Union investment: why we chose Luxembourg
Union Investment, the Luxembourg-based asset manager of Union Investment Group, is part of DZ Bank, one of the largest banks in Germany. It employs more than 350 staff in the Grand Duchy. We sat down with Maria Löwenbrück, Managing Director and member of the board, to find out more about the company’s history, activities and long-term strategy.
How long have you been based in Luxembourg and what is the role of your business in Luxembourg?
Union Investment was set up in Luxembourg 30 years ago in response to the first UCITS Directive.
Today our company manages around 200 investment funds with combined assets of approximately 52 billion euros. We offer a wide range of asset classes and investment styles, including equity funds, money market funds, bond funds, balanced funds, umbrella funds, guaranteed funds and alternative investment products, such as private equity and infrastructure funds.
What is the role of Union Investment within the DZ Group?
The Union Investment Group is part of DZ Bank, the second largest commercial bank in Germany and the central institution of the Genossenschaftliche FinanzGruppe Volks – und Raiffeisenbanken cooperative financial network comprising more than 900 banks. Within the DZ group, Union Investment is the competence centre for asset management for institutional and retail clients. As at 31 October 2018, the group managed assets 330 billion euros on behalf of 4,428 million accounts.
Why did you choose Luxembourg?
There are a number of reasons, but I would highlight three in particular. Luxembourg is the largest investment fund centre in Europe from which funds are distributed cross-border worldwide. It is also the “goto” place in Europe for alternative investment funds, such as Private Equity and real estate funds. Secondly, the fund business is integrated into a highly effective financial hub. Evidence for this is the rapid implementation of EU regulations. Thirdly, Luxembourg can offer the human resource skills to support a first-class servicing platform.
What are your primary activities and how have they developed?
Besides the core asset management services, we offer portfolio management, investment consulting, sales and brokerage support services, as well as investment custody.
Over time we have been successful at spotting trends in the mindset and behaviour of our clients. For instance, sustainability is a fundamental value of our cooperative structure, and we launched a responsible investment fund as early as 1990. This fund has 20 years of experience in the field of sustainable investing and now manages 40 billion euros.
The Luxembourg financial centre has been built on an open, liberal and constructive dialogue between all the important actors, including the regulatory authority. This has enabled Luxembourg to cope well with challenges and seize business opportunities at the right moment.
Does China represent a business opportunity?
Yes, indeed; we recognised the potential early on. In 2007, we formed a joint venture with Bank of East Asia and together we set up a Hong Kong-based asset management company specialising in Asian equities and fixed income. BEA Union Investment Management offers investment solutions to retail, institutional and pension clients in Hong Kong and continental China. In the opposite direction, in 2014, we set up an investment fund called UniInstitutional Asian Bond and Currency Fund managed by BEA. This fund is distributed in Luxembourg, Germany, Denmark, Austria, Finland and Switzerland.
We welcome the various Chinese investment schemes offered onshore and offshore. In recent years, these schemes have been fully utilised by our Luxembourg investment funds for investment into China (e.g. CIBM, Shanghai Hongkong Stock Connect). Our German affiliates intend to use the offshore accesses offered by Stock Connect and Bond Connect shortly.
How has the distribution of Union Investment’s retail funds evolved over 30 years?
Union Investment predominantly distributes its funds for retail clients through the banks belonging to the Genossenschaftliche FinanzGruppe Volks- und Raiffeisenbanken. We neither use brokers nor independent financial advisers.
In 2018, we launched a Robo Advisor for the banks belonging to the Genossenschaftliche FinanzGruppe Volks – und Raiffeisenbanken, called MeinInvest. As of 31 October 2018, 187 banks have implemented the tool, which supports bank staff by offering tailor-made asset management solutions. The client can also directly access the device via the internet.
Internationally, we started at the beginning of the 90s with the distribution of our products in selected European countries, but also Japan and Hong Kong. At the end of the 90s, we set up a structural concept for international fund distribution. Where institutional clients are concerned, we have gradually expanded our service throughout Europe. To sum up our business approach: our service is tailor-made depending on the geographical area and the type of client.
Where does the Luxembourg team fit into the group?
Our team is responsible for crossborder fund notification, working with over 200 fund distribution partners in more than 20 countries outside Germany. The risk management function for the funds is located in Luxembourg alongside fund administration, transfer agent and reporting. Indeed, Luxembourg is in charge of the transfer agent activities of the entire group. It is the point of contact between the portfolio managers and the custodian bank network: the custody function is supported by around 250 local depositary banks in 80 markets worldwide.
The core idea was always to maximise the use of product and company structures in a chosen location and to avoid the establishment of double structures, as far as legally possible.
How do you see activities evolving?
Digitalisation and the current trend in responsible and sustainable investing provide excellent opportunities to develop new products and foster innovation. Customers are expecting a continuously improving digital experience from the manager of their portfolios and asset managers have become more transparent towards both clients and regulators.
Is Luxembourg a great place to find talent?
Luxembourg has developed fund expertise to a very high level.
This environment offers real career opportunities to qualified staff: it is relatively easy to find a good job and maintain a high quality of life in Luxembourg. Certain tax benefits, such as the impatriate tax regime, make it easier to relocate highly-skilled staff to Luxembourg.
What do you love best about living and working in Luxembourg?
In Luxembourg, you can feel the European spirit on a daily basis. I enjoy being at the heart of the European project, the open borders, the multicultural environment and the willingness of European and domestic actors to work together in pursuit of common goals. A great many of our staff commute to Luxembourg from the Greater Region (Germany, France and Belgium) and this is related to our business approach.
LEO Mag December 2018, Luxembourg for Finance, Gilly Mathieson.