Investing

The spread of web-based platforms has reached into the rarefied atmosphere of private equity, which has historically been paper-based and face-to-face in-person meeting with one’s investment adviser. This is taking place against an industry-wide drive to “democratise” the private assets world, in order to sate huge desire to invest, but also to address the equity issues raised in relation to significant barriers to access, Alfi’s Private Assets Conference made clear this week. 

When it comes to enhancing the economic value chain in terms of sustainability, net-zero and financing the energy transition, the private assets sector is well positioned as an actor that can help deliver the changes that are needed to keep growth sustainable, a Luxembourg panel on net-zero investments was told on Wednesday. 

Real Estate Investment Funds, or Reifs, in Luxembourg saw total assets climb by 26 percent in the year running up to the end of the third quarter, to 131 billion euro. The number of Reifs increased by 20 percent to 621 funds.

The latest edition of the Reif survey conducted by the Association of the Luxembourg Fund Industry, or Alfi, showed that multi-sector allocations remain the most popular strategy for Reif investors, with 49 percent.

The exact impact on private asset values of this year’s declines on global stock and bond markets has yet to be determined, but already some family offices are concerned about the shifts in their portfolios. “There are capital calls that have not been met,” a UBS banker told the Alfi conference on Tuesday.

Fresh registrations for alternative investment funds in Luxembourg, considered the top European hub for private investments, this month are at their lowest monthly level in nearly six years. Regulatory changes as well as market conditions are cited as a reason for the slowdown. Some issuers have decided to wait for the new year to avoid regulatory reporting in 2022.

High-yield bonds are not equal. In the US market this year, the difference in spreads between bonds with credit ratings of CCC and below versus BBs rose from 4.6 percent to 9 percent.

Style risk is one of the key risks that sustainable investors need to be aware of. After all, many equity funds with a sustainable mandate tend to lean towards a growth style. Any choice of style brings the likelihood of it falling out of favour with investors over a period of time. So too this year’s growth style.

Outlines of reform proposals for European long-term investment funds (Eltif), agreed by EU policy-makers last month, have been hailed as major positive step forward by some in the industry. More quietly, though, others suggest the fundamental contradictions at the heart of the vehicle have yet to be resolved. 

It has been a dire and highly volatile stock market year so far. The opportunity for active investors to make a difference and outsmart the market. Fine words notwithstanding, more than three quarters of active managers have failed again this year. “The biggest cause of active funds’ failure is their inability to survive.”

This is according to the latest Morningstar European Active/Passive Barometer, a semi-annual report that compares the performance of European-based active funds with passive funds in their respective Morningstar categories.

Luxembourg’s government is proposing to simplify the corporate income tax process for investment funds which have overseas investors or subsidiaries by reducing their risk of being subjected to full Luxembourg anti-tax avoidance corporation tax. The changes to the “reverse hybrid rule” seek to remove doubt from how to deal with tax exempt entities.