2018 brings opportunities but also challenges for the fund industry

The Luxembourg Fund Industry had a very good year in 2017 with assets under management standing at EUR 4,159 billion at the end of December. 2018 also promises to bring in plenty of opportunities, with the progress of Europe’s Capital Markets Union, the plan to introduce a Pan European Personal Pension Product, pick up in sustainable finance and the development of new technologies.
“Looking at 2018, we are very optimistic, however challenges still exist for the fund industry, particularly regarding regulation, where ALFI is currently busy on 17 pieces of regulation, together with the 1,800 members of our 150+ working groups. All of them are important and our efforts to make sure that regulation works in the interest of both the investor and the asset manager alike is a fundamental part of ALFI’s mission”, explains Denise Voss, ALFI chairman.
Here are some of ALFI’s priorities for 2018:
 
Distribution opportunities worldwide
ALFI is celebrating its 30th anniversary this year and it will continue to facilitate international distribution opportunities around the globe.
It will continue to develop its contacts in Latin America, where Luxembourg UCITS are amongst the preferred investment solutions for local pension fund administrators looking to diversify their portfolios internationally in a well-regulated environment. In Asia, rapid growth of personal wealth is encouraging, and ALFI will continue to nurture its close relationship with the many fund markets it serves in the region.
  
Capital Markets Union (CMU)
ALFI believes that the key element of the European Commission’s plan to create a ‘Capital Markets Union’ is the overall thrust of the CMU “to mobilise capital in Europe and channel it to all companies and, in particular, SMEs and infrastructure projects that need to expand and create jobs”. In practice, this entails, among other things, removing obstacles to the cross-border distribution of investment funds, which ALFI strongly supports.
“In ALFI’s 2020 Ambition Paper, we highlight the essential role investment funds play in funding the economy, linking investors’ savings with those parts of the economy that require capital to drive growth.  Over the past few years this has been somewhat downplayed given the focus on regulation, so it is good that the spotlight is once again on the positive contribution that investment funds make to the economy.  The CMU should help investors have access to a larger choice of investment solutions”, says Denise Voss.
 
The Pan-European Personal Pension Product (PEPP)
Increasingly European households need to assume more responsibility for their own financial well-being, including retirement. At the same time, if the European economy is to be strengthened, mobility of workers must also increase, however, fragmentation between national markets and limited portability of personal pension products make this difficult.
“The European Commission’s plan to create a standardized pan-European Personal Pension Product (PEPP) comes at the right time. The PEPP will link the investment product to an individual rather than to an employment relationship and provides interesting opportunities not only for workers and job seekers, but also for the asset management industry. As providers of investment solutions, asset managers should be keen to offer the PEPP and we believe that Luxembourg, with its longstanding expertise in cross-border distribution of retail investment products, is an ideal hub for PEPP providers”, comments ALFI chairman.
 
Sustainable finance/ Responsible investing
ALFI was an early mover in actively promoting responsible investing opportunities for asset managers and investors. We have organized annual conferences and commissioned surveys on responsible investing since 2006, with the aim to bring this topic to the forefront.
“We believe asset managers can play a key role in fostering sustainable finance, which has been increasingly requested by investors. The market growth that we have seen in recent years – the European responsible investing fund market almost doubled between the end of 2010 and the end of 2016 – has strengthened our conviction. The Luxembourg investment fund industry is also well placed to contribute to moving climate change financing forward and is already the leading fund domicile for all environment-related investment funds in Europe with 45% of AUM”, explains Denise Voss.
 
FinTech
FinTech and technology in general have been an important focus for ALFI. The Association’s Digital/FinTech Forum aims to raise awareness, identify the challenges and develop the opportunities inherent in new digital technologies for the fund industry. In 2018 ALFI will continue its regular interaction with FinTech players to monitor and develop Regtech and Blockchain tools, which will reduce costs and increase efficiency in the industry.
 
Communiqué par l’ALFI