Opinion

“Fund managers are making record bonuses” is a headline often heard in London, Frankfurt, and Paris, but rarely in Luxembourg. While we dominate in back-office services, these jurisdictions excel in providing front-office services, an area Luxembourg’s fund industry needs to develop.

Over the past five years, the Luxembourg fund industry has experienced a slowdown in the growth of AUM and the number of funds, which has been detrimental to the economy. The solution is to grow the industry via horizontal or vertical integration.

At the time of writing, the “mother of all equity indices,” the S&P 500 Index, is down a significant 4% from its early April peak. This downturn is partly driven by escalating tensions in the Middle East.

Of course, this in itself isn’t something to cheer about. However, there’s another critical reason why stock prices are under pressure. Interest rates are inching closer to 5%, entering what many consider the danger zone.

Fund sponsors increasingly explore ways to facilitate access by retail investors to private assets. Part II UCIs have been instrumental in this development. This contribution discusses the increased success of the Part II UCI fund regime with private markets firms accessing the private wealth market.

In the financial markets, geopolitical risks often exhibit a binary nature: for a long time, they pose no issue until suddenly, they do. Consequently, the relationship between geopolitical risks and the financial markets’ response is not straightforward. This complexity partly arises because these risks usually stem from singular events, which markets are adept at overlooking. In this context, possession often marks the end of interest.

This week, the following chart from the Financial Times caught my attention. It shows the net issuance of shares worldwide since 1999. Although the year is still relatively young, 2024 so far shows the largest negative issuance over this period.

As the chart also indicates, in recent years, it has become more common for more shares to “disappear” (often bought back in buyback programs) than are issued. To be precise, in four of the last nine years.

The first quarter of 2024 has lapsed and there are only less than three quarters to go for the implementation of the Digital Operational Resilience Act (Dora). Dora will apply to most EU financial entities, including (Ucits) management companies alternative investment fund managers (AIFMs), as well as ICT third-party service providers (including providers of cloud computing services, software, data analytics services and data centres).

Money’s gotta move—it’s the backbone of our economy, and the speed at which it zips around, known as the turnover or circulation rate, tells us a lot. It’s all about how often a dollar is spent in a certain timeframe. When times are good, money flows like a river—transactions aplenty. But in rougher waters, that river slows to a trickle as folks hold tight to their wallets. Lately, after a sluggish spell, we’re seeing that flow pick up speed again.

Sofia Harrschar, head of alternative investments & structuring at Universal Investment, delves into the shift towards alternative investments among institutional investors.

Growth has turned into our modern-day holy grail—a beacon that politicians, companies, and individuals relentlessly chase, often with promises and aspirations that border on the fantastical. Every election cycle, candidates tout it as their deliverable. Businesses chase perpetually climbing profits, and personal discontent brews if our earnings stagnate or our living spaces don’t expand. Yet, ironically, the signs increasingly suggest that, deep down, we might not truly crave this endless expansion.

Sparked by a thought-provoking piece from Gregory Kennedy, the debate about Luxembourg as an international fund domicile has been engaging professionals across the industry. We’re thrilled to have Claire Guilbert, a renowned fund law expert and partner at Norton Rose Fulbright, join the conversation, marking the firm’s debut as a Knowledge Partner with Investment Officer Luxembourg.