For immediate release
Caroline DUPUY
EY Luxembourg
Tel.: + 352 42124 7552
EY Luxembourg publishes its 2016 edition of Investment Funds in Luxembourg
Luxembourg, 20 September 2016 – EY Luxembourg has just released its 2016 edition of Investment Funds in Luxembourg – A technical guide, designed to answer many questions on setting up and operating investment funds in Luxembourg. The 2016 publication has been updated to cover recent legislative and regulatory changes.
Challenges ahead
It has been another very difficult year for the asset management industry as it continues to grapple with a series of challenges. Many of these challenges are simply on-going and carried forward from prior years such as the implementation of regulatory measures, ever increasing margin pressures as well as the significant shift in asset flows from active to passive products.
Others are new such as the uncertainty and fall-out created by Brexit along with the disruptive behavior of the FinTech entrants. All of these challenges are further exacerbated by an array of geopolitical and macroeconomic issues such as an environment of negative and zero interest rates coupled with very low global growth rates.
This is perhaps the very time that the industry needs to prove itself more than ever in providing products that truly meet investors’ needs at a competitive price.
As regards product offering, asset managers are challenged more than ever with having to provide greater product customization to deal with trends such as growing de-accumulation and enhanced product transparency as well as possessing multi- asset capabilities to generate a positive yield in these times of negative interest rates. This is in many cases requiring a shift in focus to smaller less liquid alternative strategies.
Above all, active management has to demonstrate consistently over the long-term, that it’s real, it is truly adding value and it can get paid a reasonable price for doing so.
Engaging with investors was never more important. This requires immediacy and connectivity in a simple manner, and a transparent service offering. It also requires a greater understanding of investor needs and expectations.
Trust rebuilding continues post the 2008 crisis. This means clear explanation of fees, disclosure of impact of fee changes and real-time performance reporting.
Fitting with new technologies requirements
Digital has also a key part to play here when it comes to client engagement with the necessity to develop digital service for client interaction with end investors. Advisors are requiring more digital investment oriented advice from their asset managers and end investors will expect to do a lot more digitally including rating their advisors, as they do with other professionals.
The margin pressures the industry is facing are very real. 75% of the industry players cite the cost of regulatory compliance as the main cause of declining margins, followed by competitive fee pressure (64%) and macroeconomic conditions (52%).
Increasing competition from digital entrants have led firms to refocus their efforts on cutting costs. Reducing cost of manufacture has led to more unbundling, outsourcing, offshoring, process re-engineering and greater use of technology.
FinTech entrants continue to raise the bar for transparency and service expectations, adding to fee pressure due to growing transparency, comparability and competition from non-financial companies.
Robo-advisors are gaining awareness and traction around the globe and perhaps provide a means for the “unreachable” investors to be reached. Customers that were previously not interesting to serve (low-wealth individuals) are now becoming a new market because technology allows serving them at low cost and in large volumes.
However many of the current robo-advisors are not offering alpha creation products, but focusing on the unmet need for beta allocation. It’s unclear how this will change in the future with a move away from passive to active products. The future will be a mix between human and robot with little likelihood that the robo-advisor will dominate in the near future.
About the 2016 edition of Investment Funds in Luxembourg
Investment Funds in Luxembourg is a technical guide providing, in a clear and concise format, an introduction to Luxembourg as a center for investment funds, the types of funds available and a summary of the regulations applicable to the formation and operation of Luxembourg investment funds. It also covers the regulations applicable to management companies and AIFM based in Luxembourg, and provisions applicable to other service providers.
The Investment funds guide in Luxembourg may be downloaded from the EY Luxembourg website: ey.com/lu
About EY
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For more information about EY Luxembourg, please visit www.ey.com/lu.