Academics accuse Morningstar of inaccurate assessment of bond funds, and other business-critical industry news

Check out this week’s (Nov. 18, 2019) Luxembourg Funds Intelligence Briefing from VitalBriefing. Don’t miss out on the latest critical news and developments impacting the funds industry.

Subscribe to the exclusive briefing for free here.

Luxembourg Funds Intelligence Briefing
18th November 2019

A study by US-based academic researchers says Morningstar is understating the risk to investors by relying on self-reported summaries from US fixed-income funds that exaggerate their holdings of triple-A and double-A rated bonds. The true portfolio breakdown was obtained from data filed by the funds with the Securities and Exchange Commission. The researchers estimate that around 30% of high and mid-range credit quality funds have received a less risky classification from Morningstar as a result, saying this makes the funds look like a better value than they really are.

— Simon Gray, Editor in Chief

Sustainable Finance
Adoption of sustainability criteria will take time: Union Investment’s Schindler

Sustainability criteria will play a growing role in the regulation of banks, insurers and asset managers, but it will take time to fully filter through into concrete rules, according Alexander Schindler, an executive board member at German asset manager Union Investment. He says European regulators are focusing more on sustainability but recognise there is still insufficient data to gauge risks. For this reason, Schindler doesn’t fear over-regulation, but expects firms to adopt environmental, social and governance criteria step by step.

Best source:


(subscription required, in German)

Asset Management
Morningstar is mis-classifying bond funds by understating risk: academics

Morningstar has come under fire for allegedly mis-classifying bond funds by relying on self-reporting on holdings that overstate the proportion of high-quality bonds. US university professors Huaizhi Chen, Umit Gurun and Lauren Cohen say as many as 30% of high-end funds were rated less risky than they are in reality, encouraging investors to buy improperly classified products. Morningstar says the critics have misunderstood its proprietary methodologies.

Best source:

Financial Times

(subscription required)

Fund Services
Banque Havilland to distribute BlackRock private equity ELTIF

Luxembourg’s Banque Havilland is to offer its clients the BlackRock Private Equity Opportunities ELTIF, which offers direct investment in a portfolio of private equity assets through co-investments and is designed to offer investors access to an institutional private equity solution within a regulated framework. Stefano Torti, asset management and advisory group head at Banque Havilland, says the offering gives private clients access to the same alternative investment opportunities as institutions.

Best source:


Fund directors to sue PwC Luxembourg over failure to report loan defaults

The board of troubled investment fund LFP I SICAV SIF is suing PwC Luxembourg for damages of almost €6m, claiming the auditor failed to warn investors that loans extended by the Aventor Funds sub-fund were in default for three years, by which time Aventor was in liquidation. The lawsuit alleges that PwC also attributed the wrong maturity to the loans, and maintained their value in the accounts despite the defaults. Aventor is one of at least four sub-funds of LFP I that have collapsed amid allegations of mismanagement and fraud, along with the Columna Commodities Fund, BlackStar Commodities Fund and Equity Power Fund. The board is also suing fund administrator Alter Domus, which acquired LFP I’s management company, Luxembourg Fund Partners, in 2017, an Antwerp-based businessman who is accused of defrauding the Equity Power Fund, and Luxembourg-based Société Générale Bank & Trust, which was custodian to the Columna fund.

Best source:

Luxembourg Times

(subscription required)

Natixis’s H2O Asset Management reportedly breached UCITS rules on counterparty risk

London-based H2O Asset Management, a subsidiary of French investments bank Natixis, is reported to have breached limits on counterparty risk during its liquidity crisis in June, when clients redeemed €8bn from the funds after reports of illiquid bond holdings linked to controversial financier Lars Windhorst. The annual report of the Allegro fund contains a disclosure by auditor KPMG that the fund exceeded the 5% limit on net assets from non-bank institutions imposed by the French law on UCITS, with 9.9% exposure to a single counterparty.

