Raymond Frenken

The data leaves no doubt about it. This year is a tough one for investors everywhere. It’s very clear in the numbers reported this week, both for Europe and for Luxembourg, the domicile for about 10.000 Ucits funds, about one third of all such funds in Europe. Luxembourg’s loss of total fund value this year now is roughly equivalent to the size of an economy like Taiwan. At a European level, the losses can be compared to an economy the size of Canada.

Luxembourg‘s financial supervisor on Monday said it has slapped a fine of 10,000 euro on a Luxembourg subsidiary of Russian state-owned gas producer Gazprom because it was late in filing its annual report for last year.

Gaz Capital SA is fully controlled by Gazprom and held more than 13 billion euro in total assets at the end of 2021, trade data from Luxembourg shows. The firm posted its annual accounts to Luxembourg’s business register on 27 July, well beyond the deadline of three months within the close of the year.

The UK’s Financial Conduct Authority on Wednesday presented its long-awaited proposal for sustainable investment rules, going a step further than similar rules in the EU and US by suggesting three different sustainability labels for investment funds instead of two. And unlike the EU, the FCA now has proposed a 90% threshold for the most sustainable investment funds.

Have financial markets reached a bottom yet? Or is there more room on the downside? Investors, keen to find out how close to the bottom markets are, will be looking at Frankfurt on Thursday where the European Central Bank will again shed its lights on efforts to bring inflation under control. Will ECB President Christine Lagarde’s comments hold clues on where markets might move next?

Luxembourg funds may well be too expensive. Investment fund managers of Ucits funds in Luxembourg, home to about a third of all such funds in Europe, have been ordered to review, and if necessary correct, the way they calculate the costs and fees of their investment funds and report back to their national regulator before April 1 next year. 

Housing markets in major cities across the world face a “prolonged stagnation” in purchase prices and a price correction. House owners and real estate investors should not expect the market to trend sideways. It’s “game over” for housing markets, Swiss bank UBS writes in its latest Real Estate Bubble Report.

With a rise in interest rates, finance costs have increased while financial markets across the world have been rocked by geopolitical developments and severe declines in asset prices. 

When it comes to ESG and sustainable investing, Luxembourg’s financial regulator is keen to ensure that investment funds will stick to their promises when they sell products that are branded as green and sustainable. More guidance is coming soon, and the regulator plans “a deep compliance check” for the third quarter of 2023.

The EU’s sustainable finance framework is widely recognised as immensely complex. For private equity firms, it’s even more so, especially now that more and more investors demand that their investments are made in funds with sustainable assets. 

Plans by Paris-based Caceis to take over RBC Investor Services’ European business are raising redundancy fears among the firm’s 900 or so Luxembourg-based staff members in Belval.

Europe’s fund and asset management industry, seeing rapid growth in investor demand for sustainable products, is asking EU policymakers for a robust and transparent new legal framework that clearly defines how ESG and sustainability ratings for investment products are determined.