Alfi 2015 by Maison Moderne

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SEPTEMBER / OCTOBER 2015

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SUPPLEMENT

ALFI Global Distribution Conference 2015 in association with NICSA & HKIFA

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Editorial Pierre Gramegna Minister of finance

Learn from our strengths

― Text: Pierre Gramegna ― Illustration: Jan Hanrion

he Luxembourg investment fund industry has experienced spectacular growth. For more than 20 months in a row, assets under management have grown without interruption, standing at over 3,600 billion euros at the end of May 2015. One figure in particular underlines the confidence that investors all over the world have in the Luxembourg fund centre: over the last year, more than 43% of the asset growth stem from net sales, i.e., fresh money or new investments, not market appreciation. Furthermore, some 100 new promoters initiated their investment fund project in Luxembourg, which clearly confirms that our fund centre remains a major reference in the global game. However, it is obvious that past success is in no way a guarantee for continuous growth. Success needs to be fostered and consistently encouraged, through constant improvement, adaptation and innovation. While business development is first and foremost the responsibility of the private sector, the government’s duty is to make sure that the sector finds the right conditions to thrive. As minister of finance, I thus keep an open dialogue with the sector, to ensure that our

“Success needs to be fostered and consistently encouraged, through constant improvement, adaptation and innovation.” legal toolbox continues to fit and even anticipate international developments and helps the industry grow. Platforms like the High Committee for the Financial Centre (HCPF) play a decisive role in this process, and I appreciate ALFI’s active contribution therein. In the same context, ALFI’s “2020 Ambition” paper proves very constructive, as it outlines the path that Luxembourg will have to go to stay ahead of the competition in the years to come. One other key factor for Luxembourg’s competitiveness is the active role of our regulator. The CSSF is widely recognised as knowledgeable and judicious, always open to innovation when ensuring the implementation of the EU regulatory framework, while upholding a high level of customer pro-

tection. It is essential that the CSSF maintains that approach and disposes of the adequate resources to cope with the growth of the industry and with the proliferation of regulation. When it comes to promotion, ALFI is organising an impressive number of roadshows and events. In this context, I am satisfied to see the collaboration that exists between ALFI and Luxembourg for Finance. Alongside funds, there is indeed a vast array of financial products and services “made in Luxembourg” that are designed for global distribution. Among the many markets that need further development, such as South America and the Middle East, let me focus more specifically on China. I believe that it is a key growth market for the years to come. As illustrated by the presence of the six largest Chinese banks, Luxembourg has developed into a prime gateway for financial relations between China and Europe. With regard to funds, the Shanghai-Hong Kong Stock Connect offers tremendous opportunities for diversification. We should learn from our experiences gathered in Hong Kong, and build on our strong ties with the People’s Republic, to explore ways to further tap into the Chinese Mainland. With all of this in mind, I wish you an inspired conference and am looking forward to your conclusions. ◄

― Supplement ― ALFI Global Distribution Conference 2015 ― 03

Alfi Advertorial Interview Experta

Making international business happen efficiently ► Experta Corporate and Trust Services, the one-stop-shop for global corporate services. ► International structures for corporate clients, private clients, and institutional investors. ► We spoke to CEO Jean-Marie Bettinger about why Luxembourg has the right solutions for international businesses and how Experta can put these solutions to work for them.

What clients do you serve? We at Experta serve corporate and private clients, as well as institutional investors. We are specialists in the full range of domiciliation and management services, investment structures, corporate services, accounting and reporting services, tax compliance and fund administration, as well as financial and estate planning. All clients are different: we provide the onestop-shop service that each of them requires. Can you give us any examples? Well, private equity houses or real estate promoters need solid, flexible structures. European firms looking to invest, acquire, manage or sell assets internationally, and international firms investing in Europe also have specific needs. We even manage intellectual property portfolios in a tax-efficient manner. With our international estate planning, we enable wealthy clients to manage and transfer their assets efficiently. What does “one-stop-shop” mean to you? We provide a broad range of accounting and reporting services, from day-to-day bookkeeping to the preparation of financial statements and reports. We ensure the day-to-day management, assistance and coordination of each project through a client relationship manager; full coordination of the incorporation process; and provision of a registered office as well as document maintenance, etc. For investment funds, after we have set them up, we can deal with transfer and registrar agent services, domiciliation and management services including fund accounting, NAV calculation and reporting.

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▲ Jean-Marie Bettinger, CEO, Experta

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Alfi Advertorial Interview Experta

What advantages does Luxembourg have for this kind of business? Luxembourg is and will remain to be an extremely competitive place for international structuring because this country has a long history of understanding the subtleties of this business. The government is fully – this must be stressed – committed to abiding by all international norms and rules on transparency regarding international business transactions. On the other hand, industry, government and regulators are working together to ensure that the rules are as easy to implement as possible, while retaining strong investor protection. Here at Experta, we have known all of the key decision-makers for many years, and they are open to suggestions – provided they make sense. Luxembourg is located at an ideal strategic position at the heart of Europe, making it a truly international business hub. The standard of living is high, with political, economic and social stability. But the country is small. Are you able to find the talents needed to best serve your clients here? Yes, we do. The knowledge we have in this country is unparalleled. Nearly half of the resident population are non-Luxembourgers, so we are able to hire staff that speak the clients’ language and understand their culture. Many decades as a world leader has allowed the country to build up substantial experience and it is equipped with world-class service providers that can attract well-qualified staff. The country has also signed over 70 double taxation treaties, making it easy to do business around the world. This is also the largest fund centre in Europe, specialised in cross-border activity. The result is a highly predictable, low risk, sophisticated and pragmatic legal and regulatory framework. Why choose Experta? We have been in Luxembourg for over 50 years, during which we have built up excellent local and international partnerships based on mutual trust. This translates into strong experience of tax and regulatory environments around Europe and beyond. Things have changed quite radically in recent years and this can sometimes be difficult to understand. We put our client’s minds at rest by helping them to conform efficiently to every legal, procedural and fiscal requirement. Our organisation is just the right size: large enough to be able to handle every eventuality, but small enough to give close attention to every client. We understand all needs and react accordingly. For example, we have a commitment to

replying to requests with firm suggestions within two hours. You offer a very broad range of services to your clients. What competences do you have in-house at Experta? Our 55 highly motivated, multilingual and multinational staff have the necessary skills and experience. Before presenting a solution, they carry out a personalised and confidential analysis. Then, they define the specific requirements. Finally, we select from Luxembourg’s excellent “toolbox” of investment vehicles: Soparfi, SIF, SPF, securitisation vehicles, SICAR, SCSp, other unregulated entities, etc. We handle every step from creation to administration and management. We also have significant experience of international markets and structures. Our teams of lawyers, accountants, tax experts and economists can guide clients towards the best option. When we can’t help directly, we have a well-established network of partners both locally and around the world, including lawyers, notaries, asset managers and bankers. We keep our structures under review in light of any new regulatory, tax, accounting, legal or corporate developments at all times.

“Whether corporate, institutional or private – we provide the one-stop-shop service clients require.” To what extent is it important to be embedded within a bigger structure like BIL? We are indeed wholly-owned by one of the largest banks in the country: Banque Internationale à Luxembourg SA (BIL). We are able to work closely with its 2,000 staff both here and abroad in order to provide a broad range of services: wealth structuring and estate planning, management company activity, risk management, investment management, family office, custodian, wealth management and corporate finance. We are important to BIL as a key component of their ongoing five-year BIL2020 growth plan, a strategy which has the full support of our shareholder. We were one of the bank’s internal departments until 2002, when we were spun-off. We were able to take full advantage of this structural change – to the full benefit of our clients.

So you are an independent player...? Yes, our strategic focus is on being neutral, and we will only work with BIL and other service providers if this best suits our client’s needs. In early 2014, we also decided to focus on our core activities (global corporate services) and to outsource various other activities (i.e. tax advisory services), which means that we are no longer in competition with partner firms such as the Big Four consultants, tax lawyers, etc. What are the growth areas? We are seeing an increasing number of investment opportunities in Europe and globally, particularly in terms of private equity and real estate. Experta has a strong tradition of working with clients from Luxembourg’s neighbouring countries and Switzerland. We are seeing increased interest from clients from UK and the US, particularly in the areas of private equity and real estate. To take advantage of this, we have plans to establish an international branch network, while also working with partners.

50 More than 50 years of presence in Luxembourg.

Experta Corporate and Trust Services Large enough to get things done, small enough to care. Luxembourg is an ideal hub for European firms looking at investing and working internationally, and for international firms working in Europe. It is also the ideal international wealth management centre. Experta has been serving this market for over 50 years, and therefore has an intimate knowledge of the appropriate structures for its clients.

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Asset Management Wealth Management Asset Services

Geneva Lausanne Zurich Basel Luxembourg London Amsterdam Brussels Paris Frankfurt Munich Madrid Barcelona Turin Milan Florence Rome Tel Aviv Dubai Nassau Montreal Hong Kong Singapore Taipei Osaka Tokyo www.pictet.com

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Inside A quick glance at this special edition

Contents

ALFI Global Distribution Conference 2015

Editorial

PIERRE GRAMEGNA

Learn from our strengths

Past performance is no guarantee, says Luxembourg’s finance minister.

Contributors

CHRYSTELLE VEECKMANS

Time to retire the pension?

JONATHAN P. GRIFFIN

What should a Capital Markets Union look like? A common European investment framework could be a boon.

Why new retirement products are needed.

38 MARC HENGEN

Leaders

Investment funds and insurer’s technical provisions

Two sectors set to grow together.

MARC CHANDLER

The Obama dollar rally

Why the “greenback” is like to keep going up.

DENISE VOSS

“We need to be ready for that sooner than later”

The newly elected ALFI chair wants the funds sector to get ready for Generation Y.

12 GEORGE BATEJAN

The world according to NICSA

Global markets are as interconnected as ever, writes NICSA’s chair.

SHEILA NICOLL

After the regulatory wave: back to business?

MARIO MANTRISI

Six reasons to start thinking about your PRIIPs strategy now The new “KID” on the block.

THOMAS J. DIGENAN

Data driven returns.

What to make of emerging passport schemes.

Exhibitors plan

Who? Where? Here’s a practical guide.

Conference agenda

The whole programme at a glance.

30 MARTINA KELLY

Implementing alternatives Investment rules are “living acts”.

32 RAYMOND KRAWCZYKOWSKI

42 Gone fishing

MICHAEL FERGUSON

An Asian UCITS?

Why you need to multi-task.

44 DARIUSH YAZDANI

Pension funds go global

Looking for international exposure.

46 MARTIN DOBBINS

Asset managers raise the bar

Analysis and adaptability are key to future growth.

Taxing times

What those acronyms really mean.

34 BEN LYON

Drivers and trends 2015 Keep skills ahead of the curve.

Picture report

FLASHBACK

Spring Conference

Highlights from ALFI’s other big annual international conference, held last March.

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Chairman's comment

“ We need to be ready for that sooner than later” ► Denise Voss – who has worked in Luxembourg’s fund sector for 25 years and has sat on ALFI’s board of directors since 2007, including serving as vice chair since 2011 – was elected the association’s chairman in June. Here she talks about the agenda for her two year term, her message to individual and institutional investors, and women in the fund industry. ― Interview: Aaron Grunwald ― Illustration: Jan Hanrion

Denise Voss Conducting officer, Franklin Templeton Investments Chairman, Association of the Luxembourg Fund Industry

08 ―

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Is the EU’s proposed Capital Markets Union a big opportunity for the fund sector? “A wonderful opportunity but I think a big responsibility for the industry as well, because what we absolutely have to do is keep pushing on investor education. Clearly the more your funds can be purchased by more individuals, the more you need to ensure how they work and the risks as well. They need to understand that they’re not bank deposits. So this is where, and we know that we have to do more, we have the understandinginvesting.org website [which launched in March], we have two series of podcasts.”

enise Voss, congratulations on your election. How does it feel so far? “There’s been a lot of [press] interviews, and I’m not used to be the centre of attention, to be quite honest! I’m not complaining, it’s just a bit different.”

Over the past decade, ALFI’s head office has grown from 12 to 31 employees. How has the chairman’s role evolved? “One of the things we looked at during the nomination process was how do we make the role appealing, if you will, to people from all different kinds of organisations. Including the asset management industry, which traditionally hasn’t presented a candidate for chairman. So we worked on the nature of the role and that really recognises that in many ways the resources, which have always been good, of the head office of ALFI have grown with adding of a director of legal and tax, the experience of the director general and deputy director general, and then obviously the whole team. So it’s recognising that we’re in a different place now than we were, just from a resources point of view, than maybe ten years ago.” For example? “It obviously means using the resources on the board, the resources at ALFI, and saying, OK, let’s allocate. I don’t have to go on every ALFI roadshow. Which is maybe stepping back from the way it was in the past.” What do you want to accomplish with your chairmanship? “Hat’s off to [previous ALFI chairman] Marc Saluzzi for all that he did and a big achievement was implementing the Alternative Investment Fund Manager Directive. It’s been implemented and now we need to move it forward. Having assets under management reaching €3tn, that was [reached in] December of 2014, that was quite an achievement. And then maintaining our position as the number one fund centre in Europe and number two in the world. And there are some challenges that we are facing today. We’ve got regulation, although we think we might be in a phase of less new regulation. The European Commission and Lord Hill, the head of financial services, have talked about ‘better’ regulation. [I’m] all for that. One of the roles of ALFI is to continue speaking with politicians and regulators, obviously in Europe, in Luxembourg, in Brussels, and then outside as well, given Luxembourg funds are distributed in other 70 countries. So reaching out, when we travel on our roadshows, to the local regulatory authorities is extremely important, because in some cases there are more of our funds, Luxembourg UCITS registered, than there are local funds. And these funds are available to individuals like you and I, so investor protection is important.”

