Past and future impact of Covid on Lux funds
Lessons learned from Covid and the outlook for the fund industry were discussed on day one of the ALFI Rentrée online conference on 14 September. The consensus was that the sector performed well during the crisis, and that the experience is likely to hasten on-going trends rather than causing new dynamics to emerge.
The interview with Claude Marx, the director general of the CSSF, was the highlight of the morning. “The next challenge will come when bank loan moratoriums come to an end and businesses will have to resume repayments,” he said. “We need to be prepared for another potential rough ride.” This is why the CSSF continues to monitor large redemptions, major portfolio changes and liquidity.
Marx warns on delegation...
As for new regulations Mr Marx said: “I don’t see a massive change in the reform agenda, as new rules on liquidity stress-testing, ESG investing, the AIFMD review and so on were already on the agenda pre-Covid.”
Therefore, he still has concerns that discussions at the European level to reform the cross-border fund delegation model is a case of “looking to fix something that has never been an issue.” On the national level, Mr Marx said the CSSF is currently working on a circular to clarify working from home regulations.
...and against ESG delay
Some actors in the industry have called for an implementation delay for EU ESG investing reporting requirements, due to be introduced for next year. While understanding that this represents substantial work, Mr Marx suggested that the local industry “should see this an opportunity for Luxembourg to reassert its position a leader” for finding solutions to such challenges.
Managing remote working
The morning began with a panel discussion featuring fund industry personalities from Luxembourg. They agreed that one of the keys to success in negotiating the lockdown was communication and showing a human face to employees. This strategy will be put further to the test in the coming months as ways are sought to manage evolving teams virtually, particularly when onboarding new staff. Rachel Treece, CEO of fts global said “leaders have to touch people’s emotions to generate trust.”
Luxembourg experienced in managing remote working
“Luxembourg is better placed than most fund centres as we are used to remote working already, as our clients are all located abroad,” argued Jervis Smith, Managing Director of Vistra. Finbarr Browne, CEO, of Schroders Investment Management (Europe) is hopeful that if this becomes a trend it will “open up a new talent pool for people who would prefer not to commute.”
Uneven recovery, as Asia is set to boom
James Pomeroy, a global economist with HSBC described some of the big macro trends. He sees a sharp economic recovery in Q3, but that this is a multispeed recovery. “Some counties, sectors, and people are doing well but others aren’t,” he noted.
With China likely to avoid a recession this year, this is likely to speed the country’s path to becoming the world’s largest economy. However, he says other Asian economies need more attention from investors, particularly countries with low debt and young populations such as India, Indonesia, Vietnam, and the Philippines. This will be despite these economies suffering substantial losses due to the pandemic.
Hope for digital payments
Mr Pomeroy hopes the pandemic will hasten the growth of digital payment systems because “cash payments are inefficient”. Spurred by increasing use of online shopping and contactless payment cards he thinks change could come quickly even in countries which traditionally favour the use of cash.