More than 100 delegates attended the Transfer Agency and Asset Servicing Forum in Hong Kong last month, hosted by the Association of the Luxembourg Funds Industry (ALFI).
Ching Yng Choi, head of the Alfi Asia representative office in Hong Kong, commenced proceedings with an overview of Luxembourg, which continues to be the jurisdiction of choice in Europe for real estate investment funds. As of June, it had 303 funds units.
Based on figures from the first quarter of this year, Luxembourg accounts for 11% of total European real estate and ranks second in terms of institutional funds in real estate, representing 33% of the European market. The reserve alternative investment fund (Raif), created in 2016, has boosted Luxembourg as a domicile for alternative investment funds, with a total of 681 Raifs as of June 2019.
Meanwhile, as the indecision surrounding Brexit continues, UK financial services companies are set to become third-country firms, losing the benefits of funds passporting when the country leaves the EU.
The first panel discussion, hosted by Andrew Gordon, managing director for Asia at RBC Investor & Treasury Services, focused on environmental and social governance (ESG), Asia’s popular strategies for alternatives and the role of Luxembourg investment vehicles.
The conversation with Catherine Chen, founder and managing partner of AvantFaire Investment Management, Amélie Delaunay, director – research and professional standards at Anrev and Alessandro Silvestro, managing director for Asia-Pacific at Lemanik Asset Management, reflected the growing emphasis on ESG investing globally. Silvestro pointed out that investors are increasingly looking at ESG, with 35% preferring to invest in companies that have ESG parameters as it soars in importance.
When it comes to differentiating between Asia and Europe, Delaunay noted that while the former is pushing for zero-carbon-footprint buildings, European investors are pushing fund managers to look at each E, S and G component. The panel also considered having sustainability reporting as part of the financial report.
Delving deeper into what it means for a real estate manager to truly embrace ESG, Chen said that ESG for an impact investing private equity firm always has a double importance. Operationally, it must adhere to higher standards of green buildings and green initiations. But in addition, ESG frameworks should be applied across the whole investment process rather than being a standalone policy. Chen also stressed the importance of a fund’s measurability.
Panellists noted too that in Asia, ESG is featuring ever-more prominently in conversations among fund managers.
Considering the role of Luxembourg, Silvestro highlighted its three-decade track record in Ucits, safety and corporate governance. Other key attributes are investor protection and a secure environment, he added.
The second panel discussion, on the impact of fintech on the investment funds industry, was moderated by Betty Zhou, head of business development for Asia-Pacific at Caceis. Sebastien Chaker, executive director at UBS Asset Management and Alex Medana, co-founder and chief executive of FinFabrik, offered their insights.
Though few industry players are fully embracing solutions that truly change the client experience, there are reasons for this. Ucits is a tightly regulated financial instrument, making innovation more challenging. Moreover, banks and asset managers are in the business of managing and minimising risk, but risk is integral to innovation.
A layered approach
The final discussion, on the future role of transfer agency and current operational trends, was moderated by Alan Chalmers, publisher of Funds Global Asia. The panellists were Philippa Allen, chief executive and founder of ComplianceAsia, Caroline Higgins, head of global fund services – Asia at Northern Trust and Stewart Aldcroft, senior adviser, markets and securities services for Asia-Pacific at Citi.
Blockchain was a key focus. with Higgins giving a practical example of applying the technology to Northern Trust’s private equity business in 2007. Having just sold the technology, it will now be built as a utility – particularly in jurisdictions such as Guernsey.
Explaining why the firm had picked PE and Guernsey, Higgins said that in order to make it successful, it had to find a problem and ecosystem. Within PE and Guernsey, there is low-volume, high-touch and in some cases very bespoke business, and a community looking to find answers and reduce costs.
The panel considered the need to build for things that we may not know exist, and the need to build infrastructure around those now. Many organisations are building data fabric layers. They still retain their legacy, or main fund accounting transfer agent system, but can start building for technology such as API [application programming interface] blockchain within the data fabric layer. The panel reiterated the importance of finding a problem, testing, learning and rebuilding.
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