Singapore roadshow 10 march 2017

Transcription

1 Singapore roadshow 10 march 2017

2 Sponsors Media Partner

3 Welcome Denise Voss Chairman, Association of the Luxembourg Fund Industry (ALFI)

4 Welcome Nicholas Hadow Chairman, Investment Management Association of Singapore (IMAS)

5 Welcome Denise Voss Chairman, Association of the Luxembourg Fund Industry (ALFI)

6 The Luxembourg fund industry ALFI Chairman s welcome

7 Worldwide investment funds Market share (%) by assets Brazil 3,5% Americas (excl. USA & Brazil & Canada) 0,4% Canada 3,0% Asia & Pacific 12,0% Luxembourg 9,2% Global net assets $ bn USA 46,8% Europe (excl. Lux) 24,6% September 30, Exchange rate EUR / USD=1,1161, Source:ECB Africa 0,4% Figures as at September 30, 2016 Source: Investment Company Institute (ICI) 10

8 European Fund Industry UCITS & AIFs UCITS Country Total assets under management USD millions Market share in % Country Total assets under management USD millions Market share in % Luxembourg Luxembourg Ireland Ireland Germany United Kingdom France France United Kingdom Switzerland Netherlands Germany Switzerland Sweden Sweden Italy Italy Spain Denmark Denmark Others Others Total Total September 30, Exchange rate EUR / USD=1,1161, Source:ECB Figures as at September 30, 2016 Source: EFAMA 11

9 Luxembourg fund centre - diversification at a glance : 3.7 trillion EUR (4 trillion USD) investment fund assets under management Investors in Luxembourg funds resident in 70 countries Fund promoters from nearly 70 countries More than 59,000 distribution agreements for Luxembourg UCITS As at September 30, 2016 Source: CSSF 12

10 Luxembourg investment funds: the investment vehicle for cross-border distribution Luxembourg market share of foreign cross-border funds registered for sale Norway, 70% Sweden, 64% Denmark, 62% France, 61% Finland, 65% Poland, 95% Germany, 59% Switzerland, 65% Bahrain, 76% South Korea, 94% Japan, 55% Taiwan, 76% Hong Kong, 74% Peru, 46% Singapore, 69% Chile, 60% Source: Global Fund distribution analysis March

11 Luxembourg fund centre: Focus on three pillars Luxembourg fund centre UCITS* Alternative Investment Funds (AIF) Responsible Investment Funds We not only focus on products, but also on: Fund managers, governance Service provision Operations, market infrastructure, risk management Fund distribution Investor protection * Undertakings for collective investments in transferable securities 14

12 Luxembourg : a full fledged market infrastructure Stock exchange share classes listed 71 Custodians Financial Sectors Prof. (PSF) funds 5.5 trillion SGD in AUM jobs Distributors - Private Banks - Life Insurance - Platforms 387 Management Companies (including 3rd party) 155 Fund Administrators September 30, Exchange rate EUR / USD=1,1161, Source:ECB Auditors/ lawyers Regulator CSSF Source : CSSF, September

13 Asset management and investment funds: Some challenges and opportunities Governance and transparency: an increasing focus of regulators and fund investors Demographics: aging population and pressure on pensions low % of households owning funds Global economy and low or zero interest rates Geopolitical risks; e.g. Brexit Technology and Digitalization 16

14 Thank you!

15 Keynote address H.E. Pierre Gramegna, Minister of Finance, Grand Duchy of Luxembourg

16 European Regulatory agenda: what it means for Asia Asset Managers with Luxembourg Funds Moderator: Panellists: Chrystelle Veeckmans, Partner, KPMG Sandrine Leclercq, Director, Regulatory Strategy, Deloitte Stéphane Karolczuk, Partner, Arendt & Medernach Richard Lepere, Managing Director, Fund Channel S.A.

17 Regulatory developments: Entering the new world 20

18 Crisis Entering the new world Harmonization SMEs Real Estate & Infrastructure Battle for survival Wave of regulation Investor protection AIFMD UCITS V MIFID 2 Battle for growth 21

19 BREXIT: Potential impacts on the European fund industry 22

20 Timeline: Brexit/future trading position/new rules? Biggest Brexit risk is temporal: there could be a considerable time between the date of exit and when the equivalence judgements and any bespoke trade provisions kick in 4

