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Luxembourg Report Highlights Resiliency and Innovation
Insights on Luxembourg's resilient and innovative approach as discussed in Funds Europe's Luxembourg Report 2021 roundtable.
Olivier Noel, Chief Operating Officer of Northern Trust Global Services SE, joined other Luxembourg fund industry professionals to discuss themes including how the industry has adapted to the challenges of COVID-19 by embracing digitalisation. Read this extract from Funds Europe’s Luxembourg Report 2021 roundtable.
What is the current situation with COVID-19 in Luxembourg and how has the CSSF – the Luxembourg financial regulator - responded? And is any normalcy returning?
Luxembourg, and many other countries, are still facing some immediate challenges with COVID-19, albeit with expectations of positive outcomes from the vaccine.
The pragmatic approach of the CSSF enabled the asset servicing business to smoothly transition into the work-from-home environment. I have to say, despite the initial market volatility that we have seen and some liquidity challenges across the industry in early March 2020, I think the industry has adapted very quickly and shown that asset servicers can still deliver their core asset servicing business, embracing greater use of digitalisation and new communication methods.
Has the full impact of COVID-19 on the funds industry begun to be truly realised?
It is difficult to assess the long-term impact on the economy. Yet, at the same time, the low interest rate environment that we are seeing at the moment makes, in my view, investing into funds more appealing, especially for alternative investments which are less correlated to equity markets, and therefore I’d like to think that some of this may make the funds industry more appealing to investors. This is potentially something positive.
Something that is important from the asset servicing standpoint, is the acceleration of digitisation that we have seen over the past year to optimise operational processes, manage data, and strengthen resiliency. Many people would not have thought a year ago that it would be so efficient to work from home full-time, yet we can. We still have fund promoters able to reach an investor without travelling around the world. A new way of doing business has emerged drawing on digital communication channels. This is a positive development which will accelerate this year.
The last thing potentially in relation to some of the long-term impacts of COVID-19 is the ESG theme. As a community, as a whole we have all become more sensitive to ESG, and it is likely in my view to be translating into more ESG investment. The view that good returns and positive impacts for sustainability are mutually exclusive has gone, in my view, and there is clear indication that both go hand-in-hand.
Has the Brexit rush of firms that have set up entities in Luxembourg put strains on the Luxembourg ManCo/AIFM industry?
We have seen that in order to manage their regulatory risk, and as a protection against future disruption between the EU and the UK, quite a number of firms have decided to set up a presence in the EU, with Ireland and Luxembourg at the forefront.
Both countries have seen an influx of new management companies and AIFMs. In my view, this influx has created jobs and other opportunities for the industry rather than creating strain.
I certainly do not see that as a significant issue for Luxembourg, but rather, something that has contributed to growth which has been smoothly absorbed by the industry.
Can you highlight an important theme right now in the Luxembourg funds industry from your perspective and tell us why this is important in the year ahead?
The adoption of technology and digitisation to leverage innovation, optimise operations and better manage data as well as strengthen resiliency. Our enhanced technology platform, Northern Trust Matrix™, has been built to digitalise our asset servicing business by combining technology and operating model innovations supporting new ways of managing and delivering data.
The second theme is opportunity in the alternative investment world and the card that the Luxembourg market has to play in this respect.
As featured in Funds Europe’s Luxembourg Report 2021 roundtable. Read the full version here.
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Chief Operating Officer of Northern Trust Global Services SE
December 2, 2020
Luxembourg’s growing influence as a leading alternative investment funds hub is being driven by the multiple solutions it provides to global investment managers supported by its strong reputation and support infrastructure. Sara Gilbert, Northern Trust’s senior executive for alternatives business development, outlines the attributes helping Luxembourg to excel in this important fund sector.