It’s mindboggling the amount of data we create.

What other resources would you like to grow? “What we want to do is translate or subtitle the podcasts into other languages, to be able to reach out to other people. The other element is in our conferences; we always try to have an investor present or be part of a panel. This time we have an entire afternoon devoted to institutional investors. We’ll have wealth managers, insurance companies and pension funds. That’s them telling us what they think. And I hope they will tell us what they think, because that’s the point, isn’t it?” Can’t you chat with a pension fund manager any time you like? “No, not me. It’s been a challenge over the years to try and get representatives of pension funds to come and speak at our conference. So hat’s off to the organisers for having done it this time. I think it’s easy to sit your box, in your administrative back office and not really have any access to investors, to be honest. Don’t forget our conference is attended by 800 people, hopefully more, so that’s people from all backgrounds, all levels. For some people it’s the annual ALFI conference that they go to, to hear about what’s going on in the industry, so it’s a chance for them to hear and see an investor in a conference setting. I also hope that the investors feel that it’s a good thing too to be invited. The person we’ve invited for many years, and thankfully he comes, is Guillaume Prache from what is now called Better Finance. He also says [during his talk], ‘thank you for inviting the investor’.” Does the fund industry need to recruit more women? “It does! It is serving the interests of investors and the economy. That’s a good thing!” ALFI is 27 years old but you’re the first female chair. Is the investment industry woman-friendly? “It has a reputation of not being. I think a lot of the articles you see are articles about the low percentage of women in the portfolio management space. That doesn’t mean we can’t improve in Luxembourg. Frankly, on our board, there’s only two women. ► ― Supplement ― ALFI Global Distribution Conference 2015 ― 09

Chairman's comment

► When I look at my daughter’s generation, she’s 15, I doubt there will be an issue. This is part of my role, my responsibility, to mentor, to talk about it a bit and tell women to get out there and hold your hand up when there’s a project or there’s an opportunity to speak.”

So it’s more a matter of women being more visible? “It’s also daring to do it, even if you might fail. Which is not necessarily, at least in my generation I’d say, a female thing to do. We have a tendency to plan, prepare and practice. Well, you can do that too, but after you’ve already raised your hand and said ‘I’ll do it’.

What we absolutely have to do is keep pushing on investor education.

This year’s conference has a big focus on financial technology, fintech. Why? “That ties into demographics, the greying of the population, living longer, and the situation where we don’t really know – for the moment, so far so good – in terms of the state paying pensions. We don’t know: will that last as long to the extent that it is now, in terms of the benefits? I always use the example of my 15 year old and her iPhone. You know she won’t be buying funds from the banker down the street, who she’s never actually met and probably never will. When it comes time to buy funds, she’ll be buying it using her iPhone. So there’s a lot of challenges around that one. Education is important there. Of course when you have the ability to buy something online every second of the day, it’s educating people about the behaviours, what’s not good. And then just the way we distribute funds now is via intermediaries. We, as an industry in Europe and even in the US, don’t go looking for direct investors. Frankly, we prefer people to come through advisors who understand the investment funds and can explain it and receive fees for explaining how investment funds work.” Or even the bank on the corner? “Exactly; that’s the traditional model. I’m an individual, I have a bank account, my checking account, my savings account, I go to my banker for advice. It’s the model that we’ve been following for a while. Or an insurance company or financial advisor, depending on the country. Not to denigrate the value of those intermediaries, just the behaviour of certainly my daughter’s generation, and even today’s generation, is just not the same kind of behaviour. I buy online. And why wouldn’t I buy an investment fund online, frankly? The challenge obviously for the industry is that we need to be ready for that sooner than later, I’d say. In the UK, for instance, there’s Nutmeg, which is a website providing a robo-advisor, where people can buy funds online. So it already exists.” What does that mean for the industry here? Is that going to push processing costs down? “I think that’s what we need to look at, because we’re not really looking at it at all. What we are doing is looking at the way our technical committees are organised within ALFI and our working groups and thinking about how we can institutionalise, if you will, this issue within our working groups. 10 ―

The impact of digital and technology is one impact, i.e., distribution. But the other element is making our companies better companies. And especially when it comes to big data. It’s mindboggling the amount of data we create, just on our telephone, just by logging and going to one website or several in five minutes. How do we use that data, how do we secure that data, and how do we protect that data? And make it efficiently available as agreed upon with investors? This is why we wanted, and it’s just one step, at the conference, to have the fintech corner. We’re inviting 12, six per day, fintech companies. We’re giving them a free exhibition stand at the conference, where they can interact with conference attendees on the regular floor. In addition to that, at lunchtime we’ll have speed presentations.”

You said that meeting local regulators around the world was an important role for ALFI. But do you find that, for example in Hong Kong, you’re coming from Luxembourg, from an American company, they are quite open to meeting you? “Yes. The regulator itself, we know them quite well, because we’ve been doing this for years. Again the idea [is that] number one, they have to get to know Luxembourg rules... they have to be confortable with Luxembourg and sometimes they have questions. Sometimes we’re the only Europeans they see. We talk about Europe a bit, then we talk about what’s going with UCITS, we’ll obviously talk about AIFMD, but for the moment that’s only available in Europe… inevitably they have questions.” Where is ALFI headed after the conference? “Our first roadshow is to Latin America in October. First we go to Chile, and Chilean pension funds invest quite heavily in Luxembourg UCITS. Then we go Colombia and then Peru. It’s really a pension fund focus for us. That’s the first time for a roadshow in Colombia and Peru. And Switzerland in early November. Then, in November, we go to the US, starting off with San Francisco, and Chicago and then New York.” ◄

Quick facts At the end of June there were €3.5 trillion in assets under management in Luxembourg funds, according to the regulatory agency CSSF and ALFI trade association. That represents an increase of 24% compared to June 2014. Luxembourg was home to 9.3% of worldwide investment fund assets as of the end of the first quarter, roughly the same market share as the same time the previous year, reports the European Fund and Asset Management Association. “Luxembourg continued to dominate the fund market in Europe, hosting 8,983 funds” on 31 March, says Lipper, a research firm that is part of the Thomson Reuters data group. That is a gain from the 8,720 funds that the Grand Duchy hosted at the end of March 2014.

― Supplement ― ALFI Global Distribution Conference 2015

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Societe Generale Securities Services is a marketing name for the securities services businesses of Societe Generale and its affiliates worldwide. Societe Generale is regulated and authorised by the French Autorité de Contrôle Prudentiel and Autorité des Marchés Financiers. This material has been prepared solely for information purposes and does not constitute an offer to enter into a contract. Not all products and services offered by Societe Generale are available in all jurisdictions. Please contact your local office for any further information. 2015 Societe Generale Group and its affiliates. © GettyImages - FRED & FARID

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View from Washington

“Taking into account differences in culture, work hours, language, and time zones is critical to the success of a global operations strategy.” George Batejan Chair of the NICSA board of directors Executive vice president, global head of technology and operations, Janus Capital Group

The world according to NICSA ► The markets are more interdependent than ever.

― Text: George Batejan ― Illustration: Jan Hanrion

s Greece moved a moment to potentially exit the Eurozone, the world’s financial markets are reacting to the news. While proximity may affect the degree of reaction, the fact that markets are very much interdependent is not news to NICSA or to its members. It has long been our mission to connect the global investment management industry and to help identify and propagate leading operating practices around the globe. Today, as more investment companies establish cross-border offices and seek customers outside of their home country, the organisation’s role has become even more crucial. With a network of more than 10,000 business professionals representing top global investment management firms across all indus-

12 ―

try sectors, NICSA is well-placed to guide professionals at top fund firms, custodians, transfer agencies, accountancies and auditors. As the global regulatory environment and investment asset mix grow more complex, NICSA’s guidance is also more valuable than ever. For industry firms, going global involves managing the nuances of global operations. Successfully taking a business model global goes beyond simply setting up a local office and meeting a region’s unique licensing and regulatory requirements. It requires thinking about non-US markets in a different way. Taking into account differences in culture, work hours, language, and time zones is critical to the success of a global operations strategy. Operations support in non-US locations requires specific infrastructure to ensure that capabilities and technology are aligned with the needs of clients in local markets. While firms

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with a long-term global business model may have this down, others just beginning to reach out and establish offices in other countries may be less aware of what is involved in ensuring smooth operations across borders. Sometimes it may be something as basic as taking into account time zone differences when scheduling calls with research analysts in multiple locations. Or ensuring that a US portfolio manager can access tools to manage a global portfolio, even on a US market holiday. Another example is meeting trading deadlines around the globe to comply with requirements of the UCITS structure. That’s why NICSA is focused on the global issues facing fund companies. As more of our member companies establish offices in markets across the globe, we are mining our membership for best practices in global operations to share. NICSA is dedicated to giving its members unique and valuable insights into how best to operate both in the US and around the globe. NICSA fulfills its commitment to its members with a steady stream of information on a wide variety of operations topics. We do this via conferences, seminars, white papers, and webinars. Our website offers members access to an array of information including a blog which, together with an active social media presence, serves to draw members’ attention to the most up-to-date topics, news and leading practices needed to succeed in a competitive global business climate. For example, among recent NICSA webinar topics were European securities regulations, alternative investment fund domiciles, and the changing landscape of distribution and share classes. NICSA provides its own Transfer Agent Compliance Guide, and all NICSA seminars, conferences and webinars offer continuing professional education credit opportunities. By sharing best practices across markets and asset classes, NICSA members benefit from the knowledge and experience of firms with long-established global business strategies. In this way, NICSA helps remind its members that we are the world and the world is not a single market. ◄

Do you master the key elements of cross-border fund distribution? 1

Germany

Singapore

France

Switzerland

Gb Nl Es

United Kingdom

Netherlands

Ch Bh Cl Hk

At Fr Austria

Chile

Hong Kong

No Za Pe Mo Norway

Spain

Bahrain

South Africa

Peru

Macau

It Se Fi Be Dk Lu Pt Li Ae Kr Tw Italy

Sweden

Finland

Belgium

Denmark

Luxembourg

Portugal

Liechtenstein

United Arab Emirates

South Korea

Taiwan

Ie Gr Cz Sk Hu Pl Ee Is Du Au Jp Ireland

Greece

Czech Republic

Slovakia

Hungary

Poland

Estonia

Iceland

Dubai

Cy Lv Lt Mt Bg Si Ro Hr Il Cyprus

Latvia

Lithuania

Malta

Bulgaria

Slovenia

Romania

Croatia

Israel

Australia

Japan

In Cn India

China

The FundGlobam fact files

FundGlobam, S.A. 16, rue Jean-Pierre Brasseur L-1258 Luxembourg • www.fundglobam.com • info@fundglobam.com

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Practical guide Who? Where? Look here:

Exhibitors plan ► Here is a quick overview of the expositions at the Philharmonie Luxembourg.

From Airport and Motorway

Restaurant la table du Belvédère

24 25

Entrance Exit

27 28

20 21

Stage

Conference room

gis Re tio

tra n

Entrance Parking Place de l’Europe

Cocktail area & FinTech Speed Presentations rs ke ea s Sp Pres ge & un Lo

S re pea gis ke tr rs at & io Pr n es

Entr a Exit nce Loun ge ar ea

Entrance Exit

FinTech

Corner

Entrance Parking Place de l’Europe

From City center

Parking des Trois Glands

How to find us? By bus: With most bus lines to Kirchberg – stop at “Philharmonie/Mudam” – transit via Centre Aldringen, central train station and boulevard Royal. Further information can be obtained from the “Mobilitéitszentral” hotline (+352) 24 65 24 65 or www.mobiliteit.lu. By car: Direct and covered access from the place de l’Europe car park; entry on avenue John F. Kennedy. From the Trois Glands car park; via avenue John F. Kennedy and the place de l’Europe tunnel; or via rue du Fort Thüngen.

