ALFI: another year, another combat
The Luxembourg investment fund industry continued to create jobs in 2011 despite very adverse conditions. Speaking at a press conference Mr Marc Saluzzi, chairman of ALFI, described 2011 as “a year of combat”. Thanks to the strength and reputation of Luxembourg in a period when investors have lost confidence, net sales remained positive over the year. Few countries in Europe could match this performance, he noted.
International legal developments arising from the financial crisis have done nothing to ease the situation, continued Saluzzi. In his view, the greatest challenge in 2012 lies in this sphere, in particular, the application of the “Volcker Rule” and the Financial Transaction Tax (FTT).
The Volcker Rule, as proposed, discriminates against non-US regulated retail funds and will limit the activities not only of US banks but of any bank that is active in the US.
An even more immediate danger lies in the FTT. This would have an “extremely negative” effect on the investment fund industry, said Saluzzi, and be little short of a disaster if applied unilaterally in Europe. Designed as a method of making the financial sector “pay” for its contribution to the financial crisis, Saluzzi explained that it would hit retail investors first and foremost. “investment funds have a multiplier effect”, he explained. History shows that institutional investors move fast to evade this tax. Heavy institutional redemptions hit investment fund performance, create job losses, and as a knock-on effect wipe out the fiscal advantage of the tax. Retail investors and pension funds will be left paying the bill. ALFI is working through EFAMA in an effort to influence the outcome in favour of retail funds and of a wider G20 application of the tax. ER