For most of us, the speed and intensity of Covid-19 has come as a shock, forcing many countries into lockdown and putting a halt to a number of activities.

Niccolo Polli, Robert Scharfe, Marc Lauer, Pierre Bouchoms and Peter Veldman share their views on the impact of the current health crisis on their industry, and potential upcoming consequences of the pandemic.


This will definitely reshape the private equity scene. Mediocrity is not going to cut it.



Has the pandemic left a dent in the FS industries?

The current pandemic has led the world to its first truly global health crisis, affecting industries on a worldwide scale, be it the banking, insurance, private equity, capital markets or asset management industry. “If you go back in history, you’ll find a lot of examples where people have been in lockdown for a certain amount of time due to a virus or a disease, but it has always been local. No virus has previously spread this quickly on a global scale,”says Peter Veldman, Head of Fund Management at EQT Fund Management S.à r.l. Nevertheless, he notes that a good and steady level of demand in fundraising has been observed amidst the sanitary turmoil and considers the impact of the pandemic to have been fairly limited to date.

Pierre Bouchoms, General Manager at Generali Investments Luxembourg S.A., agrees that no major impact on the asset management industry has been felt on his side, stating that they have not suffered many redemptions, though specifying that his clients, being long-term investors, do not show the same behavioural traits as retail investors: “Considering the investors we have in our funds, we have not seen any major movements. We have, however, seen a slight recovery of the markets and we are experiencing a slow climb back to the level we had prior to the crisis.”

Robert Scharfe, CEO of the Luxembourg Stock Exchange, continues along this positive note. Even though the industry has suffered an 18 trillion dollar stock market capitalisation loss after the peak in mid-February, he notes that the Luxembourg Stock Exchange has seen a 65% increase of volume in the first four months of 2020: “Being a cornerstone organisation in the financial centre here, our key focus was ensuring continuity of services and security of infrastructure. Thanks to the actions of our staff a smooth continuity with no delays was ensured in the listing process of business, which has been booming with record levels of new listings.” Looking at the industry as a whole, Scharfe insists on the role and responsibility of the exchanges, which had to remain open under these extreme volatile market conditions in order to facilitate transactions and ensure the flow of funds to the real economy. Touching on the financial support provided by governments and public institutions, capital markets have seen the rise of Covid-specific financing for social and healthcare projects as a direct consequence of the crisis. Scharfe reveals that LuxSE has attracted most of these deals to list in Luxembourg: in the period from March to May 2020 alone, social and sustainability Covid-19 response bonds totalling USD 20 billion were displayed on LGX.

The insurance industry, on the other hand, has had to deal with a number of aspects. The commercial impact on the industry, according to Marc Lauer, CEO of Foyer Group, depends on the markets focused on by different insurers and their business models, with a slowdown in commercial activities having been felt throughout the industry. Regarding insurance and reinsurance companies, being mainly institutional investors, the most immediate impact on their accounts has come from the turbulences on the financial markets.


I believe the asset management industry will reinforce the economic grid by supporting the infrastructure sector and additional developments, by setting up new ways to help develop the economy.


Indeed, this situation has created a new paradigm, from the employee point of view through teleworking, new working tools, adaptation skills and agility, but also from the client point of view, with insurance currently not being a priority in the retail market. ”

From a banking perspective, Niccolo Polli, Country Chief Executive Officer of HSBC Luxembourg, describes the biggest disruption since the beginning of the pandemic as being the valuations of net assets in the currently volatile market: “Throughout the crisis our focus has been on ensuring the safety of our staff, and continuity of service for our customers. In private banking we have seen a lot of brokerage and trading activity as clients reposition their portfolios, and limited redemptions. In many cases, new debt requests have been postponed as uncertainty prevails. For the fund-related business, assets have generally moved in-line with the markets while large corporations have been working with us to ensure they have access to liquidity in case of need”.

Facing the sudden lockdown, over 90% of workforces throughout the various industries were met with the unprecedented circumstances of no longer being able to go about business as usual. Though cast into uncharted territory, IT specialists have managed to get businesses up and running in record time, allowing most industries in the financial services sector to carry on working.

Are we steering towards another financial crisis?

