Fierce competition has emerged in the changing data landscape for investment funds, and Luxembourg is the finding itself at the centre of attention. The Frankfurt and Luxembourg stock exchanges now confront each other face to face in the grand duchy, while the Paris bourse has thrown its towel into the ring and is back on the sidelines.
Deutsche Boerse entered the field this week with its acquisition of Luxembourg data specialist Kneip. Euronext voluntarily walked off by selling its French Funds360 unit to FE fundinfo, partly owned by the Luxembourg Stock Exchange.
One insider familiar with the transactions said intense discussions have taken place since Christmas. Deutsche offered the best price for Kneip, owned by its founder Bob Kneip with total assets of 31 million euro, says its latest LBR filing. That suggests it’s almost three times as big as FE fundinfo, its Luxembourg competitor.
Right decisions at the right time
Information has always been critical in financial markets. Whoever masters the data wins the business. It’s about technology, innovation and being smart in order to enable clients - investors and banks - to make the right decisions at the right time. And it’s about timing, judging when changing market conditions require a completely new approach to business.
Half-way the 19th century, Reuters for example became a power in financial markets. Its founder, Julius Josaphat, creatively and audaciously connected information with the emerging telegraph network. In 1850 he used pigeons to fly London share prices from Brussels to the German town of Aachen, north of Luxembourg. From here he telegraphed them to banks across Germany.
When US president Abraham Lincoln was assassinated in 1865, Reuters was first to bring this market moving info to London by ordering his messenger aboard the SS Nova Scotian to go ashore in Ireland, while other reporters stayed on board longer, to disembark closer to London. From Ireland, Reuters’ guy telegraphed news of the assassination directly to the banks in London, letting Reuters bring the news a full day before anyone else.
Laborious work
Reuters’ legacy was left unchallenged for more than a century until Bloomberg came along. In the 1990s it made available financial results data on every single listed company in the world on its popular terminals. Starting up this data set was laborious. I recall half a dozen 40-foot containers on Bloomberg’s parking lot in Princeton, filled with five years of annual reports from across the world, and the daily free breakfasts for the 500 summer trainees that entered revenue, earnings and other corporate data into Bloomberg’s system, supervised by accountant Arthur Andersen.
Reuters and Bloomberg became a success because they mixed creativity, audacity and tech-savviness with a deep understanding of financial markets. In Luxembourg, Bob Kneip, founder of the firm now owned by Deutsche Boerse, started up his fund data business in 1993 by buying advertising space in the Financial Times and offering space in his listings to managers of Luxembourg funds so that they could get more visibility. A welcome option for the newly emerging Ucits funds at that time.
New fund landscape
That was almost three decades ago. Fund markets have matured since. Luxembourg now is a global fund power. Fund data no longer is just about calculating net asset values and listing the prices in the FT, or somewhere online. The data fight is about ESG, about international distribution, and about meeting stringent and complex regulatory requirements. It is about shaping the next generation of data products. In this new fund landscape, the exact role of data is still liquid but it’s clear that it will be crucial.
The “traditional” data approach by the likes of Bloomberg now is considered “old-fashioned” and no longer works, says one Luxembourg insider. “They are just sitting on a lot of spreadsheets.”
The old boss at Kneip retires today. A new generation is at the helm now. His successor, CEO Enrique Sacau, described today’s fund data business as a “technology play”, heavily focused on sustainability data, and non-financial information. It no longer is about masses of people entering data, he said.
Clearly, a new era is looming, triggered by climate change and the need for sustainable finance. Regulations increasingly demand non-financial reporting by companies. The funds that invest in them want to be sure their ESG or SRI profiles are accurate. EU regulation is forcing changes.
Getting there first
“There is a discrepancy between what the asset managers labelled as ESG, and what the market interprets as ESG. Making sure that that gap is bridged in something we are interested in,” said Sacau. “The key is making sure that all sources agree on the right data.”
Sacau declined to speak about Kneip’s new ESG product “because that would let my competitors hear about it.” “There’s only so much we can say about where we are going. It is the race to see who gets there first,” Sacau said.
Deutsche Boerse said its acquisition of Kneip aims to create a leading European fund data champion based in Luxembourg. But to become champion, one first needs to win the championships. I look forward to the rest of the tournament.
‘In flux’ is a regular column on Investment Officer Luxembourg that takes a closer look at specific developments relevant to the fund and asset management business.
Financial journalist Raymond Frenken is Editorial Manager of Investment Officer Luxembourg. Earlier in his career he was bureau chief for Bloomberg News, Benelux correspondent for FT/MarketWatch, EU correspondent for CNBC in Brussels, and director of communications at the European Banking Federation.