21 Impacts on the post-brexit timeline UK-EU trade agreement None of the existing models deliver what UK citizens appeared to vote for A bespoke agreement will take time (CETA took 7 years) Also, bilateral arrangements (eg retail AIFs) will need to be reviewed Equivalence Multiple versions of it in different (but not all) pieces of legislation The process of being adjudged equivalent takes time Non-EU trade agreements Re-writing UK law New FCA / PRA rules The UK will need new ones with non-eu countries Three separate systems of law FCA rules are created by Statutory Instruments of law under powers granted by FSMA and EU treaties; some rules are direct from EU Regulation But immediate issues regarding UK financial instruments and capital markets Substance circumscribed by global commitments and regulatory priorities and by the exit agreement Super-equivalence no longer explicitly constrained Significant deviations from EU rules unlikely: UK must honour G20 commitments and international standards FSB IOSCO Converging global, regional and national regulatory & supervisory priorities EU legislation aligned with global commitments in many areas UK will wish to attain & retain equivalence status UK will wish to remain a global regulatory leader European Commission, Parliament, Council ESMA 24

22 Key direct impacts on IM and funds UK firms will be able to continue to provide investment management services to EU professional clients (and vice versa) EU firms will be able to manage UK AIF and to market UK AIF to professional clients in the EU (and vice versa). BUT both these will first require the UK to be adjudged as equivalent and the AIFMD non- EU passports to be introduced: the temporal risk UK UCITS will no longer be UCITS. The funds may no longer be able to be passported into the EU or be eligible assets for EU UCITS. A UK firm will not be able to be the ManCo of EU UCITS. Firms may no longer be able to provide IM services cross border to retail clients. Member States may take the opportunity to review their acceptance of UK retail AIFs (and vice versa) So, the immediate direct impact will be in relation to retail funds and retail clients: likely permanent The future of the delegation provisions under AIFMD and UCITS??? The impact on IM front office operations as the banks adjust their operations??? 6

23 What is new in UCITS and AIFMD? CMU Supervisory Convergence AIFMD 2 Loan funds Retail market 26

24 The growth agenda assumes first place within the EU Capital Markets Union - the new Commission s approach is a break from the past regulate everything approach. It encourages industry-led solutions to open up Europe s capital markets and asks about the cumulative impact of post-crisis regulation. Helping businesses grow Banking, investments and funds Validation, assurance and accounting Too much of EU citizens savings in cash Review of national rules for loan-originating funds Tax treatments and incentives Corporate governance and board effectiveness Data, digital and technology Financing and investing in infrastructure Financing, venture capital and private placements Risk and regulation Strengthening of cross border fund passporting and competition An EU personal pension wrapper? Review of the EU retail market more generally distribution, digitalisation, advice But firms must implement a full pipeline of legislative changes.. 27

25 AIFMD Review to start in No concrete deadline foreseen to submit the report to European Parliament/Council Review is to start on 22 July 2017 and will include a public consultation. Commission to focus (1) on impact on investors, AIFs and AIFMs in the EU and in 3rd countries and (2) assess whether the objectives of the AIFMD have been achieved FSB s Consultation on how to address structural vulnerabilities from Asset Management Activities may impact review Other European Commission Consultations may impact review The calculation of leverage (gross method vs. Commitment approach and multiple vs one global method) and stress tests Liquidity in open-ended funds Marketing provisions, reporting requirements, administrative arrangements and local facilities, notification process Different treatment of certain categories of retail investors (e.g. semi-professional) Alignment of remuneration rules 28

26 CSSF Guidance Loan origination by AIFs Is Loan Origination an allowed activity for AIFs in Luxembourg? Yes. In principle, Loan Origination by AIFs is permissible as the Law of 2013 and the AIFMD, as well as the respective Product Laws or regulations applicable to AIFs (if any) do not prohibit this activity. In the particular case of AIFs qualifying as ELTIF(s), EuSEF(s) or EuVECA(s), the granting of loans is also explicitly mentioned and permitted under certain conditions in the respective EU Regulations. Is Loan Participation/Acquisition an allowed activity for AIFs in Luxembourg? Yes. For the same reasons, Loan Participation/Acquisition by AIFs is also a permitted activity. CSSF Frequently Asked Questions AIFMD (version 10, 9 June 2016) Several Member States have set up bespoke frameworks for loan origination by funds domiciled in the respective jurisdiction, among them Germany, Ireland, Spain, Italy, Malta, France. 29

27 Mifid 2 Regulatory Overview Headline / Objective: «Investor Protection & Markets Integrity» A game changer for fund distribution: Shift to investment advice from product focus Increased transparency on costs & charges Towards a level playing field with other investment products: IMD, PRIIPS New business model / value proposition for all distributors to be elaborated. 30

28 Mifid 2 Costs & Charges Full disclosure of all costs & charges plus «who gets what» throughout the distribution chain. Ex-ante / estimate disclosure to investors plus ex-post reporting on actual costs & charges incurred on portfolio. Restrictions on inducements for DPM and independant advice. 31