The financial crisis of 2008 was quite different as it impacted mostly one sector, which is the finance sector. Governments were confronted with making sure that financial services to the real economy continued to be delivered and that savings were safe. The current pandemic, however, impacts the whole economic and societal models, which will last longer and take years to recover,” predicts Scharfe.

Rather than developing into a financial crisis, the aftermath of the pandemic is forecast to turn into an economic crisis. According to Bouchoms, “the financial sector must support the economy to avoid the economic crisis developing.”

All economic crises in the past have always jeopardised the financial situation of the population. This crisis, however, will also affect the physical situation of the population and will have a major impact on consumer habits. What these impacts will be, how long they will prevail and what the effect on businesses will be is yet to be seen,” says Lauer. The insurance sector has been very proactive, with insurance companies and clients discussing on the spot solutions where needed.

As opposed to being the cause of the crisis, as was the case in 2008, Polli expects banks to be an enabler in this crisis, keeping the economy afloat as much as possible: “I think the root causes of the two crises couldn’t be more different; one is a healthcare disease and the other was a banking disease. While both crises started as something very different, they would both be very similar in that they’re going to have a huge economic impact.”

Looking at the 2008 crisis that originated from the financial system and transitioned into the real economy, Veldman states that while policymakers and central banks responded with measures directly aimed at mitigating the impact of the financial crisis, the measures to contain the health crisis have created the shock in the real economy with far-reaching consequences for businesses, which in turn is impacting the financial sector: “This will definitely reshape the private equity scene. Certain specialist private equity players are going to have to deal with serious impacts of the pandemic. Those who manage to deal with the crisis and handle their portfolios in the right way to deliver good returns will benefit hugely. Mediocrity is not going to cut it.” He goes on to state that it is currently too early predict a V-shape, U-shaped or perhaps a long-term L-shaped recovery, indicating, however, that a long-term L-shaped scenario might be very possible, even if economies are put back on their original trajectories.

Based on the recovery rate in China after lockdown, Polli notes that recovery has been slow: “From what we can tell, it’s not what is called a V-shaped recovery at all. It is taking a little bit longer. Though the threat has been diminished, the fear lingers and the fear is going to linger on for a while.”


An important step has already been done by the Luxembourg insurance and reinsurance community by massively subscribing to the recent bond issue of the Luxembourg Treasury.

Marc Lauer

Five years ago, we started pushing for new technology and moving to Google Suite, introducing an online environment. It was not a natural transition, but it was something that we realised we needed to do. In hindsight, it prepared EQT for the current situation and allowed us to shift to teleworking fairly smoothly,” says Veldman.

It is important, however, to keep in mind the mental health of employees, especially during lockdown, with Veldman conveying that companies need to provide health monitoring for staff. Polli also notes that working from home does not eliminate the need for people to take a break and recharge; on the contrary, in these times it’s ever more important for employees to take holidays. Staying on the subject of employees, he says that HSBC has currently put their hiring plan on hold.


In regard to policies, Polli speaks highly of his experience with the regulators regarding permissions: “We have had to change processes and procedures, and the regulators have been very approachable and pragmatic.”

Taking steps to shaping the post Covid-19 future

From a strategic point of view, EQT has, over the long term, been investing in industries such as fibre infrastructure, software and healthcare, to name a few. Veldman explains: “For each of the companies EQT has invested in, business plans of how to react and work through a crisis has helped keep business stable. In general, private equity firms need to not only think of the financial aspect of investing in companies, but also about bringing added value and transforming these companies.” According to him, the global crisis has triggered a lot of financing and alternative investments will play an increasingly bigger role on the market.

In addition, Veldman sees being a tech-enabled company as an advantage, not only from an operational, but also from a business point of view, assuring that the pandemic will only accelerate digital strategies.

Polli shares his view on the impact on customers, pointing out that people will need to become more ‘disease savvy’ by applying physical distancing measures and getting used to taking care of business via digital means. He also notes a change in client investment behaviour: “Generally we see that when people get worried, their money moves from what might have been a sort of sexy deposit investment paying high interest rates to a stable low interest investment.”

Polli also touches on the increasingly symbiotic relations between banks and Fintechs: “The crisis has shown that you need both the banks and Fintechs. They serve very different purposes.”

