Financial intelligence unit calls for more resources and expertise, and other business-critical fund industry news

Every Monday, VitalBriefing is proud to publish its exclusive Luxembourg Funds Intelligence Briefing, featuring our editors’ selection of the most important stories of the week that impact the funds industry.

We invite you to check it out below, and if you like what you see, subscribe to receive the briefing FOR FREE to your inbox each week.

Luxembourg Funds Intelligence Briefing
20th January 2020

Beginning a year that will see a close inspection by the Financial Action Task Force of Luxembourg’s legal and regulatory framework to combat money laundering and other financial crime, Financial Intelligence Unit head Max Braun says the country needs extra resources as well as more specialised magistrates, analysts and IT experts. The volume of suspicious activity reports and freezing orders in the grand duchy has risen sharply in recent years, but Luxembourg has been criticised over its slow pace of transposition of EU directives, as well as the almost total absence of prosecutions in domestic money laundering cases.

— Simon Gray, Editor in Chief

Sustainable Finance
BlackRock reforms target leadership in sustainable investment

BlackRock, the world’s largest asset manager with $7trn under management, has announced a series of reforms to make it a leader in sustainable investment. The firm will double the number of exchange-traded funds focused on sustainability to 150, remove companies deriving a quarter or more of their revenue from thermal coal from actively managed portfolios, and target a 10-fold increase in sustainable assets from $90bn to $1trn over the next decade. CEO Larry Fink has told clients and CEOs that climate change represents an unprecedented investment risk.

Best source:

Financial Times

(subscription required)

Asset Management
Banque de Luxembourg Investments operations to integrate Crédit Mutuel asset management hub

French co-operative bank Crédit Mutuel is bringing together the sales and marketing operations of six group asset management units, including Banque de Luxembourg Investments, to create a specialised asset management hub, Crédit Mutuel Investment Managers. The structure will enable the different teams to promote the investment solutions of all the entities through a multi-boutique model, with the aim of expanding assets under management by 40% over the next five years. Banque de Luxembourg Investments will be responsible for international sales and marketing. Managing director Guy Wagner says the move will allow BLI to offer clients complementary investment solutions to which they might not otherwise have access.

Best source:

Crédit Mutuel
See also:

Investment Europe
See also:

Paperjam

(in French)

Fund Services
GSK Stockmann names Marcel Bartnik as partner

Marcel Bartnik, who has worked for the past 15 years in the Luxembourg investment fund industry, has become a partner in the Luxembourg practice of German-headquartered corporate law firm GSK Stockmann, whose speciality is advising institutions, private equity firms, investment houses and individuals in the corporate, real estate and financial sectors, particularly regarding fund formation and structuring.

Best source:

Agefi

(subscription required)

Regulation
CSSF fines Luxembourg fund firms for compliance failings

The CSSF has fined two fund management firms for non-compliance with regulatory requirements. Private label fund provider Axxion has been fined €80,000 following onsite monitoring in June 2017, while Hamburg-based Hansainvest Lux has received a penalty of €23,000, also following an onsite check in March 2018. The CSSF says the penalties took into account the remedial action taken and planned by the firms, which share an address in Grevenmacher. Hansainvest Lux management board member Christian Tietze was head of German business at Axxion until last June.

Best source:

Paperjam

(in French)

Public prosecutor highlights increasing complexity of financial crime and growing regulatory demands

The nature of financial crime and expectations on regulators to combat it have changed in recent decades, requiring increased resources, according to Max Braun, director of Luxembourg’s Financial Intelligence Unit and Patrick Konsbruck, deputy prosecutor at the economic and financial prosecutor’s office, who point to a particular need for more specialised magistrates, analysts and IT specialists. The financial crime agency imposed freezing orders on €220m last year related to suspicions of money laundering or the financing of terrorism, more than double the €87m total for 2018. However, Braun says he is optimistic about the outcome of the assessment of Luxembourg’s anti-money laundering policies and enforcement to be carried out later this year by the Financial Action Task Force.

