouped in April. While institutions have dominated European ETF investment, she is confident retail interest will grow, thanks to transparency on fund costs, restrictions on intermediary commission, and low interest rates.
Alternative investments are poised to benefit from pent-up investor demand, industry members say. Harrison Street’s Paul Bashir says investors are looking to alternatives for income, including from unlikely sources such as core real estate assets: “It raises the question of when assets like student housing stop being considered as alternatives.”
EHP lawyer Jérôme Wigny says the European alternatives market has been transformed by the EU’s AIFMD legislation. “A decade ago, PE giants like Blackstone and Apollo would never have thought about European funds, but today US alternative managers are creating Luxembourg funds, usually special limited partnerships that invest alongside their main vehicles in Cayman or Delaware.”
EQT’s Peter Veldman says any revision of the AIFMD should remedy its failure to create a level playing field. But Wigny warns against fixing something that already works: “We wouldn’t get the best of all worlds, but the worst. It’s more likely that some large countries would simply export their constraints to the rest of Europe.”