Alfi

The popularity of digital assets will lead to significant changes for the financial industry, including within the area of asset custody. Today’s global custody industry goes back to regulatory changes in the 1970s. Digital assets, the most well-known being Bitcoin, differ in several ways from traditional assets, including the role of information technology, specifically of private key management, which will be accompanied by potential regulatory differences.

The Luxembourg fund industry was given its ESG marching orders last week by CSSF CEO Claude Marx at the Alfi European Asset Management conference. “I am sometimes irritated by those who over inflate small issues or imperfections in this area,” he said.

Corinne Lamesch, chair of the board at the Association of the Luxembourg Fund Industry (Alfi), speaks to InvestmentOfficer.lu for a podcast about current challenges facing the asset management industry, specifically in dealing with investment funds exposed to Russian assets and the implementation of sanctions against Russia, and in sustainable finance and ESG.

Even as limited trading resumed on Moscow’s exchange on Thursday, prospects for emerging market funds exposed to Russia remained cloudy as determining accurate asset values continued to be nearly impossible. Fund managers now await guidance from financial supervisors before taking next steps on suspended funds.

Luxembourg is discussing the innovative use of a particular liquidity management tool known as “side pockets” in order to deal with the suspensions of investment funds with significant exposure to Russia.

The head of Luxembourg’s top financial regulator on Tuesday called on the country’s asset management industry to step up its efforts and make sure that Russian oligarchs don’t evade sanctions by hiding their money in European investment funds.

Also as international funds hub, Luxembourg finds itself exposed to the economic fallout from Russia’s war against Ukraine. Hundreds of investment funds with assets in Russia’s financial markets are making extra efforts to keep clients abreast about the financial impact of international sanctions. Dozens of funds have already been suspended and from Wednesday, European stock exchanges have banned all trade in Russian securities.

The financial sector needs to pay more attention to human rights in its activities, especially in its supply chains, a Luxembourg NGO said in a report it presented this week. Industry representatives said the criticism does not yet fully consider new legal requirements that recently entered into force.

The Grand Duchy of Luxembourg was home to a record EUR5.86 trillion in global financial assets at the end of last year, according to new data released on Friday by the country’s financial supervisor CSSF. That is up 17.8 percent from the end of the previous year.

Hopes are high in Luxembourg that the Grand Duchy this year will be able to claim a sizeable chunk of a growing European market for Collateralised Loan Obligations (CLOs), a structured financial product pooling corporate debts. With an update in its securitisation regime that allows active management Luxembourg wants to be competitive and seduce CLO managers from other countries, notably Ireland, to move their business.