Sector

As real estate markets worldwide move in tandem by showing clear signs of a downturn, two major international financial bodies this week have reiterated their concerns over the housing market’s potential impact on financial stability. Both the European Central Bank and the International Monetary Fund have raised a red flag. Investment Officer looks for answers to some key questions a moment that mortgage rates are at their highest since 2006.

Investment funds that hold illiquid, hard-to-sell assets and that calculate their net asset value on a daily basis can trigger volatility and add to the impact of shocks in financial markets, especially in turbulent times, the International Monetary Fund (IMF) said in a policy note addressed to the financial community. 

When it comes to sustainability, all actors, including the finance sector, need to develop a suitable level of understanding before policies and investment strategies can translate into impact, explains Nicoletta Centofanti, head of the Luxembourg Sustainable Finance Initiative, in an interview.

“Europe does not use its single market enough as a political lever and militarily the continent does not amount to much. Our democracy and free market will be besieged on all sides. Meanwhile, the West’s willingness to protect our way of life is extremely limited. If we do nothing, we will remain a weakling in ‘the big game’.”  

Young investors are seen as a bit of a wild card by the investment industry. But look closely and it’s obvious that many young investors are fundamentally cautious due to their financial circumstances, while sympathising to a greater or lesser extent with rebellious social media elements intent on taking the financial industry down a notch or two.

We’re finishing a productive week at Investment Officer Luxembourg in terms of news stories, with surprisingly strong and growing interest from international readers.

Unregulated investment funds in Luxembourg, in particular Reserved Alternative Investment Funds known Raifs, showed the biggest increase the Grand Duchy’s fund industry last year. According to the latest Monterey Insight report, the value of these funds increased 71.4 percent last year to some 330.8 billion euro.

Other unregulated funds, such as LuxLPs and Soparfi’s, reached a value of 470 billion at the end of 2021. That is an increase of 61.5 percent in assets.

The fund management industry can counter reputation risks posed by the increasingly complex regulatory requirements for sustainable investments with a bigger effort to boost investor education, a top executive at the Association of Luxembourg’s Fund Industry, Alfi, said on Tuesday. 

Financial regulators across Europe are keeping a close eye on their Luxembourg counterpart CSSF, which is reviewing its rules that tell investment firms how to handle errors in calculations of Net Asset Values, or NAVs. “I think that we may consider the CSSF approach as a best practice.”

This week on Investment Officer Luxembourg again demonstrated that the Grand Duchy can be a source of financial stories of a surprising nature. Bill Gates’ new hotel is being financed with an alternative investment fund registered in Luxembourg.