Best source:

Financial Times

(subscription required)

LHoFT and UK body launch Luxembourg Academy of Digital Finance

The Luxembourg House of Financial Technology and the UK-based Centre for Finance, Technology and Entrepreneurship have established the Luxembourg Academy of Digital Finance to provide training in financial technology. The institution, which will cover areas such as blockchain, AI applications, digital asset management, regulatory compliance technology, insurtech and cyber-security, is intended to contribute to the digital transformation of Luxembourg’s financial industry.

Best source:


Customise This Briefing

This free weekly Intelligence Briefing critical for your Luxembourg fund interests, prepared by our top financial journalists, can be personalised just for you: Essential and accurate fund market news to deploy internally and for your customers. Contact us to explore how we can customise to boost your brand and your business.


The legal and tax complexities of real estate, your biggest asset

How much do you know about the legal and tax complexities of real estate in Luxembourg?

For many people, property is the biggest asset to their name, so it is important to be aware of how real estate is held and passed on to future generations in the grand duchy.

Read the informative and succinct guide VitalBriefing created for Banque Internationale à Luxembourg’s myLife information platform.

Read the full article here.

Lessons from the global disruptors

Technological advancements have disrupted, transformed and even destroyed, whole industries. Financial technology – fintech – for instance, is revolutionizing the finance sector. On behalf of our client, KNEIP, VitalBriefing looks at the lessons that the fund industry, for instance, can take from the global technology disruptors.

Click here to read Lessons from the global disruptors.

Defend Truth Against “Truthiness”

Way back in 2005, long before Donald Trump was a glimmer in the eye of the voting public, the American late-night TV host Stephen Colbert came up with a wonderful concept. He called it “truthiness,” defined as “the belief in what you feel to be true rather than what the facts will support.”

Watch the clip and while you’ll see that the notion of anti-fact long pre-dates the current American president, during his campaign he raised the conveyance of lies, misinformation, disinformation and disproved conspiracy theories to a crude, highly effective art form — so much so that around the time of the 2016 US presidential election, the Oxford English Dictionary declared “post-truth” as its Word of the Year, echoing Colbert with its definition as “the quality of preferring concepts or facts one wishes to be true, rather than concepts or facts known to be true.” 

The idea, it added, relates “to or denot(es) circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief.”

From his insistence that Barack Obama had been born outside the United States and thus an illegally-seated president to his constant and repeated tarring of opponents based on false information, Trump literally built his campaign, and now his presidency on lies — as many as 13, 435 – an average of 13 lies per day – as of October 9, Day 993 according to the Washington Post, with the pace of his lies ever-faster in recent weeks.

Source: MSNBC/WashingtonPost

When lying is institutionalized

Why dwell on Trump and his lying? As journalists whose business is delivering “anti-fake news” for private- and public-sector clients who rely on us to ferret out the accurate from the inaccurate, the reliable from the unreliable and the truthful from the untruthful, Trump’s brazen contempt for actual fact is a constant affront, in addition to posing a real and present danger to the global economy, world peace and democracy. 

His contempt as well for accurate reporting and honest media outlets in the service of his own vanity, incompetence and immorality — reflected as well by his direct associates and his entire administration including his acting Chief of Staff, Secretary of State, various spokespeople and personal attorney —  has made it still more acceptable for autocrats around the world to traffic in phony information (see, for example: Brazil’s Bolsonaro, Hungary’s Orban, and Turkey’s Erdogan).

And let’s not forget one of the most egregious examples of the destructive power of fake news and false information: the 2016 Brexit referendum, whose supporters relied significantly on indisputably erroneous facts to help make their case.

While it’s not news that politicians lie, Trump has made it mainstream in his sheer, brazen disregard for the truth – over and over and over, despite being disproved over and over and over. 

Certainly, lying and politics have always been bedfellows. But two recent factors have combined to make this era different than any before it. Call it the Double Whammy of Misinformation: the decline of mainstream news organisations and the rise of social media. 

Nobody appreciates that damaging marriage more than the US president: “I doubt I would be here if it weren’t for social media, to be honest with you,” Trump told Fox Business News in 2017. 