Best source:

Luxembourg Times

(subscription required)
See also:

Wort

(in French)

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.

 

Luxembourg fund assets lifted by stock market boom, and other business-critical industry news

Every Monday, VitalBriefing is proud to publish its exclusive Luxembourg Funds Intelligence Briefing, featuring our editors’ selection of the most important stories of the week that impact the funds industry.

We invite you to check it out below, and if you like what you see, subscribe to receive the briefing FOR FREE to your inbox each week.

 

Luxembourg Funds Intelligence Briefing
13th January 2020

 

 

 

Luxembourg’s investment fund asset total, second in the world only to the US, continues to be lifted by the year-long stock market boom since the downturn at the end of 2018. From €1.5trn in 2009, in the aftermath of the global financial crisis, the industry’s net assets had risen to €4.67trn at the end of November. However, most of the increase in assets over the first 11 months of 2019 came from market growth rather than net inflows.

 

— Simon Gray, Editor in Chief

 

 

Asset Management
Fund assets set fresh record of €4.67trn in November

Net assets under management of Luxembourg-domiciled investment funds reached a record €4,669.7bn at the end of November, according to the CSSF. The sector has enjoyed almost a year of uninterrupted growth following the slump in global financial markets in the fourth quarter of 2018.

Best source:

Paperjam

(in French)

 

Fund Services
Thibaut Partsch joins Elvinger Hoss Prussen as partner

Alternative investment specialist Thibaut Partsch has joined Elvinger Hoss Prussen as a partner in the law firm’s asset management and investment funds practice. A member of the Luxembourg Private Equity and Venture Capital Association, Partsch was previously with international law firms in Brussels, New York and the grand duchy, including 12 years with Loyens & Loeff, and is a member of the bar in both New York and Luxembourg.

Best source:

Elvinger Hoss Prussen
Aztec Group supports close of Headway Capital Partners PE fund

Fund services provider Aztec Group says it has assisted UK-based private equity fund manager Headway Capital Partners on the final close of its HIP IV fund with total commitments of €372m. Aztec helped Headway with the fund’s formation and fundraising, and will provide ongoing administration services from its Luxembourg office.

Best source:

Luxembourg Chronicle

 

Regulation
Paris lobby group calls for more transparency from activist funds and short-selling restrictions

Paris Europlace, the lobby group for the French capital’s financial industry, has added its voice to calls for greater transparency on the part of activist funds targeting French companies, as well as seeking restrictions on short-selling. The group recommends that funds inform the targeted company of their plans and sources of finance, and share any non-public communications with the company’s shareholders. Paris Europlace has also proposed rules for proxy advisers and securities lending.

Best source:

Les Echos

(subscription required, in French)

 

Technology
Fintech firm Numbrs to relocate most of Luxembourg team to Switzerland

Martin Saidler, the founder of Swiss fintech firm Numbrs Personal Finance, says it will close its subsidiary Numbrs Luxembourg, with nine of the office’s 11 employees to be transferred to its Zug office. The firm’s main product is an app that aggregates bank account and credit card information and facilitates mobile banking and personal financial planning. Numbrs blames reported problems with the app on the implementation of the EU’s revised Payment Services Directive, but has threatened to take legal action against anyone publishing false speculation about the company.

Best source:

Inside Paradeplatz

(in German)
LuxTrust to open Paris office in European expansion drive

Digital certification firm LuxTrust is to open an office in Paris in the coming months as part of its strategy to target the wider European market, according to communications director Stéphanie Godar. The firm has recently developed products involving secure digital signatures alongside its existing digital identity services.

Best source:

Paperjam

(in French)

 

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.

 

Brexit : le Royaume-Uni – et le Luxembourg- en voyage vers l’inconnu

Simon Gray a longtemps travaillé au Luxembourg comme journaliste financier. Photo: Editpress/Hervé Montaigu

Simon Gray a longtemps travaillé au Luxembourg comme journaliste financier. Photo: Editpress/Hervé Montaigu

Voici encore quelques mois, alors que les défenseurs du Brexit promettaient à leurs compatriotes qu’ils pourraient avoir le beurre et l’argent du beurre, personne n’aurait pu imaginer que l’on se retrouverait dans la situation actuelle.