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Terrace

Main Entrance Exit

Hotel Melia

Hotels Novotel & Sofitel

in FI

2 22 23

Avenue J.F. Kennedy

Parking Place de l’Europe

― Supplement ― ALFI Global Distribution Conference 2015

Company

Booth booth number

Company

Booth booth number

Arendt & Medernach

KNEIP

BNP Paribas Securities Services

KPMG Luxembourg

MDO

BNY Mellon

Caceis

Metrosoft

Casa4Funds

Milestone Group

Cerulli Associates

Ignites

Confluence

Phoenix Systems

Dechert LLP

PwC Luxembourg

Deloitte Luxembourg

Deutsche Asset & Wealth Management Investment

Diamos

FundAssist

Funds Europe Limited

Fundsquare

GAM

HSBC Bank, Luxembourg Branch

IFBL

J.P. Morgan Bank Luxembourg

13 7

RBC Investor & Treasury Services

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― Supplement ― ALFI Global Distribution Conference 2015 ― 15

Conference Agenda

Programme day 1 – Tuesday 15th September 2015 Registration & breakfast 08.00 – 08.45

Welcome 08.45 – 09.00 Denise Voss, Chairman of the Association of the Luxembourg Fund Industry

Chairperson’s introduction 09.00 – 09.05

Freddy Brausch, Partner, Linklaters, Luxembourg

A view from around the world: a high-level discussion by representatives of EFAMA, NICSA, HKIFA, Anbima and ALFI on trends, opportunities and challenges for the international asset management industry and, of course, the investor. Setting the scene for the entire conference! 09.05 – 09.50 Moderator: Denise Voss, Chairman of the Association of the Luxembourg Fund Industry

Panelists: Sally Wong, CEO, Hong Kong Investment Funds Association (HKIFA), Hong Kong Georges Batejan, Executive vice president, global head of Technology and Operations, Janus Capital Management, Denver & chairman, NICSA José Carlos H. Doherty, Chief executive officer, Brazilian Financial and Capital Markets Association (Anbima), Brazil Alexander Schindler, Member of the executive board, Union Asset Management Holding, Frankfurt, Representative, Hong Kong Investment Funds Association (HKIFA), Hong Kong

Business Hub Luxembourg 2020: an inspiring keynote speech by “serial entrepreneur” 09.50 – 10.20 Norbert Becker

Refreshment break and visit of the exhibition area 10.20 – 10.50

Economic realities and market strategies 10.50 – 11.20 Marc Chandler, Senior vice president, global head of Markets Strategy, Brown Brothers Harriman, New York, identifies key political and economic events to consider when investing.

Capital Markets Union, on the verge of a new era: will the European Commission’s top priority really enhance the free flow of capital in Europe and increase the role that market-based finance plays in intermediating capital to European companies, projects and governments? 11.20 – 12.00 Moderator: Jonathan P. Griffin, Managing director, J.P. Morgan Asset Management, Luxembourg

Panelists: Stéphane Giordano, Regulatory strategy, senior adviser, Société Générale Global Banking and Investor Solutions, Paris Claude Niedner, Partner, Arendt & Medernach, Luxembourg Geoff Radcliffe, Managing director, BlackRock Luxembourg, Luxembourg Other speakers to be confirmed

Chairperson’s wrap up 12.00 – 12.10

Lunch 12.10 – 14.10 Hosted by EY

16 ―

― Supplement ― ALFI Global Distribution Conference 2015

Conference Agenda

Programme day 1 – Tuesday 15th September 2015 Chairperson’s introduction 14.10 – 14.15 Gast Juncker, Partner, Elvinger, Hoss & Prussen, Luxembourg

Doing business in China Learn from the salesman: 14.15 – 14.45 Mathias Lentz, Global export manager, Brasserie Nationale Bofferding, Luxembourg, who knows how to be successful in China. A stimulating “out-of-the-box” presentation!

China, Hong Kong, Taiwan – the “promised land” for fund distributors? Which investment funds are hip, which ones leave Asian investors cold? In light of local passporting initiatives, what does the future of UCITS look like in Asia? Which distribution channels and strategies are rewarding, which ones risk to be bottomless pits? 14.45 – 15.25

Moderator: Michael Ferguson, Partner, Asset Management leader, EY, Luxembourg Panelists: Michael Chow, Managing director, head of International Business, Fullgoal Asset Management, Hong Kong Peng Wah Choy, Vice chairman, board of directors, CEO, Harvest Global Investment Limited, Hong Kong Dr. Gian Luigi Costanzo, Senior adviser, China Universal Asset Management, Hong Kong Chris Edge, Managing director, HSBC Bank, Luxembourg Branch, Luxembourg

Refreshment break and visit of the exhibition area 15.25 – 15.55

Brazil’s fund market opens its gates: recent regulatory changes make international funds more easily accessible to local investors. How can asset managers capitalize on these changes? What are the prospects for an even further opening-up of this huge investment fund market? 15.55 – 16.45 Moderator: Jefferson L. Matias Oliveira, Investment Management & Capital Markets lead director, PwC, São Paulo

Panelists: João Albino, Head of Private Banking, Banco Bradesco, Brazil Andrea Cattaneo, Head of Brazil, BNP Paribas Securities Services, São Paulo Carlos Massaru Takahashi, CEO, BB DTVM, São Paulo

Digitalising today’s distribution success: the trend seems irreversible – the marketing and distribution of products and services is increasingly digital. Can fund industry players and platforms keep pace with this rapid evolution? How can we make our proven traditional distribution models fit for the digital age? 16.45 – 17.35 Moderator: Martin F. Dobbins, Managing director & country head Luxembourg, State Street Bank Luxembourg, Luxembourg

Panelists: Kristina Danielson, Head of Global Client Portal Distribution, UBS Global Asset Management, Zurich Nicolas Buck, CEO, Seqvoia, Luxembourg Olivier Portenseigne, Chief commercial officer, Fundsquare, Luxembourg Michael Weber, Vice president, head of Mutual Fund Distribution Operations, Allianz Global Investors, Frankfurt

Chairperson’s wrap up 17.35 – 17.40

Cocktail 17.40 – 19.30 Hosted by KPMG

― Supplement ― ALFI Global Distribution Conference 2015 ― 17

Conference Agenda

Programme day 2 – Wednesday 16th September 2015 Refreshment break and visit of the exhibition area

Registration & breakfast 08.00 – 08.45

10.15 – 10.45

Chairperson’s introduction Noel Fessey, Global head of fund services, Schroders, Luxembourg

How to keep a cool head in the midst of the current tax turmoil: BEPS, FATCA, EOI… what do these acronyms stand for and how will they impact the fund industry and its clients?

Taking the long view: prospects for markets and the global economy in 2016 and beyond

10.45 – 11.25 Frederic Batardy, Tax directorate, Ministry of Finance, Luxembourg

08.45 – 08.50

Raymond Krawczykowski, Partner and Tax leader, Deloitte, Luxembourg

08.50 – 09.30

Stephanie Flanders, Chief market strategist for Europe, J. P. Morgan Asset Management, London

Keith O’Donnell, Managing partner, Atoz, Luxembourg

After the regulatory wave: back to business? Many fund industry professionals feel that the rampant post-crisis regulatory activity has passed its peak and that the time is right to concentrate on business expansion. A fallacy? Regulators from the UK, France, Ireland and Luxembourg reveal and discuss what is still in the pipeline.

Lunch 12.00 – 14.00 Hosted by BNP Paribas, Deloitte

Esther Wandel, Manager, Investment Funds Team, Financial Conduct Authority, London Franck Guiader, Head of the Asset Management Regulation Division, Autorité des Marchés Financiers, Paris Jean-Marc Goy, Counsel for International Affairs, Commission de Surveillance du Secteur Financier, Luxembourg

18 ―

Interviewer: David Ricketts, Associate editor, Ignites Europe, London

11.55 – 12.00

Panelists: Martina Kelly, Deputy head of Markets Policy Division, Central Bank of Ireland, Dublin

11.25 – 11.55 Anne Richards, CIO, Aberdeen Asset Management, Edinburgh

Chairperson’s wrap up

09.30 – 10.15 Moderator: Sheila Nicoll, Head of Public Policy, Schroders, London

banner135x26mmHD.pdf

CIO interview

15/12/14

15:41

― Supplement ― ALFI Global Distribution Conference 2015

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Conference Agenda

Programme day 2 – Wednesday 16th September 2015 Chairperson’s introduction 14.00 – 14.05 Thomas Seale, CEO, European Fund Administration, Luxembourg

Moderator: Chrystelle Veeckmans, Chairman of the Association of Luxembourg Pension Funds and chairman of KPMG Luxembourg Pension Fund

Ready for take-off – are the current low interest rates and investors’ growing risk aversion paving the way for investment funds in modern wealth management?

Panelists: Silke Bernard, Managing associate, Linklaters, Luxembourg and chairman of the ALFI Pensions & Long Term Savings Committee

14.05 – 14.45 Moderator: Pierre Etienne, Managing director, Pictet & Cie, Luxembourg

Hervé Noël, Head of pension fund management, GDF Suez Belgium and vice chairman at Belgian Association of Pension Institutions

Panelists: Nannette Hechler Fayd-Herbe, Head of global financial market research, Private Banking & Wealth Management, Credit Suisse, Zurich

José Veiga Sarmento, Chairman, Portuguese Mutual And Pensions Funds, Lisbon

Stefan van Geyt, Group chief investment officer, KBL Asset Management, Antwerp Gavin Rankin, Head of managed investments, EMEA, Citi, London

Refreshment break and visit of the exhibition area 14.45 – 15.15

Foreign investments of pension funds: which opportunities for Luxembourg? Pension schemes and funds under the spotlight – learn how new regulations and provisions are impacting the way pension funds will use investment funds. 15.15 – 16.15 Dariush Yazdani, Partner, PwC, Luxembourg

René van Leggelo, Product manager, International Retirement, Amundi Asset Management, Paris

New regulations and provisions impacting the insurers use of investment funds underlying assets in life insurance: new CAA circular 15/3 – new provisions derived from Solvency 2 16.15 – 16.55 Moderator: Marc Hengen, CEO, Association des Compagnies d’Assurances et de Réassurances du Grand-Duché de Luxembourg

Panelists: Laurent Bouchet, Product development, European Fund Administration, Luxembourg Olav Jones, Deputy director general, Insurance Europe, Brussels Fabrice Sauvignon, CEO, La Mondiale Europartner, Luxembourg

Chairperson’s wrap up 16.55 – 17.00

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20 ―

― Supplement ― ALFI Global Distribution Conference 2015

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*Source: TOP 10 de la plateforme par HFM Week (Déc. 2014); Données au 30 Juin 2015. En raison de restrictions réglementaires, ces organismes de placements collectifs (« Fonds ») ne sont pas autorisés à la commercialisation dans tous les pays. Ces Fonds sont conformes aux dispositions de la directive OPCVM (2009/65/CE). Chaque Fonds est un compartiment d’une SICAV irlandaise autorisée par la Central Bank of Ireland. Lyxor Asset Management (« LAM ») recommande de lire attentivement la rubrique « Profil de risque » de la documentation juridique du fonds (prospectus, supplément et DICI). Le prospectus et le supplément en anglais, ainsi que le DICI en français, peuvent être obtenus gratuitement sur www.lyxorfunds.com ou auprès de client-services@lyxor.com. Aucun des gestionnaires financiers par délégation mettant en œuvre sa propre stratégie de gestion dans un Fonds Lyxor (les « Gestionnaires ») n’endosse de responsabilité pour (i) l’exactitude ou l’exhaustivité du contenu de ce document, (ii) les déclarations qu’il contient, et/ou (iii) la performance des Fonds Lyxor concernés. LAM et chaque Gestionnaire déclinent toute responsabilité pour tout dommage direct ou indirect, y compris une perte de profit, subi par le lecteur de ce document ou un tiers. Chaque Gestionnaire n’est ni responsable, ni impliqué dans la commercialisation, la distribution ou la vente des Fonds ou dans le respect de la réglementation y afférente ; et aucun tiers n’est autorisé à faire de déclaration concernant un quelconque produit ou service du Gestionnaire concerné dans le cadre de la commercialisation des Fonds. Ce document est publié en France par Lyxor Asset Management, société par actions simplifiée, ayant son siège social au 17, Cours Valmy, Tour Société Générale, 92800 Puteaux, France, immatriculée au Registre du Commerce et des Sociétés de Nanterre sous le numéro 418 862 215 et est une société de gestion de portefeuille autorisée par l’Autorité des marchés financiers (AMF). L’attention de l’investisseur est attirée sur le fait que le prospectus et le supplément ne sont disponibles qu’en version anglaise, comme l’autorise la réglementation en vigueur.

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07/09/15 17:50

On the verge of a new era

What should a Capital Markets Union look like? ► A common investment framework could be a boon to both Europe’s economy and the fund industry. ― Text: Jonathan P. Griffin ― Illustration: Jan Hanrion

he Capital Markets Union represents a turning point in financial regulation. Where policymakers, rightly, focused on financial stability in the aftermath of the global financial crisis, our shared concern is now securing the economic recovery. Asset managers already play a key role in providing important cross-border growth and job-creating investment in Europe. Luxembourg--with over 2.4 trillion euro in assets under management, making it the second largest fund administration centre in the world and the largest in Europe--is a key jurisdiction of these activities. A well-constructed Capital Markets Union will encourage the important non-bank funding provided by fund managers. Luxembourg, with its highly skilled and international workforce, strict but sensible regulatory oversight, and its thriving funds administration and custody services industries, will be a central player in a CMU.

The CMU’s objectives and the role of asset managers In November last year, when Jean-Claude Juncker assumed his role as president of the European Commission, he tasked his new commissioner for financial services, Lord Hill, with bringing about a CMU. The aim is to address some of the deficiencies in Europe’s financial markets. The European Commission recognises that the European economy is over-reliant on bank financing. While approximately 80% of funding in Europe comes from banks, only 20% comes from other sources; the inverse is true in the US. Also, the financial crisis has led to mistrust between EU member state regulators and ensuing greater fragmentation of Europe’s financial markets. Ultimately, the CMU seeks to tackle these problems and improve economic growth through better integrated and more efficient Euro-

22 ―

pean capital markets, with an emphasis on alternatives to traditional bank financing and cross-border investment. On the supply side, this means increasing and diversifying the flow of funds into investments, including from retail investors, pension funds and insurers. On the demand side, this means better matching finance with investment opportunities, particularly those that can increase growth and productivity such as infrastructure and small-and-medium sized enterprises. Removing barriers to cross-border investment is part of this plan. Asset managers will have an increasingly important role to play in these steps.

