Investment Officer Luxembourg

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. 

An extrapolation of Preqin’s global projection for private capital demand to Luxembourg suggests the grand duchy’s private and alternative investment market could add more than 1000 billion euro in private capital during the coming years.

The third quarter has come to a close.  In the category of global large-cap mixed equity, Gavekal, JOHCM and State Street offered the best-performing funds during these three months, as measured by the performance of funds with a classification for the Netherlands in this week’s Morningstar Top 5. 

US stocks appear to have entered the ‘final stages’ of a bear market. But the final low for the S&P 500 is seen around the 3000 to 3400 point level, which would represent a drop of another 16 per cent from last week’s close. Current conditions are such that financial accidents can easily happen, some market watchers warn.

UK financial markets are in “turmoil”. This somewhat CNBC-esque opening, however, covers it well. And it has resulted in a chart that usually belongs to an emerging economy on the verge of collapse. The British pound is falling despite rapidly rising interest rates.

Over the past 12 months, the yield on corporate bonds has been as much as minus 22 per cent. As a result, the effective yield on investment grade corporate bonds has now risen to 5.5 per cent at a duration of just over 6 years. This is in line with the return earned on investments according to the tax authorities, on which 31 per cent tax has to be paid this year.

At the same time, most banks still do not give interest on current account balances, but that is not subject to tax these days.

Sustainable investing may be taking the wider investment fund world by storm, especially in Europe. But when it comes to liquid alternative funds, the sustainable wave is less advanced.

Some in the liquid alternative space remain openly dismissive of sustainability as an investment principle. Certain liquid alternative providers use derivatives,  making it more difficult to integrate sustainability criteria. Derivatives are excluded from the EU’s Taxonomy.

Luxembourg financial regulator the CSSF announced late last Friday a “reprimand” on a Swiss private bank named Banque  J. Safra Sarasin (Luxembourg) S.A. for failing to comply with Luxembourg law on the fight against money laundering and terrorist financing (the AML/CFT law).

The growing complexity of Europe’s sustainable finance framework and a lack of clear guidance from EU supervisors is leading to a fragmented application of the benchmark EU regulation that determines which investment funds are sustainable and which are not. As a result, the sector is facing what Morningstar’s top ESG expert calls “The Great Reclassification”.