Tweet, tweet, tweet

When Trump says social media, he’s really talking about Twitter, which he uses like a club that he wields over the heads of the frightened, many of them politicians from his own party — when he’s not pounding them with it, as he confirmed to a broadcast medium: “Tweeting is like a typewriter – when I put it out, you put it immediately on your show. When somebody says something about me, I am able to go bing, bing, bing and I take care of it. The other way, I would never be able to get the word out.”

Twitter and other social media represent one aspect of the problem, enabling anyone with a social media account, a digital device and an internet connection to become a publisher. He or she can make any information look “real” by skinning it to appear to be real news in or from a real publication.

For you as an information consumer, though, it’s like buying cooked food from a kitchen you’ve never seen, with no ingredients on the package — or no guarantee that the ingredients on the label are really there at all.

That other factor — the decline of mainstream media — is actually the collapse of the traditional advertising-based business model for newspapers and magazines. The rise of digital media + the fragmentation of audiences + the demise of older print media consumers has translated into the rapid weakening and, in many cases, disappearance of the kind of responsible journalism — with fact-checking at its core — that once acted as a filter to weed out the erroneous.

In other words, the quality control once inherent in mainstream media has rapidly diminished and is disappearing.

Protect yourself

All that said, there are steps you can take at least to better ensure the information you take in both personally and professionally is as accurate and trustworthy as possible. (At VitalBriefing, we talk incessantly and write frequently about this issue. No surprise as trustworthy, accurate and timely information is our bread and butter and what we serve our clients).

Start with this video, then consider these tips:

Source: International Federation of Library Associations and Institutions

Here’s a handy tool, courtesy of California State University at Chico, to help you evaluate whatever you’re following. You have to love it for the name alone: The CRAAP Test (Currency, Relevance, Authority, Accuracy, Purpose)

Another American college, Mount Allison University, has assembled a helpful reference page.

Finally, keep an eye on the authoritative debunkers of fake news, among them and PolitiFact.

It’s virtually become a civic responsibility to ensure that the factual material you’re reading, watching and sharing is accurate and truthful – no matter your side of any issue. Just know that it’s critical to our democratic way of life, as well as the health of your business or organisation, to make your judgements based on good information.

Amazon’s 100,000 Electric Vehicle Order Changes the Game for Shippers

As Amazon strives to reach its just-announced “net-zero carbon emissions” goal, it’s logged a massive order for 100,000 electric vans (from a start-up, no less), confirming what many in the industry already suspected: the last mile for deliveries is going battery-powered.

Discover the implications for the supply chain sector as Amazon paves the way for electric:

Don’t be fooled: Curing the fake news epidemic, one story at a time

Over the last several years, the world has succumbed to an epidemic of fake news. While disinformation has circulated for as long as people have created news, the internet, social media and changes in the way in which we consume information have turned fake news into an uncontrollable global virus with massive repercussions across politics, business and society.

Stories that on the surface may seem accurate but instead are misleading or downright false can have serious consequences once – to adopt the social media phraseology – they go ‘viral.’

Fake news stories have been absorbed and spread by millions of people, enticed by the click-bait headlines plaguing social media feeds – feeds originally designed to ease the sharing of content rather than to encourage the dissemination of untruth. On occasion, such as in the run-up to the 2016 US election or the Brexit referendum, this has resulted in a viral storm of sound bites that can trap people in a ‘filter bubble’ of disinformation, impacting how they vote, who they connect with socially and which companies they buy from.

While the mainstream media is certainly not innocent of embellishing the news to attract readers, of making mistakes or of inaccurate reporting, more alarmingly, the phrase ‘fake news’ is now deliberately being used by politicians and business leaders around the world as a weapon against legitimate news reporting, to mislead their constituencies and as an excuse to censor free speech.

In the business world, being tarnished with fake news that sticks can be disastrous, impacting public sentiment and your brand reputation with after-effects that can be hard – even impossible – to shake off.

