Investment Officer Luxembourg

US mortgage rates have shot up since the start of this year. The 30-year fixed rate stands at 4.5 percent, the highest level since the start of 2019. Will this bring an end to the housing boom?

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.

Japanese shares were hot in the 1980s, but the bubble has deflated mercilessly in the decades that followed. The high point that was reached in 1989 was never reached again. Especially funds in value shares seem to have fallen victim to the disinterest of investors in recent years. Now Japanese value stocks are hitting back.

Japanese value stocks in particular performed relatively well in 2021 and have continued to strengthen in the first two months of this year. The 1980s marked the heyday of the Japanese stock market.

Emerging market bond markets are under pressure. Concerns about whether Russia will make its interest payments this month are leading investors to wonder which other countries are at risk of default.

Billions of dollars of Russian government and corporate bonds are at risk, with as much as two-thirds of the country’s foreign exchange reserves frozen. Russia must make at least $400 million in interest payments over the next ten weeks. Next month, a redemption of no less than $2 billion awaits, according to Bloomberg data.

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.

The biggest risk for investors at the moment is high inflation. While the market places too much emphasis on short-term inflation, it also tends to underestimate long-term inflation.

The news that Powell might raise interest rates by 50 basis points next time was greeted with cheers, as it would bring inflation under control more quickly. However, the Fed will be able to live with inflation hovering between 3 and 4 per cent for a long time, although Powell will never admit that. In the eurozone, it is certainly not about fighting higher inflation.

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.