What should the CMU aim to achieve? Fund managers already play a crucial role in connecting savers with the businesses and projects that need funding to create the growth and jobs that Europe needs so urgently. Much of this activity is being led from Luxembourg. Still, there are opportunities for asset management to play an even greater role in channelling investment to where it is needed most and a CMU can help in number of ways.

“Asset managers will have an increasingly important role to play in these steps.” Jonathan P. Griffin Managing director, J.P. Morgan Asset Management (Europe)

― Supplement ― ALFI Global Distribution Conference 2015

Here are just a few: Firstly, the CMU should look at the sources of available capital and at the ways of incentivising its investment. The retirement market, for one, is a very large source of under-utilised capital in Europe. In the UK alone, pension assets grew from 20% to 80% of GDP between 1980 and 2009, according to a City of London Corporation study. Large amounts of stable, long-term funding were channelled into capital markets, driving the development of the UK stock market as one of the deepest and most liquid in the world. The role of institutional investors in much of Europe has been significantly smaller, partly as a result of regulation that has contributed to European firms’ reliance on bank finance. On the supply side, the EU should consider creation of a “UCITS-style” standard pension product that can channel Pillar 2 savings to SMEs and long-term investments. A further way of addressing Pillar 2 fragmentation must be found to allow member states to apply tax wrappers around the fund, instead of inside it. This would permit fund managers to market similar products across borders, while still respecting individual countries’ rights to apply their own tax regime. On the demand side, the EU should revisit regulations that undermine institutional investors’ ability to invest in long-term illiquid assets; in particular, the prudential requirements under IORP II and Solvency II. A clear definition of infrastructure investments in prudential regulation, and indeed longer-term investments more generally under the ELTIFs Regulation, are also needed. Another area of regulation that the EU should reconsider in the light of CMU is MiFID II. ESMA has proposed that all non-UCITS funds be treated as complex products. This will hamper the retail distribution of Investment Trusts and ELTIFs, among other products, regardless of those funds’ particular characteristics. Furthermore, MiFID II may exacerbate market illiquidity through its definition of liquid

and regulators would do better to revisit the underlying causes of these changes in liquidity, rather than applying another band aid in the form of standardisation. Lastly, the EU has created a global success story in UCITS. Funds constructed and marketed under the UCITS framework are the most trusted investment vehicles on a global, cross-border basis and Luxembourg has poised itself in the centre of this. The transparency, diversification and stability that UCITS provide have earned the trust of investors and regulators not just in Europe but also in Asia and Latin America. While this is positive, there are still barriers, which make it difficult to distribute funds across borders even within the EU itself. The marketing restrictions that are applied to funds are generally those of EU host countries. Meeting local marketing documentation requirements can be inefficient and lead to delays in distribution. As one possible measure, the CMU could seek to allow home regulators to approve marketing materials when approving UCITS funds themselves, or at the very least, impose stricter deadlines for member states to give consent to marketing materials for funds.

Where next?

and illiquid instruments. This is particularly so when taken together with other proposed regulations, such as the Financial Transactions Tax and Bank Structure Regulation. One idea suggested to address liquidity problems is bond standardisation. There has been a range of views expressed on this, beyond the buy-side. I am inclined to agree with the Bank of England’s position: some industry-driven standardisation of contracts

may be helpful. However, mandatory standardisation strikes me as unnecessary and possibly counterproductive. While small issuers lack the scale for standardisation; large frequent issues are, by definition, the most liquid part of the market and least in need of a fix. This leaves large infrequent issuers that are already undertaking “jumbo” issues and where some standardization could occur. Ultimately the problems of liquidity run deep

This is undoubtedly an exciting time. Many problems and challenges remain to be dealt with, but regulators are committed to moving financial services forward. This is a great opportunity for our industry to prove its worth to society, contributing our most innovative thinking. We are beginning to see the first shoots of the CMU emerge. We will soon see the European Commission’s action plan that will set the CMU agenda through to 2019. Let’s ensure that we grow the type of industry that we want to see with Luxembourg and its thriving funds market continuing to play a central role. ◄

― Supplement ― ALFI Global Distribution Conference 2015 ― 23

Economic realities

The Obama dollar rally ► The US dollar is likely to continue to gain against the euro.

― Text: Marc Chandler ― Illustration: Jan Hanrion

he US dollar is in the third significant dollar rally since the end of Bretton Woods. There is more room for the dollar to appreciate. Before the bull market is over, the euro is likely to return toward the historic lows made in 2000 near $0.8230. We associate the first dollar rally with Ronald Reagan though it began before he took office. The rally was driven by policy considerations. Paul Volcker at the helm of the Federal Reserve aggressively tightened monetary policy to squeeze out double digit inflation. Reagan pursued an accommodative fiscal policy with tax cuts and spending increase. That policy mix is associated with appreciating currencies. It is the same policy mix (and similar proportions) that Germany enacted with its merger with East Germany.

24 ―

If the euro had existed, it would have fallen by about 60% during the Reagan bull market. The dollar’s appreciation ended with an agreement by the major industrialised countries to intervene in the foreign exchange market to drive down its value. The decision is formally known as the Plaza Agreement, and it was struck in September 1985. The second dollar rally is associated with Bill Clinton, though it did not begin until his second term. There were several coordinated attempts to stop the dollar from falling, but it took a new treasury secretary (Robert Rubin replaced Lloyd Bentsen) and the articulation of a new dollar policy to solidify the dollar’s bottom. US treasury secretaries would often threaten to depreciate the dollar to win concessions from its major trading partners. Some narratives claim that treasury secretary James Baker’s threat to depreciate the dollar in 1987

― Supplement ― ALFI Global Distribution Conference 2015

unless Germany eased policy helped spur the equity market crash that year. Bentsen threatened dollar devaluation unless Japan made trade concessions in 1993, and this produced a sharp dollar slide. Rubin replaced him and announced a “strong dollar policy,” and nearly every treasury secretary since has repeated this mantra. The strong dollar policy has been the subject of much confusion. It does not have anything to do with the bilateral exchange rate. It is a promise that the US will not use the dollar as a weapon to force concessions from US trading partners and creditors. It means the US will not seek a depreciation of the dollar as a direct policy objective. The Clinton dollar rally is associated with the commercialisation of the internet and the US tech bubble that drew international capital into the US. During this dollar rally the euro depreciated by almost 45%. It ended with another round of coordinated intervention in early Q4 2000. It is more difficult to pinpoint the beginning of the Obama dollar rally. The euro peaked in July 2008 near $1.6040. At the low recorded in March, the euro had fallen about 35%. However, the rally did not begin in earnest until about a year ago. The euro was near $1.40 then. The Obama dollar rally is being driven by the divergence of monetary policy. The US policy response to the Great Financial Crisis was earlier and more aggressive than Europe’s policy response. Several years later the different policy responses have produced different economic outcomes. The US is preparing to exit from its emergency monetary settings, while many countries in Europe are still deeply engaged in unorthodox policies. The Federal Reserve is expected to hike rates in September and begin a gradual tightening. The European Central Bank’s asset purchasing programme is expected to run through at least September 2016. The divergence of monetary policy has not peaked, and won’t for at least another year. This suggests there is more fuel in Obama dollar rally. ◄

“The US policy response to the Great Financial Crisis was earlier and more aggressive than Europe’s policy response.” Marc Chandler Senior vice president, global head of markets strategy, Brown Brothers Harriman (New York)

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Investor communication

Six reasons to start thinking about your PRIIPs strategy now ► The new Key Investor Information Document will have a larger impact than many imagine.

― Text: Mario Mantrisi ― Illustration: Jan Hanrion

he new regulation – PRIIPs (short for Packaged Retail and Insurance-based Investment Products) – will only go live on 31 December 2016, but asset managers should get ready for it already today. Why? It will introduce the Key Investor Document (KID), a maximum three-page plain-language document for retail investors. The fund industry is already producing UCITS IV KIIDs (Key Investor Information Document), but this KID will have a far greater impact on asset managers than it may seem. The European Commission has granted a five-year grandfather period to the KID before deciding on its future, which in principle will give the fund industry some time before adapting the new KIDs. The big question is, however, how will investors react when those two documents are presented to them by distributors? Although KIIDs and KIDs will be similar, they will not be identical. First, unlike the KIID, the KID does not demonstrate investment rewards based on past performance, but on scenarios showing potential rewards and maximum losses on invested capital. This is brand new for the industry in which sales arguments have always been based on past performance. Even if the distribution arm has not relied on this so far, risk and performance teams will have to increase their contribution to the elaboration of the KID. Second, a heavily debated element of the UCITS KIID has been the Synthetic Risk and Reward Indicator. Regulator ESMA concluded that a number from one to seven – based on the volatility of the fund – would represent a common denominator to express the risk using an indicator that could easily be understood by retail investors. As the KID shall be applicable to widely varying types of financial instruments, the challenge for regulators will lie in finding a common approach for a unique risk indicator that summarises the combination of different risk categories (not just volatility), and in finding a balance of the risk components that does not disadvantage any type of instrument. Third, the regulation requires going further in terms of cost disclosure. Indeed, the on-going charges should encompass all fees, including those related to transaction and performance. This will represent a new challenge for asset servicers, as a new total expense ratio method will have to be put into practice. Fourth, considering the fragmented intermediation of the distribution chain, the industry will face a real challenge to pass on the infor-

26 ―

“Although KIIDs and KIDs will be similar, they will not be identical.” Mario Mantrisi Senior advisor to the CEO and member of the executive board, Kneip

mation and the documents themselves. As for UCITS KIIDs, the industry will have to consider efficient document delivery, especially as the PRIIPs regulation strongly encourages physical remittance during face-to-face meetings with investors. Another challenge is related to document production. The sheer mass of documents to be produced under PRIIPs is exponentially greater than that of the UCITS KIID. Although it is impossible to estimate the actual workload, by looking at the proportion of revenues within the finan-

― Supplement ― ALFI Global Distribution Conference 2015

cial industry stemming from structured retail products, one has a good indicator of the incredible amount of issued instruments that will all require KIDs. Finally, we need to acknowledge that many structured products are tailor made and produced on the spot with real time data. This is a complete new world, especially for KIID producers. PRIIPs is a big step in the direction of a unique level playing field amongst investment products. The fund industry has pushed for this for a long time, especially as the transparency requirements and heavy regulations imposed on them have penalised them so far. Many actors within the fund industry, however, have paid little attention to PRIIPs because of the five years exemption period for the UCITS KIID. Although many implementation details are still expected within Level 2 regulation, the industry should not wait until then and already now start proactivity define its strategy and structure its implementation for PRIIPs. As we’ve seen before, the first movers will come out ahead! ◄

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07/09/15 16:20

Promised land

An Asian UCITS? ► In light of various local passporting and similar initiatives, what does the future for UCITS look like in Asia? ― Text: Michael Ferguson ― Illustration: Jan Hanrion

n Asia-Pacific, there are a range of fund passporting type of initiatives being undertaken by regulators to reduce bureaucracy, speed up the process of bringing new products to market, stimulate market activity within each jurisdiction by attracting more participants and most importantly in the longer-term, to build an integrated Asia-Pacific cross-border market… to potentially compete with the EU UCITS cross-border products? The first key step towards building this integrated Asia-Pacific cross-border market would be the successful implementation of these passporting type initiatives; this would be a very significant first step for the Asia-Pacific investment fund industry. On 22 May 2015, the Securities and Futures Commission of Hong Kong and the China Securities Regulatory Commission finally signed the Memorandum of Regulatory Cooperation on Mainland-Hong Kong Mutual Recognition of Funds (MRF). This memorandum will allow eligible mainland and Hong Kong funds to be distributed in each other’s markets through a streamlined vetting process. The scheme has been implemented since 1 July 2015. With the successful launch of the Shanghai-Hong Kong Stock Connect in November 2014, and the positive market response, the recent announcement of the MRF is seen as another key breakthrough step in the liberalisation of the mainland’s financial market. It offers more investment options for both the mainland and Hong Kong investors to access unparalleled capital markets. It also opens up a potential new chapter in developing a fund regulatory standard in Asia, as the MRF between mainland and Hong Kong is expected to be the first of many across Asia and beyond. The Asia Region Funds Passport, which has been discussed for some time, is seen by many as having the greatest potential to be the most authentic Asia-Pacific cross-border pass-

28 ―

“The political support of the Chinese and its regulators will be the critical success factor for any of these initiatives long-term.” Michael Ferguson EMEIA regulated funds and Luxembourg asset management leader, EY Luxembourg

porting arrangement with six countries (Australia, South Korea, New Zealand, the Philippines, Singapore and Thailand) participating. The ARFP is being viewed by some as the Asian equivalent of the European UCITS with passport status granted to eligible funds operating in member countries. The launch of this Asia-Pacific Economic Cooperation-backed initiative has been delayed but is now expected to commence sometime during 2016. The final passporting type initiative is the ASEAN Collective Investment Scheme (CIS) Framework (ACIS), which provides for a passport for cross-border marketing of CISs meeting certain common standards, some of which are comparably to UCITS requirements. These common standards are designed to ensure that retail funds are managed according to industry good practices. The framework initially includes Singapore, Malaysia and Thailand. What are the benefits for member states? At the macro level, all three proposals have similar goals: (i) open up Asia’s capital markets; (ii) allow a freer flow of capital within the region; (iii) improve the integration of member economies.