Alors que le Gouvernement et le Parlement britanniques tentent toujours – en vain- de s’accorder sur une éventuelle sortie du Royaume-Uni de l’Union européenne et, le cas échéant, sur ses modalités, le Luxembourg doit lui aussi faire face à de nombreuses incertitudes.

En effet, l’avenir du secteur financier luxembourgeois et en particulier les activités liées aux fonds d’investissement pourraient être considérablement secoués par un tel événement. Selon Standard & Poor’s, le Luxembourg est le pays qui, après l’Irlande, devrait ressentir le plus intensément les répercussions du Brexit.

Les magistrales erreurs commises par les dirigeants britanniques qui ont conduit à cette situation ont été amplement commentées. Parmi elles, on peut rappeler la mise en place du referendum de 2016 dans l’espoir des dirigeants britanniques de balayer “une fois pour toutes” l’insurrection eurosceptique qui minait le parti conservateur depuis plus de trois décennies.

Ou encore l’organisation d’élections législatives anticipées en 2017, inutiles, dont les résultats ont finalement fragilisé la majorité en place, ne laissant à aucune des forces politiques en présence les marges de manœuvre suffisantes pour sortir de l’impasse. En résulte, au final, cette stratégie absconse, insaisissable, rendant difficile la négociation et la conclusion d’un accord de sortie de l’Union européenne.

On peut se réjouir, au moins pendant quelques mois encore, que les pires craintes d’un Brexit sans accord ont été balayées (avec le risque de briser purement et simplement des relations financières qui ont été construites pendant plus d’un demi-siècle, d’empêcher les Britanniques de vivre et de travailler au sein de l’Union européenne, ou même de perturber la circulation aérienne entre l’Europe continentale et le Royaume-Uni).

Grâce au pragmatisme dont ont su faire preuve les autorités financières, au Royaume-Uni, au Luxembourg ainsi qu’au niveau de l’Union européenne, les règlements vont, en toute probabilité, rester en l’état actuel, au moins jusqu’à la fin de cette année, et sans doute encore durant 21 mois, voire davantage, quel que soit le dénouement du débat interne britannique.

A priori, le secteur financier luxembourgeois devrait être un bénéficiaire important du Brexit, aux côtés de Dublin, Francfort, Paris et Amsterdam ou encore Madrid.

A priori, le secteur financier luxembourgeois devrait être un bénéficiaire important du Brexit, aux côtés de Dublin, Francfort, Paris et Amsterdam ou encore Madrid Face au risque de ne plus pouvoir accéder au marché unique en cas de Brexit, près de 60 gestionnaires d’actifs, prestataires de services financiers et assureurs spécialisés, ont déjà fait le choix de s’installer au Grand-Duché.

En effet, des acteurs financiers établis au sein de l’Union européenne bénéficient d’un passeport leur permettant de distribuer leurs produits et services dans d’autres États membres sans avoir à obtenir d’autorisations supplémentaires. Si le Royaume-Uni devait sortir de l’UE, les acteurs financiers britanniques perdraient cet avantage, même sous un accord de sortie.

L’arrivée de ces acteurs au Luxembourg a eu pour effet de renforcer la position de la place financière internationale, et plus particulièrement son pôle d’activité lié aux fonds d’investissement. C’est d’ailleurs sans doute heureux que cette tendance n’ait pas– à ce jour– mené à une croissance majeure de l’emploi dans le secteur de la finance luxembourgeois.

A l’approche de la date initiale du Brexit, le 29 mars, le mouvement de migration d’acteurs venus du Royaume-Uni vers le Luxembourg semblait s’accélérer, les institutions financières craignant que la période de transition additionnelle de 21 mois ne se concrétise pas.