Risk strategies across industries have started adding pandemics to the list, though many remark that while people and organisations perfect their pandemic BCPs, risk will come from another source. “If you are expecting it and you have planned for it, it is not much of a risk.”


We anticipate business volumes in capital markets to remain extremely high with strong funding activity for the second half of 2020.


Scharfe acknowledges that the current situation exposes two major weaknesses in current risk approaches:

1. BCPs need to be entirely reviewed, as complete remote working scenarios were not foreseen

2. Sanitary/health pandemics are not new to the markets, however, the assumption that pandemics are locally limited issues contained in limited geographical regions no longer applies.

I believe that many organisations are currently drawing up first plans to improve risk assumptions and management processes, notably by inserting the most recent technology available.”

On the economic side, a number of industries will have a role to play in reshaping the post Covid-19 era. “I believe the asset management industry will reinforce the economic grid by supporting the infrastructure sector and additional developments, by setting up new ways to help develop the economy.” says Bouchoms He expresses worry, however, on the current employment state worldwide, with the increasing rise of unemployment having been triggered by the pandemic.


Similarly, Lauer suggests that insurance companies will play a role in financing the relaunch of the economy: “An important step has already been done by the Luxembourg insurance and reinsurance community by massively subscribing to the recent bond issue of the Luxembourg Treasury.”

As to whether a pandemic can be insured, Lauer explains that the fundamental business model of all insurers is based on the fact that many pay a limited premium to pay for claims of a few, i.e. mutualisation. Based on that model, these mechanisms would not work should everybody be impacted by the claim at the same moment, unless the State comes in to finance pandemics, as is does in some countries, for natural catastrophes.

Seeing an over 50% reversal of the 18 trillion dollars market downward trend, demonstrating that markets in various countries are reacting to Covid-19 numbers, rather than evaluating economic potential of companies, Scharfe remains positive:“We anticipate business volumes in capital markets to remain extremely high with strong funding activity for the second half of 2020.” He nevertheless stresses the fact that the impact on the real economy is currently still unknown and that many industries will be under severe pressure despite various funding programmes: “At one point in time we expect to see a shift from the equity market to the debt market. Financing needs will be huge, both from public and private users. Issuers, be it the government or SMEs, will need to gain access to multiple sources of funding, from the conventional market of syndicated transactions up to B2B platforms.”


While both crises started as something very different, they would both be very similar in that they're going to have a huge economic impact.


Operationally, all industries agree that teleworking will be part of their future working culture. How this will shape up, however, varies drastically. Some argue that the need for traditional office models and secondary remote sites/business continuity sites will be revised, as the transition from pre-pandemic office spaces to working from home has been tried and tested positively by most over the past few weeks.

Typically, the office space is what is set up in front of you: a computer, a keyboard, a monitor, a mouse and so on. We are looking more towards hot-desking, with employees having their own portable equipment to use from home or at the office. Through a poll taken within the company, we have noticed that preferences of teleworking and coming into the office vary among employees, with some preferring to forego long commutes and others seeking the calm and social interaction of the office.” Polli reveals that they are looking to creating a more flexible work environment in the future.

Veldman raises the question of how the real estate market will be affected in the future. Will teleworking lead to a reduced need of office space? Or will the office space have a different, more social function? “Rather than having dedicated desks for each staff member, it might be more important to transform that space into proper meeting facilities.”

While the pandemic has brought up many questions regarding globalisation in its classical form, Veldman examines the potential globalisation of labour, questioning whether all employees need to be brought to a same location, or if staff could work from different countries, should regulation allow it in the future. At the same time, he notes that while companies are reinventing business models and including an increasing amount of technology, employees will need to upskill and adapt to facilitate these new digital additions.


Alongside office transformations, Scharfe wonders if the current sanitary precautions will need to be taken into consideration in the long term, leading to a revamping of traditional office spaces. Among teleworking and more flexible working methods, he points out that one should not underestimate the impact that decentralisation could have on corporate culture and mutual socialisation.

It is clear that the pandemic has already had an effect on the financial services industry, but which of these changes, be it on a financial, operational or human level, will persist into the future remains to be seen.