― Supplement ― ALFI Global Distribution Conference 2015

By breaking down national barriers, the proposals aim to increase competition and broaden investor choice. That should have the dual effect of reducing costs for investors and making it easier for them to achieve diversification. What are the opportunities for asset managers? At a strategic level, the proposed cross-border frameworks offer asset managers access to a more diverse investor base, and a new way to access foreign markets with attractive growth characteristics. At an operating level, passporting should make it quicker for firms to gain cross-border distribution approval and easier to generate economies of scale. Overall, passporting should make it easier for firms to achieve faster levels of growth and, potentially, stronger profitability. For individual firms, the possible opportunities will depend on their current positions and on the actions they take to improve them. In most cases, an onshore presence in one of the participating markets is likely to be the most important factor. All current passporting type initiatives currently implicitly exclude externally (e.g., Luxembourg) domiciled products, even if they have been approved for local sale. This current position may evolve over a period of time, in light of various other EU-Asia-Pacific trade discussions, but unlikely to dramatically change in the near-term. Firms with strong branding and distribution networks will be especially well placed to build a presence across the region. What uncertainties and challenges do asset managers face? Practical uncertainties such as product adaption to local market demand, distribution in unfamiliar markets and in particular what distribution partners, channels, investor group to target, lack of brand recognition, dominance of local-players, overcoming uncertainties regarding tax barriers and currency

risks are the likely to be of greater concern to most asset managers. Political uncertainty over the evolution of Asian passporting and related marketing and operational issues may be less of an less immediate concern to asset managers, but must always be borne in mind given the lack of maturity of some of these markets and the political ambitions to build strong local industries and players.

And what does the future of UCITS look like in Asia? All of these fund passporting type initiatives will potentially challenge the current dominant distribution position of UCITS in the Asian region over the longerterm. However, it’s still very early days and while its without question these initiatives will over a period of time drive the building of stronger local Asian based fund domiciles

including a related supporting infrastructure, the time-period and challenges taken to achieve this should not be underestimated. In addition UCITS as the long-established global brand will continue to be the product of choice of many investors, notwithstanding these local regional initiatives. The political support of the Chinese and its regulators will be the critical success factor for any of these initiatives long-term. Without their support and access to the huge Chinese market potential, many of these initiatives could remain little more than interesting concepts. Looking into the future, some of these initiatives may be extended to cover regions/ jurisdictions such as the EU and/or individual countries such as Luxembourg. This could start with the extension of the HKCMR to funds from other countries. Currently, there is no information on the duration of the exclusivity of Chinese mutual fund recognition to Hong Kong. However as with many other mainland financial liberalisation schemes (RQFII and Stock Connect), there is a market expectation that the scheme may be expanded in the future once the MRF is proven to be successful. All of these initiatives are welcomed by both Asian and global managers as opportunities to enter and broaden their footprint in these growing new markets with vast potential. Notwithstanding this, certain local managers will see the entry of foreign long established managers with global brands as a real threat to their local dominance. Overall, asset managers are broadly optimistic about the future Asia-Pacific market notwithstanding the recent market volatility in the Chinese markets. This region will continue to be one of their top target markets and as such managers will continue to use a mixture of both local and foreign domiciled products to achieve this. ◄

― Supplement ― ALFI Global Distribution Conference 2015 ― 29

View from Dublin

Implementing alternatives ► After the regulatory wave, back to business.

― Text: Martina Kelly ― Illustration: Jan Hanrion

wo years after implementation of AIFMD and with UCITS V on the horizon, it probably seems to many as a good time to slow down the European legislative process and focus on ensuring that what has been introduced is appropriately applied. Nevertheless there are a number of review clauses built into both AIFMD and the UCITS Directive and in the case of AIFMD the timelines for some of those reviews are now upon us. One of the most significant reviews concerns the application of the AIFMD passport to non-EU AIFs and non-EU AIFMs under the passporting provisions set out in articles 35 and 37-41 of AIFMD. Article 67, which sets out the steps required in order for the relevant articles to come into effect, requires the European Securities and Markets Authority to issue advice on the application of the non-EU passports. Article 67 also requires ESMA to provide an opinion on the functioning of the current passport for EU alternative investment fund managers and on the activities of non-EU AIFMs in member states in accordance with articles 36 and 42. While much comment and focus has been placed on the likely content of ESMA’s advice, not so much has been mentioned about the content of the ESMA opinion, particularly with regard to the activities of EU AIFMs. ESMA issued a call for evidence in relation to both the advice and opinion on 7 November 2014. A review of the 50 or so responses since published by ESMA provides a substantial amount of useful information on the functioning of the EU passports. It is interesting to note for example the considerable amount of passporting activity entered into as revealed by respondents. They have also provided very illuminating information on issues and problems which have been experienced. These include the definition of professional investor under AIFMD. This is linked to the definition of professional client in MiFID. Respondents suggest that this has caused difficulty for some in selling AIFs to high net worth individuals. They point to the possibility to establish “semi-professional” AIFs in many member states. These AIFs admit categories of investors which do not fall within the AIFMD definition. Perhaps a sensible approach therefore might be to expand that definition. One possibility is to align it with the category of eligible investors for EuVECA and EuSEF funds. Other problems often encountered by respondents include the absence of a common understanding on the approach to marketing of AIF not yet authorised or established, in order to test investor interest. The lack of uni-

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“It is hugely important that this EU investment fund legislation continue to be living acts which are capable of being changed where this would benefit all stakeholders.” Martina Kelly Deputy head of markets policy division, Central Bank of Ireland

― Supplement ― ALFI Global Distribution Conference 2015

formity in the treatment of passporting notifications, particularly with regard to marketing EU AIF, is also highlighted. The issues raised by respondents point to the need to keep AIFMD and all of the European Union investment fund legislation under review. Since the crisis we have seen AIFMD, the EuVECA and EuSEF Regulations, the ELTIF Regulation and most recently UCITS V. Added to that list is the variety of Delegated Acts and ESMA guidelines underpinning the Level 1 measures. It is hugely important that this EU investment fund legislation continue to be living acts which are capable of being changed where this would benefit all stakeholders. This is not to advocate major structural changes but changes which are of benefit should be introduced without undue delay. The European Commission is required to commence a review of the application of AIFMD by 22 July 2017. A similar review on the functioning of the UCITS Directive is implied in Article 99 and must be undertaken by 18 September 2017. In light of issues identified from the ESMA exercise pursuant to article 67 of AIFMD perhaps some targeted changes should not await those more formal reviews. ◄

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24/08/2015 15:57 07/09/15 16:22

Be prepared for the transition

Taxing times ► How to keep a cool head in the midst of the current tax turmoil: BEPS, FATCA, EOI… what do these acronyms stand for and how will they impact the fund industry and its clients? ― Text: Raymond Krawczykowski ― Illustration: Jan Hanrion

ecent years have witnessed considerable resentment over what are viewed as strikingly low taxable bases for global companies. Indeed, barely a day passes without a publication including the words “tax avoidance” or “tax evasion”. Despite some unfounded myths, in a rapidly evolving globalised society in which companies have offices across the world, the tax treatment of their transactions based on current treaties and national laws-dating mainly from the last century--may now be considered somewhat antiquated. There are thus many international and European proposals on the table to address this situation and to promote tax transparency. These proposals are abbreviated as BEPS, FATCA, and EOI, among others. The main impacts of the proposed new rules include the increase of documentation requirements for companies, the increased exchange of information (EOI) between national tax authorities as well as the need for more detailed explanations on the economic rationale behind transactions. Indeed, despite any tax motives involved in the transaction, companies should also be sure to demonstrate that they perform genuine economic activities in a country. Even if we are not yet aware of the extent to which the proposals will be implemented, it is important that companies are prepared for the transition.

The current tax “turmoil” Developments in EOI have already begun, for example, through the intergovernmental agreement with the United States with the purpose of transposing obligations set out in the Foreign Account Tax Compliance Act (FATCA). On this basis, the United States and another country (such as Luxembourg) will automatically exchange information on assets held by US citizens and US residents in financial institutions of the concerned country. As part of the global move toward tax transparency, the European Union has notably proposed measures that would require national tax authorities to share much more information than in the past. Indeed, it is now proposed that advance tax rulings and advance pricing agreements (previously considered as highly confidential documentation)

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― Supplement ― ALFI Global Distribution Conference 2015

should be exchanged between national tax authorities of European Union member states on a regular basis. Another impact on current transactions comes in the form of Base Erosion and Profit Shifting (BEPS). BEPS is a plan of 15 actions formed by the Organization for Economic Cooperation and Development. This plan aims to design new global standards to ensure the coherence of corporate income taxation at an international level as well as increasing substance requirements. In recent years, the OECD has issued a number of draft papers with regard to this action plan on areas including tax treaty abuse, hybrid mismatches, transfer pricing and aggressive tax planning, among others. One point of the action plan (action 13) focuses on the country-by-country reporting obligation. Some entities (including investment funds) will be required to complete a country-by-country report subject to certain conditions. The country-by-country report will include company information (i.e., taxes paid, capital, assets, etc.) about each country in which the group is based as well as the global group picture. In light of these new developments within the European Union and as part of the BEPS initiative led by the OECD, at least some propositions on the table are likely to lead to an adaptation of the fiscal framework on a national level as well as an increase in requirements for companies.

What next? The future rules will be binding not just on Luxembourg but also on many countries across the world, and all will have to take actions to modify their respective tax laws, tax practices, and double taxation treaties. Luxembourg has demonstrated a particularly proactive approach in ensuring that investors and businesses can trust the country’s stability. Indeed, until the mid-1980s, Luxembourg’s economy was almost completely reliant on the steel industry. In the wake of the world economic crisis from 1975 to 1985 and of the pressure on the steel industry due to global over-production, Luxembourg fought back and reemerged as a true global player in the financial sector. More recently, Luxembourg has demonstrated its dedication to ensure quick adapt-

“Businesses should be prepared to successfully adapt to the changing fiscal landscape.” Raymond Krawczykowski Partner and tax leader, Deloitte Luxembourg

ability to an ever-changing landscape with the implementation of the framework for the regulation and oversight of alternative investment fund managers. For the first time, such managers became required to seek authorisation, which Luxembourg addresses under a comprehensive regime with far-reaching business impacts. It is this adaptability and forward-thinking outlook that gives Luxembourg the advantage when meeting the changes imposed on both a global and European level. We are confident that Luxembourg will continue to meet the future changes discussed above with the same proactivity and resourcefulness as in previous years. For companies, it is likely that these

new developments will have an important impact on their business. Changes to long-established practices may be considered a disruption and result in uncertainty as well as being burdensome and restrictive. It is therefore important for companies to act quickly to reassess their international tax positions and to ensure a trouble-free passage to this new world of more stringent tax rules. Furthermore, the increase in compliance requirements will require companies to report all necessary data in a particular format. These changes may mean new technologies or system changes will be essential, which could be time-consuming and result in added costs. As previously mentioned, we regularly see pub-

lications with the words “tax avoidance” or “tax evasion” in the title. There appears to be a general fear that taxpayers will always find loopholes in order to avoid applying tax rules. To combat this, legislators may initially vote on strict or even excessive tax laws, which will also be implemented differently in each country, leading to inconsistencies. In light of the above, taxpayers need to start preparing now. There will be much less confusion, uncertainty, and costs involved if the assessment of a company’s tax situation begins early on. In conclusion, one thing is sure: businesses should be prepared to successfully adapt to the changing fiscal landscape in the wake of the BEPS Action Plan and other proposals. Companies will require assistance in tax, compliance, and technology, to ensure the fulfilment of the new requirements. Tax has become a strategic business issue with a significant impact on an organisation’s competitiveness in the global market. Structures currently in place, without being altered in light of BEPS, could lead to situations of double taxation. It is therefore important that companies seek advice now to be ready for the future and avoid any non-compliant or double taxation situations. Developments in the realm of international tax are inevitable; therefore, the sooner a company is prepared, the better. The information provided may be subject to change and is accurate as of 22 July 2015. ◄

― Supplement ― ALFI Global Distribution Conference 2015 ― 33

Training

“Here are four hot courses to help heat up your fund industry career.” Ben Lyon Business manager, ATTF (until August 2015, he was project manager, IFBL)

Drivers and trends 2015 ► International fund registrations, anti-money laundering, REIF, private equity... ― Text: Ben Lyon ― Illustration: Jan Hanrion

ver the hot summer months many of us will have booked hotels or restaurants over the internet, attentively looking at the rankings and comments. In the same spirit, let the IFBL and ALFI provide you with a similar view on their top four training sessions, which will give insights from a selection of our expert trainers regarding industry drivers and possible future trends. First, the course on international fund registrations presented by Yves Tambour, partner at FundGlobam, will provide key principles of international fund registrations, roles, Euro-

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pean domestic market specificities and non-EU registrations. “An asset manager distributing a fund cross-border needs to understand the foreign market and its regulatory requirements to mitigate often underestimated business and regulatory risks both when entering the market and on an ongoing basis,” says Tambour. “Foreign markets requirements are complex and subject to change. The added value of the course is to provide a methodology to analyse foreign markets and keep up to date. Expect changes in market access rules, expansion of distribution into new markets and increased scrutiny by regulators – all the more reason to be on the ball!”