Selon la dernière estimation de Luxembourg for Finance, dix entreprises britanniques supplémentaires ont fait le choix de s’installer au Grand-Duché en février, portant leur nombre total à 58, dont 31 gestionnaires d’actifs. En outre, le Luxembourg, comme d’autres juridictions européennes d’ailleurs, va certainement profiter dans les années à venir de retombées liées à des investissements et opérations qui auraient normalement été confiés à Londres.

Selon S&P, le Luxembourg est une des économies les plus exposées aux répercussions ayant trait aux échanges commerciaux et à la migration

Toutefois, toute médaille a son revers. Selon Standard & Poor’s, le Grand-Duché est une des économies les plus exposées aux répercussions relatives aux perturbations des échanges commerciaux et des flux migratoires liés au Brexit, en raison notamment du nombre conséquent de transactions entre les deux places financières ainsi que du niveau d’exportation des biens et services luxembourgeois vers le Royaume-Uni.

Un rapport de la fondation allemande Bertelsmann Stiftung a évalué la perte des revenus auxquels Luxembourg aurait dû faire face cette année, en cas de Brexit sans accord, à 127 millions d’euros. Rapporté à la population du pays, cela représente un montant de 220 euros par habitant. Notons que la perte pour les résidents britanniques serait bien plus conséquente, puisque évaluée à 875 euros par habitant.

Malgré la décision de reporter la date limite du Brexit au 31 octobre, ce risque de préjudice économique demeure pour l’avenir, à moins qu’un accord de sortie ne soit conclu.

De manière générale, au sein de la communauté financière luxembourgeoise et dans les sphères dirigeantes du pays, de nombreuses personnalités considèrent le Brexit comme une perte globale pour le Grand-Duché. En effet, une grande partie des activités liées à l’industrie des fonds d’investissement découle directement des relations que la place financière luxembourgeoise entretient avec la City. Le Brexit risque de rendre ces relations bien plus complexes.

Dans les jours, semaines et mois à venir, Luxembourg pourrait faire face à un véritable séisme politique et économique, sans doute plus conséquent pour ce pays que ce qu’a pu représenter la chute du rideau de fer et de l’Union soviétique..

Les responsables de la place financière craignent notamment l’émergence de nouvelles restrictions et un renforcement du contrôle de l’Union européenne en matière de délégation de l’activité de gestion d’actifs vers des pays non européens, comme pourrait le devenir le Royaume-Uni. C’est un enjeu réel, et ce malgré l’assouplissement récent d’un projet de la Commission européenne qui prévoyait le transfert des pouvoirs des régulateurs nationaux vers l’autorité européenne de supervision des marchés financiers (ESMA).

Au-delà, avec le Brexit, le Luxembourg perd un allié puissant au cœur des délibérations menées au niveau de l’Union européenne. Le Royaume-Uni était un soutien fort du Luxembourg dans la défense du modèle d’ouverture des frontières et de libre-échange économique. Le Luxembourg peut davantage craindre que des barrières protectionnistes s’élèvent à nouveau en Europe, menaçant la croissance de l’industrie financière paneuropéenne. Le renforcement des mouvements populistes et la tendance à un plus grand protectionnisme dans de nombreuses régions du monde n’augurent en effet rien de bon.

Dans ce contexte, le Gouvernement, le Parlement et les régulateurs luxembourgeois ont fait de leur mieux pour protéger le pays et son secteur financier face à un risque de Brexit chaotique. Est-ce que cela sera suffisant ? Difficile à dire pour le moment. Dans les mois à venir, Luxembourg pourrait en effet devoir faire face à un véritable séisme politico-économique, peut-être plus conséquent pour ce pays que ce qu’a pu représenter la chute du mur de Berlin et l’effondrement de l’Union soviétique.

L’environnement économique et politique relativement stable du Luxembourg, qui lui a permis de prospérer considérablement au cours des dernières décennies malgré les crises, risque de disparaître à jamais. Il est désormais l’heure de boucler la ceinture, car nous partons en voyage vers l’inconnu.

