Opinion

One of my first lessons in finance was that you cannot consistently outperform the market. When it does occur, it is the result of luck rather than skill. You are better off investing in passively managed funds than those actively run by gurus and clairvoyants.

I’m a big fan of the Bank of America Global Fund Manager Survey. Firstly, because it pertains to the positioning and perspectives of real investors managing significant amounts of money. And secondly, because Bank of America tries to translate the responses given in the survey into signals and even investment decisions—something often overlooked by many “storytellers.”

The fund industry is a poster child for digital transformation. The industry is characterised by easy-to-follow processes and a high degree of automation. With just a few clicks, investors and auditors can interact with fund managers seamlessly.

Sounds exciting. The reality though is quite different.

Benefiting from a favourable business climate, robust infrastructure, and a strategic position as a gateway to Europe, the Netherlands presents enticing options for fund managers seeking practical and tax-friendly solutions in the alternative investment fund (AIF) space, write Tom Loonen and Jan Saalfrank of Pinsent Masons.

It is not easy for Luxembourg, home to 5,139 billion euro in international fund assets at the end of April, to maintain its international leadership as cross-border funds centre.

Competition between Luxembourg and Ireland, Europe’s other international funds hub, is a topic that re-emerged on two separate axes this week in our coverage at Investment Officer.lu.

To give me a better life than they had, my parents helped me develop a strong work ethic and invested heavily in my education. Just like them, at the age of 30, I bought a 4-bedroom house suitable for raising a family in. Their investment paid off.

If only this was true.

Education

My parents moved from Ireland to Luxembourg in the 1980s. Even though they did not receive a higher education, they were quickly able to find jobs and subsequently buy a house and raise a family. I wish I could do the same.

Financial stability as we have always known it is showing cracks. The climate in the financial markets is changing. Despite earlier assumptions, it turns out to be a definitive shift.

To thrive in a new climate, adaptability is needed. Market participants lacking this quality face the same fate as the dinosaurs. Dominant market players fail to realize that a major catastrophe is not necessary. After all, dinosaurs at the top of the food chain do not pay attention to their surroundings.

Costs of investment funds continue to be a divisive topic in the fund and asset management business. Are investors really paying 40% too much? Or ‘only’ 25%? What are they actually paying for? In Luxembourg, home to a third of Europe’s 30,000 Ucits funds, this discussion could lead to major changes in the coming years, like it already has in the United Kingdom and the Netherlands.

One of the elements that Bitcoin investors cite is the cryptocurrency’s performance when the stock market is doing poorly. These coins are then often described as a “flight-to-safety” investment: an asset that rises in value when the rest of the portfolio goes down. Is this really the case?

The latest edition of the Bank of America Global Fund Manager Survey shows that fund managers are still overweight equities while their expectations of future economic growth have come down considerably.

Indeed, the chart below shows that fund managers have never been so pessimistic about growth. Not during Covid and not during the Great Financial Crisis. The ‘mismatch’ between expectations and positioning is extreme.