― Supplement ― ALFI Global Distribution Conference 2015

Next is a course on anti-money laundering for funds taught by Sandrine Periot, director at KPMG. It covers applied understanding, guidelines, roles and responsibilities, the risk based approach, due diligence, vigilance and outsourced partners. “The latest requirements and changes brought by the Regulation 12-02 are particularly relevant for the fund industry,” explains Periot. “The latest ALFI guidelines have given some precision and defined key concepts, but a lot of questions remain as to how to address these new obligations in practice. Attendees from TA’s and management companies, compliance and conducting officers know that the burden will increase with the adoption of the 4th AML directive, similarly the next FATF visit should also not be underestimated.” Then the REIF fundamentals programme with Michael Hornsby, partner at EY. It looks at fundamentals, structuring and roles to processes, tax, accounting and valuation. “The real estate investment fund industry is a fast growing market, especially in Luxembourg being one of the major hubs in that area. Insights into the RE industry open doors to a huge range of opportunities in the marketplace,” observes Hornsby. “In the fundamentals module, participants are often beginners, quite international and looking to broaden their knowledge and develop a deeper understanding of key market infrastructure. Investors’ allocation of capital to RE is increasing, new vehicle formats and platforms are coming into place, while the industry is under the constant pressure to adapt to upcoming regulatory changes.” And finally, the private equity programme with Pascal Leclerc of Colony Luxembourg and ALFI training quality circle representative. It covers fundamentals, structuring and roles, processes, tax, accounting, strategies and valuation. “Over years and thanks to its efficient tax and legal environment, Luxembourg has become the most favoured place to structure PE investment vehicles and deals. As a result, most of its actors have expressed an increasing need for professional training in the fields of PE structuring, processes, valuation and reporting,” states Leclerc. “We can legitimately foresee a need for an intensified professionalization of the actors in the Luxembourg PE industry that will lead the IFBL to propose additional streams of specialised courses to cope with market demand.” ◄

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07/09/15 16:22

Prospective

Time to retire the pension? ► The future of long term savings and the role of investment managers. ― Text: Chrystelle Veeckmans ― Illustration: Jan Hanrion

ue to demographic change, the sustainability of state pensions in Europe is under scrutiny. While post-retirement life-expectancy stood at 19 years in 2013, it is set to rise to 24 by 2060, attendees at the PensionsEurope conference 2015 heard. Many EU member states have been reforming pensions systems to various degrees to meet this challenge. However, the financial and economic crisis left prominent scars, adding to the complexity of the situation. Across the European Union, the annual pension gap stands at €1.9tn, the Financial Times reported in 2013. The average state or “Pillar 1” pension is predicted to decrease, falling from 43.8% of average salary in 2013 to 36% in 2060 (also heard at PensionsEurope conference 2015). Despite states encouraging citizens to pay into private pension schemes, only 40% of Europeans do so. As a result, there is still a growing need for more company pension schemes – also known as employer, occupational or “Pillar 2” schemes – wherein employers make pension contributions to qualifying institutions known as Institutions for Occupational Retirement Provision, or “IORPs”, in addition to personal savings or “Pillar 3” pensions. The solution is more savings from more people. What is the present state of the Luxembourg state pension? The General Pension Insurance Scheme in Luxembourg is currently building up its reserves. Pension contributions stand at 24% of total wages, with 8% paid by the state, 8% by the employer and 8% by the employee. This is higher than the 22% of total wages paid out to pensioners. The 2% difference is collected in a reserve fund, the Fonds de Compensation, whose total assets amount to €15bn or four times the annual spend on pensions.

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“The current low interest rate environment challenges pension funds to rethink their investment strategy.” Chrystelle Veeckmans Partner, KPMG Luxembourg President, Luxembourg Pension Fund Association

Although the figures may appear reassuring, further analysis reveals this is not the case. Current contribution levels will not cover the future cost of benefits promised in law; the gross replacement ratio is over 80%, one of the highest in Europe. Up until now, a growing labour force has compensated for the pension gap, however Luxembourg will probably struggle to replicate the growth seen over the past 25 years. Even with a 2% annual increase in the labour force, a contribution rate of 24% will be difficult to maintain. Reserves will start to fall towards 2029 and eventually vanish around 2040. Unless the Luxembourg workforce doubles in the next 20 years, which is unlikely, pension reform is inevitable. Are cross-border pension funds a solution for Pillar 2? The free movement of workers in the EU has led to a significant increase in the number of people working in several countries over the course of their career. However, occupational pension fund regulation in Europe today is a nightmare. Multinationals present in numerous member states have

― Supplement ― ALFI Global Distribution Conference 2015

to manage up to 28 different regulations with different tax, social and regulatory regimes. It makes sense for such companies to set up a single pension fund in one jurisdiction for all EU employees. Cross-border funds would allow multinationals to harmonise their pension schemes; facilitate employee mobility; improve efficiency, transparency and governance; and reduce costs. Of the 140,000 IORPs across Europe, only 86 are cross-border. The primary objective of the European Regulation IORP 1 – creating a single EU pension market – has failed. Why? As a major regulatory obstacle is hindering cross-border activities: the capital requirement forcing IORPs to be fully funded at all times. A revised European regulation, IORP 2, is due in 2016, aiming to stimulate cross-border pension funds. The harmonisation of regulatory standards will help, however EU regulation cannot address the main barrier to cross-border funds, namely the different tax and social legislation applicable in each member state. How can people be encouraged to save more? Nearly half of all millennials and two thirds of those under 23 do not know how pensions work. Saving for a house, travel, car and other consumer products ranked higher for these groups than savings for retirement, a KPMG study, Time to retire the pension?, found. There is a real need to educate citizens and develop information about pensions. Regulation is pushing transparency, simplification and standardised formats to facilitate understanding and product comparison. Today’s consumers are very different. They have less to invest, but a greater need to save to compensate for the disappearance of guaranteed retirement income. One global trend is the move from defined benefit to defined contribution pension schemes; shifting risk from employers to individuals. Long term savings consumers are becoming more demanding.

adapted to offer pension funds the incentive to invest in the real economy. Operating on a very low interest rate, efficiency and costs are becoming very important. A 1% reduction in costs over a 20 year period increases the performance of a pension fund invested in government bonds by 20%. To reach these customers directly and restore trust, investment managers need to be more transparent on risk and fees as these are currently regarded as too complex and uncertain. Investment managers also have to think in more sophisticated ways, based on behaviour and preferences. Putting together investment products based on asset classes will no longer work. Instead, personalised products should be marketed to customers in a way that reflects their personal circumstances and meets the needs of the different stages in their life.

They look to the financial services market for a solution, not a product, which may include medium term assets such as property. The European long term investment fund (ELTIF) is an example of a new and innovative product aimed at stimulating long term savings. It gives investment managers the opportunity to offer investments in infrastructure, small companies and real estate to pension funds and also directly to consumers across Europe.

What is the role of investment managers? The current low interest rate environment challenges pension funds to rethink their investment strategy. A preference for fixed income will be replaced by a wider variety of products, allowing for greater diversity of investment and return. Through its Capital Market Union initiative, the new EU commission has recognised though that regulation needs to be

What roads can Luxembourg explore? To maintain its state pension, Luxembourg must stay competitive, attract talent and develop new sources of employment in areas such as financial technology, enticing digital companies to Luxembourg. To manage pension reserves, Luxembourg could adopt best-in-class pension models seen in the Nordic countries and Canada, including investing more assets in alternatives. Regarding Pillar 2, a single EU market in pensions is slowly emerging. Given its excellence in servicing the fund industry, Luxembourg is the perfect domicile for future cross-border pension funds. The investment management industry as a whole needs to think of ways of developing products that meet the changing needs of a more diverse and demanding end consumer. If Luxembourg effectively adapts to this changing environment, it will remain a leader in asset management for many years, with strong growth in its economy and its workforce. ◄

― Supplement ― ALFI Global Distribution Conference 2015 ― 37

Assurance

“The partnership between the fund industry and the insurance sector is about to tighten.” Marc Hengen CEO, Association des compagnies d’assurances et de réassurances

Investment funds and insurer’s technical provisions ► The head of Luxembourg’s insurance trade group calls for closer cooperation with the fund sector.

― Text: Marc Hengen ― Illustration: Jan Hanrion

here are tight and important links between insurance companies and the investment funds industry. Insurance undertakings take financial commitments towards their clients as the counterpart of insurance premiums paid to them. They cover certain risks or manage retirement or savings provisions. These commitments, also called technical provisions, are covered by assets owned by the insurance undertaking. The list of the eligible assets or financial instruments is regulated by law. Insurers have traditionally been large subscribers of government bonds. Since the recent financial crisis

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the situation has evolved. Persisting low interest rates on quality bonds has led insurers to look more and more towards the fund industry’s products in search of financial instruments combining security and yield. The partnership between the fund industry and the insurance sector is about to tighten. If we focus on the life insurance business several combined factors thrive towards a tightened partnership between insurers and the fund industry. The upcoming Solvency II regime, which will take effect on 1 January 2016 will most probably lead to an increase in the offer of unit linked products. In unit linked products the insurance taker bears the financial risks and

― Supplement ― ALFI Global Distribution Conference 2015

benefits compared to fixed income products for which the insurer gives a fixed guarantee. Lighter capital requirements for unit linked products will contribute to this trend. Solvency II will also have another effect on the fund industry. The new solvency regime for insurers comes with increased and more detailed reporting duties. Managers of investment funds used as underlying assets to insurance contracts will have to offer a “look-through approach” for the new reporting purposes. As mentioned, life insurers also offer fixed income products. In a low interest environment the offer for high yield products is scarce which further encourages insurers to shift their product offer to unit linked products. Guaranteed products have lost attraction because of very low guaranteed interest rates: since July 2015, there is a maximum of 0.75% interest rate for guaranteed products in euros. Life insurance products have a favorable place in the toolbox of the wealth manager. Luxembourg life insurance products are highly appreciated as they offer – amongst others – the advantage of giving the subscriber the choice of a long list of available underlying assets. The product range and the list of available assets have recently been reviewed by the circular letter Nr 15/03 from the Commissariat aux Assurances making life insurance products even more attractive. For (ultra) high net worth individuals, Luxembourg insurance companies can offer tailor-made solutions: the client can choose himself the underlying assets. Life insurers can create dedicated funds for one client. For sophisticated solutions, such a dedicated fund can have a personalised investment policy put up together with the client’s advisors. As of the end of 2014 Luxembourg life insurance companies were holding €97.92bn worth of technical provisions related to unitlinked life insurance contracts; this represents an increase of 12.03% compared to 2013. During the year 2014 Luxembourg life insurance companies emitted €12.63bn of new premiums for unit linked life insurance contracts, up by 9.09% compared to 2013. The market conditions are good for 2015 – the partnership between the investment fund industry and the insurance sector will thus be increased. ◄

Kurt Salmon, signe de différence Trouver la différenciation compétitive pour atteindre le leadership Kurt Salmon accompagne les dirigeants dans l’exploration de nouvelles voies pour les entreprises. Les équipes de conseil en stratégie du cabinet interviennent à leurs côtés pour mieux comprendre les attentes du marché, pour les aider à discerner les facteurs d’évolution de leur secteur d’activité et à trouver la différenciation compétitive qui leur permettra d’exprimer leur leadership. Kurt Salmon est un cabinet de conseil en transformation des entreprises La vocation des 1 400 consultants de Kurt Salmon est d’apporter aux dirigeants des entreprises le conseil et les idées originales qui ont un impact direct et concret sur la réussite de leurs projets et, en particulier, sur leurs projets de transformation. Kurt Salmon, signe d’excellence depuis 1935 - www.kurtsalmon.com

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4/17/14 14:56 18/04/13 09:36 12/04/13 11:30 07/09/15 16:23

Opportunities

After the regulatory wave: back to business? ► MiFID II is looming, and will provoke significant questions about business models and the relationship between product providers and distributors.

e can all dream, but the dream of a world in which regulation slows down and we can just focus on expanding our business may be some way from coming true. There are some very encouraging signs: European Commissioners Lord Hill and Mr Timmermans are making very welcome noises about slowing down the pace of regulation, and about focusing on fewer, big issues. They are also committing to doing proper impact assessments of proposed legislation and making existing regulation work, in contrast to the traditional approach of just introducing more. Opportunities for asset managers, who provide a channel for savings to flow into European companies, are likely to arise from the focus of the Capital Markets Union initiative on market-based finance. We have been given a specific opportunity to feed in ideas about how to encourage savings and break down remaining barriers to cross-border activity, as well as contribute to thinking about how funds can be used in personal pensions. But there is still a significant legacy of legislation coming our way: MiFID II is looming, and will provoke significant questions about business models and the relationship between product providers and distributors. It remains to be seen how the limitations on paying “inducements” to distributors will develop and affect the market. There is a danger of many different national interpretations and applications, not only of those rules but also around what may or may not be a complex product and what limitations should apply to such products when they are offered to retail investors. And the timetables for implementation are going to be incredibly short. Asset managers, UCITS managers and alternative investment fund managers may still not have escaped the strictures of remuneration structures designed for large, systemic banks. In its consultation on the application of remuneration policies to UCITS managers, the European Securities Market Authority has helpfully diverged from the view of the European Banking Authority about the application of proportionality and the extent to which it is possible to disapply particular directive requirements to take account of the nature of different businesses. We need to take the opportunity being presented to us to explain why the risks and