A lire: LËTZEBUERGER JOURNAL – Petite mise au point

Proposed AIFMD marketing regulation could make life easier for alternative fund industry

Alternative fund managers in Europe and outside appear poised to win greater flexibility on early-stage marketing to professional investors, despite dissatisfaction with the first draft of EU legislation to amend the 2011 Alternative Investment Fund Managers Directive.

In March, the European Commission published a proposed directive amending EU regimes that regulate cross-border distribution of retail and alternative investment funds. The law is a key element of a legislative package advancing the Commission’s Capital Markets Union project, which also includes a prospective regulation intended to facilitate cross-border fund distribution.

At first, the Commission’s proposals to amend the AIFMD alarmed the fund industry, which feared they could make marketing more difficult in several major European markets.

However, following the drafting of a revised version of the legislation by the EU Council, comprised of member states, it now appears that alternative fund managers in Europe and elsewhere will win the greater flexibility they seek in early-stage marketing to professional investors. 

The proposed legislation defines and sets rules on ‘pre-marketing’ activity: gauging interest from potential investors before a fund has actually been established while avoiding the full disclosure and administrative rules the directive requires for fully-fledged fund marketing. 

This process enables managers to refine their investment offerings and terms, or even abandon projects if they fail to generate market enthusiasm.

What would change

The original AIFMD defines marketing but makes no mention of pre-marketing, leaving it to member states to choose whether or not to authorise it at all. Regulators including Luxembourg’s CSSF and the UK’s Financial Conduct Authority have done so, but other member states treat any initial contact with a prospective investor as marketing. 

In its proposals, the Commission was aiming for pre-marketing to be permitted throughout the European Economic Area – the EU plus other counties that follow its single market regime – but under uniform rules.

While the March proposals would liberalise the rules for fund managers in countries where pre-marketing is now barred, they would impose new constraints in other states. 

Most notably, they forbid the provision of offering documents or limited partnership agreements, even in draft form, to potential investors. Otherwise, the AIFMD’s full requirements governing marketing would be triggered.

Industry critics protested that the rules would prohibit established practice in the alternative investment industry. This applies especially to funds structured as limited partnerships, often the result of long negotiations between managers and cornerstone investors – whose commitment is essential to the project.

They also noted that the EU’s (now-superseded) Prospectus Directive governing the offering or listing of securities permits the circulation of draft prospectuses to professional investors. 

In some cases, critics argued, the proposed directive could force managers to comply with marketing passport conditions even before a final decision to establish a fund had been reached.

Responding to industry complaints

The revised draft issued by the EU Council on June 15 is viewed by analysts as far closer to the more liberal interpretation of the marketing requirements prevalent in the union’s leading asset management and fund service jurisdictions.

The changes would permit alternative investment fund managers (AIFMs) to explore the market of prospective investors, including by circulating draft fund documents until they are finalised before a launch. 

Investors would not be able to invest in the prospective fund at this point, and no subscription documents would be available. AIFMs would be required to document details of their market-testing activities and be prepared to supply them to regulators.

Under the Council’s amendments, any subscription to a fund within 18 months of pre-marketing that either referred to the fund, or was established as a result of pre-marketing, would be treated as a product of marketing and subject to notification or authorisation procedures – depending on the AIFM’s volume of assets under management. 

That rule would prevent managers from using pre-marketing to obtain reverse solicitation, where participation in the fund takes place at the investor’s initiative and is thus not subject to the directive’s rules on marketing.

The Council draft also would ease a proposed requirement that managers offer to repurchase shares or units from local investors in jurisdictions where they wish to discontinue marketing their funds. 

Notably, closed-ended funds are exempted from the repurchase obligation.

While the directive next faces negotiation between the Council and the European Parliament, alternative fund managers are now confident that established practice for dealing with key investors is less likely to be overturned as part of a well-intentioned liberalisation measure.