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CSSF demands notification of high levels of redemption requests, and other business-critical industry news
With markets experiencing continuing volatility as a result of the Covid-19 pandemic and the impact of national lockdown measures on economic activity, the CSSF has instructed Luxembourg funds to notify it if they receive redemption requests amounting to 10% of assets in a day or 30% in a week. So far the main liquidity problems that have become public knowledge involve real estate funds that offer daily dealing but are struggling to value their assets accurately. A further issue for the sector may be the impact on income funds of the strong advice to banks by European regulators and governments not to pay out dividends for 2019, and dividends cuts by other companies.
— Simon Gray, Editor in Chief
LuxFlag says assets under management of labelled funds now exceed €100bn
The assets under management of sustainable investment funds benefiting from a LuxFlag label reached €106.2bn at the end of March. Labels have been awarded to 196 investment products domiciled in Belgium, France, Germany, Ireland, Italy, Luxembourg and the Netherlands from 84 asset managers. The largest share consists of funds investing according to environmental, social responsibility and governance criteria (123), along with 33 microfinance vehicles.
Best source: InFinance
Coronavirus to prompt increase in asset management consolidation: State Street
State Street’s country head for Luxembourg, Eduardo Gramuglia Pallavicino, expects that the coronavirus crisis will put greater pressure on asset managers’ ability to generate fee income, and this will result in increased consolidation of the asset management industry as well as greater use of outsourcing. Gramuglia also praises the CSSF for its swift action in response to the Covid-19 pandemic in streamlining procedures and authorising use of cloud services, private computers and other aspects of remote working. He says previous plans at State Street to make 101 employees redundant over the next two years may be put on hold.
Best source: Luxembourg Times (subscription required)
Fed move to inject liquidity into bond market throws lifeline to debt mutual funds
The US Federal Reserve’s pledge last week to buy investment-grade credit and exchange-traded funds has thrown a lifeline to debt mutual funds, curbing the slide in net asset values as a willing buyer has entered the market when funds are forced to sell. The US central bank is creating a Secondary Market Corporate Credit Facility to add liquidity to the market in response to the coronavirus pandemic.
Best source: Pensions and Investments
State pension fund to report on sustainability of investment portfolio
Luxembourg’s state pension fund, the €19bn Fonds de Compensation, has promised to publish a wide-ranging sustainability report on its investments, following last year’s court action by Greenpeace against social security minister Romain Schneider for failing to disclose the organisation’s financial risks from its investments in 27 fossil fuel companies including Exxon Mobil, Shell and BP. The court ruled that although Schneider should have responded to Greenpeace, there was no legal requirement for him to do so, and his ministry had no easy access to the information. However, the pension fund says it will provide a sustainability report incorporating risk assessment linked to climate change and the availability of natural resources, the fund’s carbon footprint and its adherence to environmental, social responsibility and governance standards.
Best source: Luxembourg Times (subscription required)
Luxempart reports €207m net income for 2019
Luxembourg investment company Luxempart has reported net income of €207m for last year, up from €16m the previous year. Investment for the year amounted to €149m, including in three German companies for the first time: IT network equipment provider Assmann, children’s audio equipment firm Boxine, an audio equipment firm; and physiotherapy group Novotergum. Disinvestment totalled €127m and included a significant reduction in Luxempart’s stake in satellite operator SES. Managing director Jacquot Schwertzer has stepped down from the role he has occupied since 2017 to become vice-chairman and is succeeded by John Penning, a member of the executive committee since 2017.
Best source: Paperjam (in French)
CSSF requires funds to report daily redemption requests exceeding 10% of assets
The CSSF is requiring investment funds to report whenever investors are seeking to redeem more than 10% of its asset in a day or more than 30% over a week, in response to concern about the impact of market volatility stemming from the coronavirus pandemic. The CSSF says it initially contacted the 60 biggest asset managers with funds domiciled in Luxembourg on March 10, and issued a standard reporting template three days later. The regulator has not indicated how many funds, if any, have seen redemptions request levels requiring reporting. Xavier Parain, CEO of management company FundRock, says he believes a handful of funds in Luxembourg have been obliged to suspend trading temporarily over the past two weeks to ensure fair pricing.
Best source: Reuters
ESMA consults on leverage risks of alternative funds sector
The European Securities and Markets Authority has launched a public consultation on how to address leverage risks in the alternative investment fund sector, as part of its response to the European Systemic Risk Board’s April 2018 recommendations to address liquidity and leverage risk in investment funds. ESMA says its guidelines aim to promote convergence in the way national regulators assess how alternative funds’ use of leverage contributes to the build-up of systemic risk in the financial system, as well as how supervisors design, calibrate and implement leverage limits.
Best source: Global Custody
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