Luxembourg Investment Vehicles

The regulatory search continues for perfect disclosures to investors, with a focus on the calculation and presentation of costs and charges. A small but increasing number of regulators are also probing the level of costs, in response to persistent voices that call for a different equilibrium to be found between what is reasonable for investors to be charged and the profits of investment firms. "Closet trackers", the use of benchmarks and performance fees are all under the regulatory microscope. Many markets are opening, but others are becoming more restrictive and there remain frictions in the cross- border distribution of investment funds. In particular, "Brexit" is impacting cross-border flows between the UK and the rest of the EU, and this impact is likely to increase. Meanwhile, the EU regulatory approach to delegation is being more stringently supervised, with US and Asian firms potentially affected, too. Elsewhere, use of the Asian fund passports remains low but is slowly rising. Bilateral fund arrangements are flourishing, developing economies continue to open up their capital markets to foreign firms and investors, and new fund structures seek to compete. Around the globe, there are new opportunities for asset managers and investment funds in the retirement savings market, but in some cases more conditions or restrictions are being imposed. Voices arguing for climate-aware investing and carbon controls are increasing. Demand for ethical treatment of employees, customers and other stakeholders is also growing, as is indignation about poorly-managed companies. Regulators in some jurisdictions are seeking to catch up, but their responses vary, and industry and investor reactions to their proposals are mixed. Most, but by no means all, institutional investors believe sustainability should be incorporated into portfolios. However most, but not all, investors believe that ESG measures should not be mandated. Meanwhile, fintech developments are coming thick and fast, and are already a powerful external driver of regulation. The regulators have a dilemma: they are called on to support and help nurture nascent industries that increase efficiency and help consumers to access financial services, but they are concerned about new and heightened risks, in particular the protection of personal data. Regulators are rethinking how they regulate the industry, both new fintech entrants and existing businesses that are encompassing fintech developments. Existing conduct rules were largely written in a paper and face-to- face world. Are the rules fit-for-purpose in a digital age? " Publication A sea A sea of voices - Evolving Asset Management report 2019 Measuring ESG criteria in the absence of transparent and harmonized information sources and standards is a difficulty. The ESG screening is an excellent opportunity for AIF managers to take initiatives in Luxembourg. David Capocci Partner " 4 KPMG Luxembourg Investment Vehicles

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