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― Text: Sheila Nicoll ― Illustration: Jan Hanrion

“The debate around access of third country AIFs to the EU market is just beginning to heat up.” Sheila Nicoll Head of public policy, Schroders

incentives for staff in an agency business like asset management are very different from those in the balance sheet business of a large bank. The debate around access of third country AIFs to the EU market is just beginning to heat up. As regulators think about whether asset managers may or may not be systemic they

― Supplement ― ALFI Global Distribution Conference 2015

are increasingly focusing on how we manage liquidity in our funds, particularly open ended ones, and how we communicate with investors if there is some kind of mismatch between the liquidity of our funds and liquidity in the underlying market. So I am sorry to shatter the dream, but as the profile of asset managers increases and our role in supporting the financial well-being of European citizens is better understood, there will be an inevitable increase in the scrutiny of asset managers. In my view it is not a question of either/or – focusing on regulation or on the business – at least for the next few years. We are just going to have to multi-task. We need to explain the nature of our business in order to avoid inappropriate, banking-inspired regulation being applied to us; we need to cope with further, significant regulatory change; and we need to focus on expanding our business, all at the same time. ◄

Professional Training and Qualifications for the Fund Industry Developing knowledge and competence in Luxembourg in association with ALFI and the fund industry’s leading specialists. The professionalism of the Fund Industry in Luxembourg is in constant progression. The IFBL – Institute, the “finance” pillar of the House of Training, offers you in association with ALFI the tools and resources needed to keep up with both fundamental and specialized training demands. With certifications, expert trainers, materials that are permanently kept up to date, IFBL / ALFI fund training is the choice of the industry to keep driving forward.

The IFBL is pleased to highlight the following courses, available in the 2nd semester:

_ENG 16th October: Understanding IFRS and their use in accounting for alternative investment funds. UCIS KEY INSIGHTS INTO IFRS

_ENG 16th October: Principles and methods of risk management and governance for UCITS and AIF funds. RISK FOR CONDUCTING OFFICERS AND DIRECTORS

_ENG 19th (am) & 29th (am) October: The directive and its environment, objectives, impact, implementation and scope. UNDERSTANDING AIFMD

INTERNATIONAL FUND REGISTRATIONS

_ENG

23rd October: Key principles, roles of actors, European domestic market specificities, registrations outside the EU.

INTRODUCTION TO FUND COMPLIANCE _ENG 30th October: Ethics, governance and rules of conduct, market abuse, insider trading, customer complaints, conflict of interest, data and confidentiality. INTRODUCTION TO EUROPEAN FUND TAXATION

_ENG

9th November: Basic notions, terminology, key EU markets and reporting.

_ENG 18th (am) & 25th (am) November: Applied understanding of AML and industry guidelines, responsibilities, due diligence, vigilance and outsourcing. APPLIED AML FOR FUNDS

_ENG 7th December: Role, responsibilities, authorization, passport and programme of activities. UCITS AND NON-UCITS MANCOS

More information can be found on both the IFBL and ALFI websites (www.ifbl.lu & www.alfi.lu)

IFBL - L’INSTITUT customer@ifbl.lu | Tel. : +352 46 50 16 – 1 | Fax : +352 46 50 19 | www.ifbl.lu

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Portfolio management

“To optimise the application of a sound research process, the manager should not be limited.” Thomas J. Digenan Managing director & head of US Intrinsic Value Equities, UBS Global Asset Management (Chicago)

Gone fishing ► How clever research can help reel in better returns.

― Text: Thomas J. Digenan ― Illustration: Jan Hanrion

or investors, picking stocks is like going fishing. You can be the best fisherman in the world, but if there aren’t any fish nearby, you are out of luck. Of course you must be skilled, but you must also pick the right lake. Investors, like fishermen, increase their opportunity set by fishing in the lake with the most fish. This is quantified by Richard C. Grinold’s fundamental law of active management: information ratio = information coefficient (skill) x breadth (number of independent investment opportunities).

IR = IC * √N Information ratio is added value per unit of risk. Investors want to maximise this num-

42 ―

ber. An information ratio of 1.0 is exceptional. For a manager to achieve this he must have skill, but as in fishing, he needs breadth. There are various ways to measure breadth; one simple way is to look at the size of the investable universe. Let us assume a stock is investable if a manager can buy a 1% position in a $5bn fund within 20 trading days at a 20% participation rate of daily volume. How much skill (IC) does a manager need to achieve an information ratio of 1.0 in various developed equity market fishing holes? For the US, the investable breadth is 1,595 stocks so the IC required is 0.025; pan-Europe the investable breadth is 535 and the IC required is 0.043; and in Asia the investable breadth is 501 so the IC required is 0.045. The US clearly has the greatest breadth of any

― Supplement ― ALFI Global Distribution Conference 2015

developed country. What does this mean? In mathematical terms it means investors in Europe or Asia require a much higher level of skill to generate the same information ratio. How much more? A lot more. A manager investing in Europe would require 73% more skill, and one investing in Asia would require 78% more skill. The required skill differential is even higher considering transaction costs, as the US offers lower commission costs on average relative to other developed markets. The US market may be more efficient than Europe or Asia, but it is probably not 70% more efficient. While the US equity market represents over a third of the overall equity world market cap, it represents well over half the investable opportunity among developed markets. This opportunity should not be ignored. Assuming opportunities exist within US equities, how can they be captured most efficiently? A strong research process requires an effective screening mechanism (to locate the fish), rigor and expertise (skill) and breadth of coverage. The disciplined application of that research process will deliver the highest potential added value. Let us return to the fishing analogy once more. Placing limitations on investors is like restricting the portion of the lake that can be fished. To optimise the application of a sound research process, the manager should not be limited. A common constraint placed on managers is on the ability to short stocks. Limitations on shorting stocks, in effect, reduce breadth and establish a higher hurdle for the manager to clear when it comes to skill. In addition to offering greater breadth, the US market is advantageous because it provides more liquidity on the shorting of stocks relative to other developed markets. The UBS US Opportunity Fund, a longonly portfolio, follows this approach. We have delivered strong results. In early 2016 we plan to offer an additional fund which relaxes the long-only constraint so that we can fish the entire lake. We can’t wait. ◄

UCITS

PRIIPs

From KIID to KID

Challenges lie ahead. Let’s face them together. Our experience in the UCITS and AIFMD reporting spaces has proven that many of the regulatory reporting challenges faced by asset managers lie outside of report production. As the PRIIPs regulation takes shape, we will surely be faced with unforeseen challenges. At KNEIP, we are actively involved in the PRIIPs workgroups that are shaping this regulation, and have in-depth knowledge and experience in the ﬁeld of regulatory reporting that we are now using to beneﬁt asset managers as we meet the challenges of this new regulation.

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Globalisation

Pension funds go global ► Pension funds fulfil a critical role in the economy as they channel the savings of millions of people into investable financial assets and convert them into post-retirement income. ― Text: Dariush Yazdani ― Illustration: Jan Hanrion

ension funds represent the largest institutional investors at the global level with total assets under management of US$36.4tn in 2013, and their assets are set to reach $56.5tn by 2020, according to PwC’s Asset Management 2020: a brave new world, 2013, as both developed and developing countries attempt to bring more savers under the retirement umbrella. However, a long period of low interest rates has diminished returns on assets and made it more arduous for pension funds to meet their long-term liabilities. Furthermore, the global population is ageing at an unprecedented pace (the number of people 60 years old or older is set to increase by 2.8% annually from 2025 to 2030, PwC found in Real Estate 2020: building the future, 2014), and the worldwide old-age dependency ratio is forecasted to reach 25.4% in 2050, up from 11.7% in 2010 (source: the UN report World Population Ageing 1950-2050). This is shifting government pension structures from traditional defined benefits (DB) schemes and “pay as you go” models to defined contribution (DC) schemes. The later are more sustainable in a scenario where governments have to deal with a beneficiary population that lives longer and bears longer pay-out periods. In light of that, during the last ten years, DC assets have grown at a rate of 7% annually while DB assets increased at a slower pace (4.3%), Towers Watson said in its Global Pension Study 2015.

The need to “go beyond borders” As the global population ages and pressure mounts on pensions to deliver liveable incomes to retired people, pension fund managers will need to increase the diversification of their portfolios by asset class as well as geographical exposure.

44 ―

Allocations to alternatives have, in fact, increased in the largest markets. For instance, both Canadian and British pension funds allocated 25% of their total assets to alternatives in 2008 and this figure jumped to 31% by 2013. At the same time, pension funds managers are looking more closely at foreign markets as they offer further diversification. For the majority of OECD countries (excluding the US), foreign investments of pension funds accounted for about 23% of their total investments in 2008 and reached nearly 30% by 2013. Dutch, Finnish, Portuguese and Italian pension funds are the most aggressive investors in overseas markets, while countries like Brazil and Poland allocate only a small portion of their assets due to regulatory barriers. With regards to regulatory barriers, the majority of OECD countries do not set limits on their overseas pension investments. However, some have established maximum percentages that can be invested in non-OECD or non-EU countries (i.e., Denmark, Finland and Italy), a number of countries have set limits on pension investments in foreign currency (i.e., Portugal, Poland and Switzerland), and others impose limits on specific asset classes (i.e., Chile, Norway and Mexico), the OECD reported. As pension funds increasingly look beyond their borders to address their needs, they are achieving foreign exposure in a variety of ways.

Equity investments When investing abroad, pension funds tend to favour equity investments. This remains the largest asset class within pension funds at the global level. As a matter of fact, in 2013, about $15.6tn were allocated to this asset class, accounting for 45% of the total portfolio of pension funds globally. In this context, the weight of domestic equity as a percentage of total equity in pension portfolios has decreased at the global level from 87% in

― Supplement ― ALFI Global Distribution Conference 2015

2008 to 84% in 2013, according to the PwC Market Research Centre.

Developing asset management teams abroad Establishing “outposts” in specific markets abroad is another strategy for gaining foreign exposure. In 2011, Norges Bank Investment Management, which manages the Government Pension Fund Global (GPFG) for Norway, established a subsidiary in Luxembourg to oversee direct and indirect real estate investments in mainland Europe. South Korean National Pension Service (NPS), seeking to expand its overseas investments, opened an office in London in 2012, as reported by Gov.uk, followed by another in Singapore three years later, Yonhap said. OPSEU Pension Trust, one of Canada’s largest pension fund managers, opened an office in Sydney in 2013 (source: Osler, The Leading Role of Canadian Pension Funds at Home and Abroad). That year, the Ontario Teachers’ Pension Plan also opened doors in Hong Kong to boost strategic Asian investments. Similarly, the CPPIB launched a new office in New York and Sao Paolo in 2014, while Legal & General Capital and Dutch pension fund manager PGGM announced, on its website the launch of a London office joint venture partnership in January 2015.

Partnering with asset managers Another strategy includes partnerships with asset managers that have expertise in foreign markets. Citywire reported that in 2012, Fidante Partners, which manages the Australian government’s pensions, bought a significant stake in MIR Investment Management, a specialist in Asia-Pacific equities. In 2013, Norges Bank Investment Management said in a press release that it bought 49.9% of five office properties in the US, its first investment in the country, through a joint venture with TIAA-

“Economic, tax and political stability combined with an appealing regulatory framework also make Luxembourg a prime alternative for pension funds.” Dariush Yazdani Partner, PwC Luxembourg

CREF. And in 2015, the CPPIB partnered with Unibail-Rodamco to grow its German retail real estate platform and acquired Antares Capital, the US sponsor lending portfolio of GE Capital, those firms said in press releases.