No global vaccine exists for inoculating against the fake news epidemic, but VitalBriefing, as specialists in media and brand monitoring, has developed tools and techniques to filter fact from fiction, enhanced by our team of highly skilled and experienced journalists.

Here are six tips and tricks you can apply today when you read the news online or browse your social media feed:

  • Is the publisher credible?

Simply because a website is popular, does not mean it is accurate – especially if it appears on social media or automated news aggregation services where clicks and computer algorithms decide what leads. Be wary, for example, of unusual domain names or websites imitating legitimate news publications. Check the ‘About Us’ section to get an idea of what and who is behind the publication.

  • Is the writer credible? 

Check authors’ by-lines: Have they published anything else? Are they real writers, commentators or experts in their field or – as is often the case with fake news stories – simply a fictitious pseudonym?

  • Is the story credible?

Has the information been published on other websites, especially on authoritative ones such as noted mainstream media publications or specialist news outlets? If there’s no coverage elsewhere, it’s not a certainty that the news is fake, but it’s a strong warning sign that other verification methods need to be applied, especially if it’s not published by a legitimate news organisation.

  • Who’s in the story? 

If a person or organisation is quoted, perform a reverse search to check the original source of the quote. Is the attribution accurate? Is it being taken out of context? If there are no quotes or contributing sources, consider it another red flag.

  • How timely is the information?

Checking other sources can reveal a common indicator of fake news: the recycling of older information, dragged out of context, and made to appear as fresh news.

  • How’s the quality of the writing? 

Poor grammar and spelling is not necessarily indicative of a disreputable publication – automated or poor-quality translations are common on non-native language news sites, for example – but it should be a cause for scepticism, necessitating cross-checking the accuracy of the information. 

VitalBriefing applies all of the above and more when searching, filtering and curating information for your organisation, culling fake news to supply accurate business intelligence with journalistic integrity.

The Rise of Cloud Services: Infographic

We’ve known for years that cloud computing would eventually rock the business world — and that time has come. The value of cloud services is growing fast as organisations across industries increasingly adopt the public cloud as an affordable platform for enterprise applications as well as for developing and deploying customer-facing solutions. It’s just the beginning: By 2022, it’s projected, 90% of organisations will be there. Based on available data, the sector is consolidating: Major players are boosting their market share, eliminating the various kinks and migrating to the cloud.

Monetary and Fiscal Policy Divide North and South Europe

VitalBriefing Editor-in-Chief Simon Gray discusses the worrying current state of monetary and fiscal policy in Europe.

Countries in the north and south of the continent are divided in opinion as to what they believe the role of monetary policy should be in stimulating the economy. Moreover, consensus cannot be reached regarding the fiscal rules governing participation in the euro, Europe’s single currency.

With both sides of the debate entrenched in their positions, US banks have been able to dominate global finance and even steal investment banking business from their European counterparts.

With the global economy facing a possible recession, how will Europe solve this inter-continental discord?

Read the full article on

Should You Relaunch Your Website?

by David Schrieberg

For much of our eight-year history, our COO has loved to repeat that “we should eat our own dog food.”

It’s a standing joke between us – he knows I’ll smack him (half-)playfully every time he repeats it. But after years of rolling my eyes, I’ve finally admitted that there’s meaning in his cliche.

Which brings me to the point: After barely touching it for eight years, we’ve just overhauled our website and now that I survived the process, I have to say that you should probably take a look at yours and at least consider doing the same, if you haven’t recently.

The reason I held off for so long, given my experience with websites, was because I knew what kind of a project we would be taking on: Days, weeks and months of distraction, negotiations, back-and-forth, development, design, time, money…and arguments. Endless arguments.

If I’ve learned anything over 20 years spent in digital media, it’s this: Everybody and his or her mother know how to design a website. They know that this color should be changed, that quote should be dropped, this photo should be moved, that font should be altered, this text should be rewritten, that graphic killed…on and on and on.

Creating or relaunching a website is like living in an extended family argument: The fight is never really about the subject of the fight. Rather, it’s about lots of other things going on under the surface (and on the surface, too). Underlying tensions and issues have a way of bubbling over during the debates. Things can get heated. Ugly, even.