29 Mifid 2 Product / Service Governance Target market to be defined for each fund both at the producer and distributor level. Suitability test upgraded for investment advice and portfolio management (DPM): Clients knowledge and experience, financial situation and objectives have to be assessed and documented. Appropriateness for investment services without advice: Clients knowledge and experience, types of financial service, nature, volume, frequency of transactions, level of education and profession. 32

30 Mifid 2 Take Away A major change for distributors impacting both revenues and costs. Potential streamlining of product range offered by distributors. Opportunities for Asset Managers with a sound value proposition to capture business. Increased level of responsibility for the distributors vis-à-vis investors. Luxembourg domiciled funds well placed to compete with strong cross-border experience and local expertise / know-how. 33

31 Thank you!

32 Luxembourg UCITS and the emerging Asia passport: what is the best solution for Asia Asset Managers? Moderator: Panellists: Chris Edge, Partner, PwC Adeline Soh, Legal Counsel, BlackRock David Perez de Albeniz, Regional Manager Asia, Allfunds David Suetens, Executive Vice President, Country Head State Street Luxembourg Ganesh Valakati, Senior Product Manager, HSBC Securities Services

33 Sponsors Media Partner

34 AIFs: using Luxembourg to facilitate global PERE investing Moderator: Panellists: Xavier Le Sourne, Partner, Elvinger Hoss Prussen Valérie Mantot, Director, SANNE Chris Blakey, Global Product Manager, Standard Chartered Bank Laurent Capolaghi, Partner, EY

35 Luxembourg Alternative Investment Funds Regulatory regime UCITS More supervision / regulation -Restricted asset classes -Public distribution with EU passport -Very high level of supervision - Private Equity and Venture capital (Real Estate under conditions) - Lower level of regulation/supervision - Restricted to well informed/sophisticated investors - Prof. investors: access EU passport - Almost all asset classes - High level of regulation/supervision - Public distribution No EU passport - Prof. investors: EU passport UCI Part II - All asset classes - Lower level of regulation/supervision - Restricted to well-informed/sophisticated investors - Prof. investors: access EU passport SICAR SIF - All asset classes/ prof. investors - No regulatory supervision - Highly flexible structuring regime - Access EU passport - All asset classes - Lower level of regulation/supervision - Restricted to well-informed/sophisticated investors - Prof. investors: access EU passport SCS-SLPs RAIF More flexibility - All asset classes - No regulation - Fully flexible - Highly used for structuring SOPARFI 38

36 Tax General Luxembourg AIF features Legal Forms Corporate form or contractual form (FCP or Partnership) SIF SICAR RAIF Partnership Corporate form or contractual form (FCP or Partnership) Corporate form or contractual form (FCP or Partnership) Partnership Eligible Investors Well-informed investors Well-informed investors Well-informed investors Professional investors (under AIFM passport) CSSF supervised entities Yes Yes No (indirect supervision No through mandatory appointment of an AIFM) Diversification requirement Yes (30%) No Yes (30%) No Possibility to have legally segregated portfolios (subfunds) Marketing Time to market Yes Yes Yes No (although tracking class mechanism can be structured) EU Passport to professional investors 8-12 weeks CSSF approval process EU Passport to professional investors 8-12 weeks CSSF approval process EU Passport to professional investors As soon as documents are ready EU Passport to professional investors As soon as documents are ready and GP incorporated before public notary Tax status Exempt. Small subscription tax with exemptions Taxable with exemption on income & gain of qualifying securities By default, SIF regime or SICAR regime for risk capital assets Full tax transparency (under conditions) Tax transparency Available Available Available Yes Treaty access Limited (under certain forms) Yes Yes or limited (depending on form) No WHT on distribution No No No No 39

37 Case study: The Luxembourg Partnership Investors Main Fund Investment Manager / Advisor Singapore Investors Investors Lux Management Company/ AIFM GP AIV Parallel Fund SLP (Lux) SPV SPV SPV SPV Investments 40

38 AIF: tax and regulatory convergence Under the AIFMD Minimum functions: - Final decision in Luxembourg - Portfolio management - Risk management - Interaction with Lux authorities Limitation to delegation: - Letter-box entity - Leveraging on the substance Substance Tax authorities trend BEPS Motive test PPT Management and control Infrastructures and resources Beneficial ownership Other business income Managed by Lux office Reporting 41

39 Luxembourg from single SPV to strong investment platforms EU passport available Real economic and rationale activity Use of pooling vehicle with appropriate substance Investors protection Less risk of challenge by tax authorities in invested countries and recognized by worldwide investors Singapore Fund Lux AIF Master Lux Lux SPVs Non-EU advisor Lux ManCo AIFM AIF platform Local SPVs 42

40 Thank you!

41 Investor Protection: a multi-layered approach Chris Edge, Partner, PwC Colm Quirke, Director Business Development, FundRock Management Company S.A.

