Embarking on an odyssey
Capital market players, asset managers and insurance companies have to reinvent their business model after the financial crisis. This shift will have considerable consequences for all financial centres. In his presentation at the ALFI spring conference in Luxembourg, Marc Saluzzi, partner at PwC Luxembourg says that all financial actors will have to face a regulatory tsunami. He nevertheless sees opportunities for Luxembourg. The directive on alternative investment funds is one of them.
Luxembourg’s dominant position in the domain of UCITS (Undertaking for Collective Investment in Transferable Securities) funds is uncontested. The country has successfully positioned itself as the global leader for cross-border distribution, to the extent that today over 75% of European retail funds distributed internationally are based in Luxembourg.
Luxembourg’s market share in alternative investment funds is less flattering, with only 4% of the 3,542 billion Euros under management. For Marc Saluzzi this figure is no reason to be depressed, because the Luxembourg financial centre has a lot to offer.
“The good news is that most of the top fund management companies already have a first experience of Luxembourg”, he underlines. Now is the time to capitalise on this, because in the area of alternative investment funds you don’t get a second chance to make a first good impression.
In his presentation entitled Impact of the new regulatory framework for the Luxembourg fund industry, Marc Saluzzi highlights the strengths and weaknesses of the financial centre. One of the strengths is undoubtedly that local professionals know how regulated alternative investment funds work. “Alternative UCITS have become a credible alternative to offshore hedge funds”, he adds.
At the same time, Luxembourg is not a centre of excellence yet. “One has not convinced fund management companies enough to bring their funds to Luxembourg” Saluzzi adds and goes on asking if the Luxembourg regulator CSSF could cope with an AIFM wave.
Another key question mark concerns institutional investors. Marc Saluzzi highlights the fact that Luxembourg has made itself a name in wholesale distribution of UCITS funds, but institutional investors are worried by additional compliance costs and negative impacts of the performance of their investments.
In his closing remarks, Marc Saluzzi of PwC Luxembourg states that the regulation of alternative investment funds must be seen as a new beginning for Luxembourg in this area.
The country’s main objectives should be to attract the best service providers to Luxembourg, to become the domicile of choice for institutional investors and to become the global distribution platform for AIFMs. “The UCITS adventure was quite a ride, let’s now embark on the AIFM odyssey”, Saluzzi closes on an optimistic note. CW