Yet, here’s the bottom line: That’s all healthy and all to the good of the organisation. It forces everyone to look hard at, and focus on, the strategy, goals, operations and products or output. Because the website is a window on your collective organisational soul.

In our case, our previous website was a thing of beauty, design-wise, but it wasn’t specifically intended to “sell” our services or products. So we decided it was time – go ahead and smack me – to eat our own dog food. And while it was painful in the preparation, it was a necessary meal and I couldn’t be happier we ate together.

Because in a world where trustworthy, accurate and engaging content is ever more important, effective storytelling is really about “story selling.” In this context and in our case, that means creating thought leadership content that showcases expertise, authority and trustworthiness – EAT – which mightily helps you get top-of-Google-search-results. That’s what our clients rightfully expect from us.

The process forced us to look hard at ourselves. We surveyed our customers and gathered new testimonials in order to better understand the value we offer them, and presumably our prospects. We added a revolving, regularly-refreshed carousel of examples of the content we produce for them across 25+ different industries including finance, technology, HR, Space and content marketing.

And maybe the most important outcome: We revised our own core message from “the cure for information overload” (still true) to a message more relevant in today’s confusing world: “content you can trust,” because we consider ourselves one small antidote for a world beset by fake news.

So take a look at Then I invite you to ask yourself whether it’s time to join us at the table.

Fintech: closing in on the end of the beginning

Fintech is not about the future of the financial industry – but its present. 

Online and mobile banking is no longer futuristic, but what’s expected of any institution, from venerable financial dynasties to upstart challengers. 

Instant payments, smartphone transactions, crowdfunding and savings apps have moved from the disruptive fringe into the mainstream. Confined just a short time ago to the world of start-ups, today’s fintech firms just as likely could be well-established businesses recording swelling profits and paying handsome dividends to shareholders.

After years of steady rather than breakneck growth, investment in the sector may be growing faster than ever: New money doubled to $55 billion last year alone compared with a total of $153 billion in the eight years between 2010 and 2018. Almost half came from China ($26 billion), although the US and the UK, despite Brexit, remain significant sources of venture capital and other types of investment. 

Fintech firms are becoming bigger – much bigger – but there are fewer of them: the number of start-ups founded worldwide peaked at 668 in 2014 and in 2016 was down sharply to 256.

While still a hotbed of innovation, that’s a sign of a sector starting to mature. A few years ago, the industry’s most high-profile firms were focusing on, among others, mobile transactions, digital payments, and above all crypto-currencies and blockchain, the distributed ledger technology underpinning bitcoin. 

Today the headlines are more about artificial intelligence, machine learning and big data as new applications try less to sweep away the traditional financial architecture and its incumbents than to carry out more cheaply, quickly and efficiently familiar functions such as customer due diligence or trade processing.

The traditional financial industry remains worried about the possible impact on its business of technology giants such as Google, Apple and Facebook moving onto their turf to exploit huge established customer bases. 

For mainstream banks, insurers, asset and wealth managers, and their myriad service providers, fintech firms offer a source of new thinking not found in-house as well as technology to make them fit for purpose in the digital era.

For all their concern about the impact of disruptive technology on the stability of the financial system, even officials who might be considered champions of orthodoxy are looking for ways to encourage the flow of fintech innovation into the mainstream. Regulators’ digital sandbox schemes enable fintech firms to test and refine their products and services with live customers before they shoulder the full weight of regulatory compliance. 

They’re also encouraging the fast-growing area of regtech, enabling digital technology to ease the ever-more-complex process of adherence to the additional rules that have besieged the financial sector over the decade since the financial crisis. 

And even the world’s central banks, while they decry the instability, insecurity and lawlessness of crypto-currencies, are discreetly exploring the capability of digital money to smooth financial flows and anchor monetary policy-making. 

In short, fintech may be moving beyond its Wild West phase but the digital transformation of the global financial framework is barely at the end of the beginning.