42 Governance: an increasing focus of regulators and fund investors

43 The management company model

44 Satisfying regulatory requirements

45 Fintech: a transformational agenda shaped by Luxembourg Keith Hale, CEO Multifonds / IGEFI Group S.à r.l.

46 Remember this?

47 Disruption Music distribution case study Artist Label Distribution Consumer 2002 Ease of use Time to market Piracy Today Ease of use Immediate Easier artist entry

48 Music

49 Selected US music unit sales (millions) Vinyl album Vinyl single Cassette album Cassette single CD album CD single Download album Download single Paid subscription Source: RIAA

50 Current model in asset management Asset Manager TA Distribution End Investor Ease of use Time to market Paper based Transparency

51 Disruption Barriers to entry #1 74% Regulation 54% New game-changing disruptor will enter the market in next 2 years #2 37% Back office complexity Source: Multifonds Every Fund Survey Jun 2016 (125 respondent $27trn total AUM$19trn total AUA)

52 ALFI FinTech Working Groups Biggest impact from FinTech disruption? Big data analytics 43.2% Blockchain 41.6% Blockchain DLT Working Group Distribution channels 38.4% Cybersecurity 28.0% Data Management Working Group AML/KYC 25.6% Robo advice 22.4% Social media 19.2% Digital Investing Working Group Investment research 9.6% Industry utilities 8.0% P2P Lending Working Group Source: Multifonds Every Fund Survey Jun 2016 (125 respondent $27trn total AUM$19trn total AUA)

53 Blockchain DLT Working Group

54 Blockchain Likely impact areas International money transfers Securities clearing and settlement KYC & AML Creating transparency Fiat currency payment and settlement Asset registries Security issuance and transfer Prediction and stock markets Syndicated loans Securities asset servicing Trade surveillance Collateral management Derivatives contracts and clearing 60% 23% 20% 19% 19% 12% 11% 7% 7% 7% 5% 5% 5% Source: Deloitte / EFAMA 57

55 The benefits of Blockchain are Increase speed of processing thereby reduced risk to the end investor 45% Reduced cost of processing (e.g. settlement) passed on to the end investor 16% Consultant opportunity to have new projects 16% Reduced cost of processing to improve asset management margin 14% No obvious benefits today 6% Source: ALFI TA and Distribution Forum 16 Nov Live Voting 107 responses 58

56 The biggest challenges with Blockchain Security 22% Regulatory 20% Adoption 15% Scalability 2% All of the above 40% Source: ALFI TA and Distribution Forum 16 Nov Live Voting 107 responses 59

57 Data Management Working Group AML / KYC Utilities

58 Current model Retail Insurance Pension Sovereign Distributor Distributor Global Distributor Fund Platform Fund Platform Fund Platform Fund Platform Sales Agent Sales Agent Transfer Agent Transfer Agent Transfer Agent Transfer Agent Transfer Agent

59 Ideal model Retail Insurance Pension Sovereign Distributor Distributor Global Distributor Fund Platform Fund Platform Fund Platform Fund Platform Sales Agent Sales Agent Centralised AML/KYC Utility Transfer Agent Transfer Agent Transfer Agent Transfer Agent Transfer Agent

60 Likely first step Retail Insurance Pension Sovereign Distributor Distributor Global Distributor Fund Platform Fund Platform Fund Platform Fund Platform Sales Agent Sales Agent AML/KYC Utility AML/KYC Utility AML/KYC Utility Transfer Agent Transfer Agent Transfer Agent Transfer Agent Transfer Agent

61 Digital Investing Working Group

62 Range of digital services and products Execution only Discretionary management Robo advisor Order process Investors Investing platform Transfer agent Custodian Asset manager Execution only Discretionary management Robo advisory Order processing Shareholder keeping Cash and securities custody Investment Vehicles 65

63 What is a Robo Advisor? Source: Nutmeg 66

64 Fees Robo-advisors vs traditional providers Based on a $100k investment Standard Life Hargreaves Lansdown Bestinvest 0,40% 0,45% 0,60% UK Traditional Providers Providing ready made risk based portfolios and/or fund of funds Nutmeg 0,75% Scalable Capital Wealthify 0,60% 0,75% UK Robo-advisor MoneyFarm 0,53% Wealthfront Betterment 0,15% 0,23% US Robo-advisor

65 Conclusion Global FinTech Financing Activity Digital revolution has arrived in the financial services sector. Unclear whether this presents more of a challenge or an opportunity for the incumbents.

66 Finally

67 Thank you!

68 Sponsors Media Partner