Raymond Frenken

Perhaps the most contentious development in Luxembourg’s fund management ecosystem this year was the order to management firms, issued by supervisor CSSF, to report back on the costs of investment funds and look at becoming more efficient.

Investment fund managers of Ucits funds in Luxembourg, home to about a third of all such funds in Europe, were ordered to review, and if necessary correct, the way they calculate the costs and fees of their investment funds and report back to the CSSF before April 1 next year.

Luxembourg’s international status as a hub for alternative investments and private equity this year was reinforced as institutional investors sought stability as global equity and bond markets were taking a beating by surging inflation and rising interest rates.

The EU Packaged Retail Investment and Insurance Products (Priips) regulation is set to take effect across the EU from January, requiring the production of a paper-based Key Investor Document (KID) for all products sold to European retail investors. The UK, meanwhile, has started to explore a new digital retail disclosure system.

Apex Group in January will bring all its different management company sub-brands under a single brand. Now that the major takeovers of Sanne and Maitland are closed, country head Pierre Weimerskirch told Investment Officer more acquisitions can be expected, although not directly in Luxembourg. “There are some markets where we are still not at the level where we want to be.”

After completing a similar transition last year for the supervision of investment fund managers, Luxembourg’s financial supervisors, in close cooperation with bank sector representatives, now have adopted a major modernisation of its banking supervision by overhauling what is known as the Long Form Report. Both banks and supervisors see the new approach as a major step forward. 

Luxembourg has recently seen the launch of the Luxembourg Valuation Professionals Association, known as LVPA. Valuations are “extremely strategic for building trust with your investors,” said Hind El Gaidi, one of the LVPA’s co-founders. For this Luxembourg edition of the IO Talks podcast, El Gaidi spoke to Investment Officer together with three fellow co-founders: Christophe Vandendorpe, partner at EY; Rafaël Le Saux, director at PwC; and Antoine Boggini, co-founder at BHB & Partners, an independent advisory firm.

Luxembourg’s financial supervisor CSSF has made clear that it expects investment funds that commit to sustainability objectives will stick to these commitments. If a fund defines thresholds for specific ESG or sustainability investments, then it should consider these as a “binding commitments”.

EY Luxembourg, one of the Big Four accounting and consulting firms, has moved a step closer to splitting its business into separate entities for audit services and for management consultancy. The firm announced on Tuesday that its 65 partners in the grand duchy will decide on the demerger during the first quarter of next year.

Public registers in Luxembourg, the Netherlands, Austria as well as other EU countries set up under EU laws to fight money-laundering and tax evasion remain temporarily closed as legal specialists agreed that the ruling effectively shut down a key aspect of the EU’s fifth anti-money laundering directive. National governments as well as the EU are still considering next steps.

Luxembourg last week was buzzing with speculation and market talk. A major deal was said to be in the making that could change the international leadership tables among Alternative Investment Fund Managers, AIFMs. “Is your firm going to be bought?”