Investing in foreign funds Investing in foreign funds is another key way to invest abroad. Nearly all mature pension markets tend to use mutual funds when investing a large percentage of their assets abroad. Invest-

ment funds are, in fact, one of the most convenient vehicles for gaining exposure to international assets. In effect, they are highly regulated and more liquid than the majority of other investment products, and they have the ability to provide broad global representation while spreading risk across hundreds of companies, sectors, and countries around the world. During the last decade, pension schemes in OECD countries have been increasingly using indirect investments. For instance, in 2013,

about 30% of global pension assets (both domestic and foreign) were invested through investment funds with mature pension markets like Australia (61%) and Switzerland (50%) directing at least a half of their investments to mutual funds, the PwC Market Research Centre found based on national pension associations and the OECD. This trend is also catching on in developing markets. Peruvian pension funds, for example, invested USD 2.3bn through investment funds in 2010 while in 2014 the figure stood at $13.6bn which is a 56.2% CAGR in the time span. If pension funds are looking for a one-stopshop to increase their foreign exposure through mutual funds, Luxembourg is the perfect match. The world’s biggest asset managers have chosen the Grand Duchy for their global distribution, and the funds domiciled in Luxembourg are distributed across over 70 countries in Europe, Asia, the Middle East and Latin America. The array of products available to serve pension funds is also vast and the range of service providers is highly diversified. Economic, tax and political stability combined with an appealing regulatory framework also make the country a prime alternative for pension funds. ◄

― Supplement ― ALFI Global Distribution Conference 2015 ― 45

Trends

Asset managers raise the bar ► State Street’s new survey of asset managers reveals an industry focused on delivering robust growth. At the same time, they are also aware of new risks such as cybersecurity. ― Text: Martin Dobbins ― Illustration: Jan Hanrion

espite their optimism, asset managers are not complacent, according to the State Street 2015 Asset Manager Survey conducted by FT Remark in April and May 2015. Respondents from 23 countries participated, spanning both institutional and retail assets. It found that asset managers continue to invest heavily in regulation: 59% are increasing their investment in regulatory compliance. Arguably the biggest risk for asset managers is that they struggle to adjust to significantly changing investor needs. To justify their optimism, asset managers need to deliver a new “vision for value” for investors. It’s about value, not just performance. Consistently strong investment performance remains paramount. However, investors are also looking for strategies that more tightly reflect their approach to managing investment risk. As part of this focus, asset managers are working hard to adapt and create more collaborative and open relationships with their clients. 79% in our survey say their strategy is being impacted by client demands for increased transparency. And, in a further sign that the dynamic between asset managers is changing, fully three-quarters of our survey respondents are spending more time and resources educating the boards of institutional clients on risk issues. Asset managers reshape product mix. New product development is also a focus for asset managers, as they respond to investor demand for new types of investment products and solutions. Indeed, the majority of managers see product innovation as their primary route to growth: 42% say they are currently preparing to enter a product category for the first time, compared with 36% who are planning to enter new markets. Asset managers are developing new value propositions based on a more customised approach to risk and return that meets clients’ unique needs. This includes a drive toward more multi-asset solutions — a product category that nearly a fifth of asset managers plan to enter for the first time. These solutions place extra pressure on asset managers’ ability to integrate and analyse risk data from multiple sources, encompassing multiple asset classes. This requires modern IT architectures and the highest standards of data governance. Equipped for transparency. As a result, asset managers are turning to a new breed of

46 ―

“The biggest risk for asset managers is that they struggle to adjust to significantly changing investor needs.” Martin Dobbins Managing director, head of State Street Bank Luxembourg

performance, risk and compliance tools to help achieve greater transparency. Such tools enable more efficient governance and transparency across diverse portfolios. With strategic deployment of these tools, asset managers can both ensure their portfolios are fully compliant and empower their clients with the granular risk and performance information

― Supplement ― ALFI Global Distribution Conference 2015

they demand — turning transparency into a source of competitive advantage. Competitive forces play their part. It’s critical that asset managers adapt, as they face new competitive threats. Almost four out of five asset managers in our survey (79%) expect to face direct competition from non-traditional challengers such as technology players like Google, Apple and Alibaba Group in the next three years. Arguably these players are distinguished by their ability to use data and analytics to understand their customers and shape the proposition accordingly — qualities that will be key to future success in asset management. Growth through differentiation and innovation. In short, the most enterprising asset managers are raising the bar with innovative and differentiated approaches to justify their optimism and build deeper relationships with investors to capture the anticipated growth opportunities that lie ahead. ◄

ogier.com

To the p int. We get straight to the point, managing complexity to get to the essentials. It is a collaborative approach. We listen actively, asking the right questions, focused on what really matters. We deliver targeted, pragmatic advice with absolute clarity.

Legal services in British Virgin Islands Cayman Islands Guernsey Hong Kong Jersey Luxembourg Shanghai Tokyo

GLOBAL DISTRIBUTION CONFERENCE A world of opportunities for investors Philharmonie, Luxembourg 15 & 16 September 2015 in association with

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Picture report ALFI Spring Conference 2015 03

ALFI also organises, each March, another major international conference which attracts hundreds of professionals from around the world. Here are a few highlights. ― Photos: Steve Eastwood 01. Michel Lentz (Lentz) and Nadia Faber (EY) 02. Claude Michaux and Christopher Penny (Caceis) 03. Geert Kruizinga and Consuelo Nardon (PES Luxembourg)

06. Ben Lyon and Stéphanie Boria (IFBL) and Mark Edmonds (Lombard Odier Funds) 07. Yann Magnan (Duff & Phelps) and Alan Picone (Kinetic Partners)

08. Davide Dragoni, Ulrike Jacquin04. Ludivine Nicolai and Becker (Ogier), Daniela Klasén-Martin Lionel Trouvain (Crestbridge) (Société Générale Bank and Trust) 05. Bob Kneip (Kneip) and Leon Schwab 09. Geoffrey Lunt (Blackrock Operations) (HSBC) speaking

48 ―

― Supplement ― ALFI Global Distribution Conference 2015

Picture report ALFI Spring Conference 2015 10

13 10. Joseph E. Hendry 14. Jan Stig Rasmussen (Brown Brothers Harriman), (European Capital Partners Bettina Graeber (Pictet Luxembourg), Michaela & Cie) and Ewald Winther (European Value Hamlescher (Swiss & Partners), Ilias GeorgoGlobal Asset Management) poulos (RBC Investor & Treasury Services) 11. Nick Parkes (Novitas Partners) and 15. Aysel Boschian and Nicolas Buck (Seqvoia) Marilyn Baratto (Maison Moderne) 12. Erik Knorringa (Easynet Global Services) 16. Keith Burman and Pradipto Basu (State Street), Kavitha (Tech Mahindra) Ramachandran and Giovanni Amendola 13. Laura Totaro (KBL (Maitland Group) European Private Bankers), Cristina Ferreira 17. Géraldine Mascelli (State Street Bank) and (BNY Mellon) and Christine O’Bright Emmanuelle Miette (State Street Bank (Deloitte Luxembourg) Luxembourg) 18. Amanda Yeung (EY) and Nicolas Mackel (Luxembourg for Finance)

― Supplement ― ALFI Global Distribution Conference 2015 ― 49

ACA Acolin Fund Services ALFI Alibaba Group Amendola Giovanni Anderson Ted Antares Capital Apple ATTF Axa im Benelux

About Credits and index SUPPLEMENT

38 49 8, 34, 47 46 49 49 44 46 34 19

ALFI Global Distribution Conference 2015 in association with NICSA & HKIFA WWW.PAPERJAM.LU

•

SEPTEMBER / OCTOBER 2015

•

SUPPLEMENT

COVER Illustrations Jan Hanrion

Baratto Marilyn 49 Basu Pradipto 49 Batejan George 12 Banque Havilland 25 Banque Pictet 6 Bentsen Lloyd 24 BGL BNP Paribas 2 Blackrock Operations 48 BNY Mellon 49 Boria Stéphanie 48 Boschian Aysel 49 Brown Brothers Harriman 24, 49 Buck Nicolas 49 Burman Keith 49

Jan Hanrion is an in-house creative talent at Maison Moderne. Hailing from Metz, he studied fine art in France. He specialises in image in the widest sense of the word: illustrations, photography and reworking images.

ALFI Global Distribution Conference 2015 in association with NICSA & HKIFA

CACEIS Central Bank of Ireland Chandler Marc China Securities Regulatory Commission Clinton Bill Comarch Crestbridge CSSF

Deloitte Luxembourg Denayer Laurent Digenan Thomas J. Dobbins Martin Dragoni Davide Duff & Phelps

Write to PO Box 728 L-2017 Luxembourg Offices 10, rue des Gaulois, Luxembourg-Bonnevoie ISSN 1992-4275 Web www.maisonmoderne.com Founder and CEO Mike Koedinger Administrative and financial director Étienne Velasti

Publisher Phone (+352) 20 70 70 100 Fax (+352) 29 66 19 E-mail publishing@maisonmoderne.com Editorial staff press@paperjam.com Web www.paperjam.lu Publisher Mike Koedinger Editorial director, editor in chief Jean-Michel Gaudron (-101) jean-michel.gaudron@maisonmoderne.com Staff editor Aaron Grunwald Illustrations Jan Hanrion Proofreading Pauline Berg, Muriel Dietsch, Sarah Lambolez, Cynthia Schreiber

Advertising Phone (+352) 20 70 70 300 Fax (+352) 26 29 66 20 E-mail mediasales@maisonmoderne.com Director “Maison Moderne Media Sales” Francis Gasparotto Sales director Luciana Restivo Advertising account managers Marilyn Baratto, Laurent Goffin Sales management assistants Tania Henriques, Nathalie Sohn Sales assistant Céline Bayle Administration Isabelle Ney To reach employees by e-mail, please follow this model : first.last@maisonmoderne.com Printed by Imprimerie Centrale, Corelio

Easynet Global Services Edmonds Mark ESMA European Capital Partners Luxembourg European Commission European Union European Value Partners Experta EY

Please recycle. Finished reading this publication? Archive it, pass it on or recycle it.

Phone (+352) 20 70 70 200 Fax (+352) 27 62 12 62-84 E-mail studio@maisonmoderne.com Director “Maison Moderne Studio” Guido Kröger Creative Director Jeremy Leslie Art director Stephanie Post Studio manager Stéphanie Poras Layout Monique Bernard (coordination)

32, 49, 51 49 42 46 48 48

49 48 30 49 22, 26 32, 36 49 4, 5 28, 48

GE Capital Georgopoulos Ilias Google Graeber Bettina Gramegna Pierre Griffin Jonathan P.

Hamlescher Ewald Häfele Daniel J. Hendry Joseph E. Hengen Marc Hill Lord HRT Services HSBC

IFBL

Design

28 24 49 48 34

Faber Nadia 48 Farad 27 Federal Reserve 24 Ferguson Michael 28 Ferreira Cristina 49 Fidante Partners 44 Financial Times 36 Fonds de compensation 36 Foster Anna M. 49 Franklin Templeton Investments 8 FT Remark 46 Fundglobam 13

EU Ecolabel : FI/11/001

31, 48 30 24

44 49 46 49 3 22

49 49 49 38 22 35 48

KBL European Private Bankers Kelly Martina Kempeneer Pierre

Lentz Lentz Michel Lombard Odier Funds Lunt Geoffrey Luxembourg for Finance Luxembourg Pension Fund Association Lyon Ben Lyxor

Mackel Nicolas Magnan Yann Maison Moderne Maitland Group Mantrisi Mario Mascelli Geraldine Michaux Claude Miette Emmanuelle MIR Investment Management

Nardon Consuelo Nichol Kerry-Jane Nicolai Ludivine Nicoll Sheila Nicsa NN Investment Partners Norges Bank Investment Management Novitas Partners

O’Bright Christine Obama Barak OECD OGIER OPSEU Pension Trust

Parkes Nick Penny Christopher PES Luxembourg Picone Alan Pictet & Cie PwC Luxembourg

Ramachandran Kavitha Rasmussen Jan Stig RBC Investor & Treasury Services Reagan Ronald Rubin Robert

22 48 12 22

49 30 49

48 48 48 48 49 36 34, 48 21

49 48 49 49 26 49 48 49 44

48 49 48 40 12 52 44 49

49 24 32, 44 47, 48 44

49 49 48 48 49 44

49 49 49 24 24

Schroders 40 Schwab Leon 48 Securities and Futures Commission of Hong Kong 28 Seqvoia 49 Société Générale Bank and Trust 48 Sociéte Générale 11 State Street Bank Luxembourg 46, 49 Swiss & Global Asset Management 49

Tech Mahindra Totaro Laura Trouvain Lionel

49 49 48

UBS Global Asset Management (Chicago) Unibail-Rodamco United Nations

34, 41, 48

J J.P. Morgan Asset Management (Europe) Jacquin-Becker Ulrike Janus Capital Group Juncker Jean-Claude

Kinetic Partners 48 Klasén-Martin Daniela 48 Kneip 26, 43, 48 Kneip Bob 48 Knorringa Erik 49 KPMG Luxembourg 36 Krawczykowski Raymond 32 Kruizinga Geert 48 Kurt Salmon 39 Kusch Ron 49

Veeckmans Chrystelle Von der Heydt Invest Voss Denise

Winther Michaela

Yazdani Dariush Yeung Amanda

42 44 44

36 49 8

44 49

In this Index are all companies, people and advertisers mentioned in this special edition.

50 ―

― Supplement ― ALFI Global Distribution Conference 2015

Keeping a cool head in an everchanging regulatory landscape Although the worlds of UCITS and AIFMD are converging, major challenges still lie ahead to ensure cross-border compliance when it comes to distribution and marketing of funds. Deloitte can help you through the maze of regulatory and practical requirements to ensure a seamless and effective cross-border distribution strategy. More information on: www.deloitte.com/lu

Deloitte Luxembourg’s app is Deloitte Luxembourg’s app is

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We build partnerships based on high standards of individual service, not one-size-fits-all

When it comes to Fixed Income investing, our focus is to ensure you achieve your objectives. We do this through greater transparency, faster response and solutions that are precisely tailored to your needs. Great partnerships start with a conversation, and we are always happy to discuss the future with our clients. What matters to you, matters to us. For more insights, visit www.nnip.com

Fixed Income

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Absolute Return

Convertibles

Europe High Yield

Emerging Market Debt

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