PLACE FINANCIÈRE & MARCHÉS — Fonds

L’innovation, et plus particulièrement les solutions digitales, représente-t-elle des leviers non négligeables pour optimiser la performance des fonds?

“Digital solutions boost fund and human performance”


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Fèmy Mouftaou, chief commercial director at IQ-EQ. (Photo: Maison Moderne)

Fèmy Mouftaou, chief commercial director at IQ-EQ. (Photo: Maison Moderne)

Digital disruption and technological innovation are reshaping business transactions across the world, and the financial sector in Luxembourg is no exception. IQ-EQ’s chief commercial director for Luxembourg, Fèmy Mouftaou, discusses how technology is optimising the performance of funds and the people who manage them.

“Technology gives fund managers a better understanding of the performance of their funds. They can see where the performance is coming from. They can compare between regions, between sectors, between fund types, between structures,” Fèmy says, articulating one of the ways data modelling is helping to optimise fund performance. “I would also say that reporting systems such as IQ-EQ Cosmos are paving the way for advanced data analysis and reporting – driven by the need for LPs to comply with transparency requirements such as ILPA 3.0,” he adds.

Comparing disparate data was difficult in the past, but systems now streamline the information so that it’s easier to compare like with unlike and spot funds that are performing well, which leads to new opportunities. The opposite is also true. “You can capture some investments that are not performing efficiently or are not worth following.” But Fèmy is quick to point out that experienced fund managers don’t just react to a fund’s numbers – they need to consider the quantitative and qualitative data. “For example, you may see that there is an asset that is not really performing today in terms of its quantitative reporting, but if you can read, thanks to the technology, those qualitative details, you can see that there is a potential for performance and that is much more important.”

New tech also ensures that asset reporting is fully automated, which ensures analysis is based on current market activity.
Fèmy Mouftaou

Fèmy Mouftaou,  chief commercial director,  IQ-EQ

New tech also ensures that asset reporting is fully automated, which ensures analysis is based on current market activity. Reliance on integrated digital systems for day-to-day record keeping has other benefits, too. “It’s not just about providing greater performance or cost savings, it’s also about transforming the job,” Fèmy explains. “Any activity that is not adding value can be done by the system. Then it remains for our colleagues to analyse this information.” In effect, technology is empowering fund managers by giving them new ways to evaluate data, while releasing them from routine tasks enables them to focus on improving investment returns.

The introduction of artificial intelligence will improve matters further. One new system that Fèmy is keen to employ would hand over the process of reviewing 50-page remuneration policies to an AI-driven application designed to flag non-standard clauses in the document. This is a task that currently takes a human one to two days, but could be completed in minutes using new technology. Another AI app promises to be able to filter newsfeeds, so that managers only receive bulletins that are pertinent to the task at hand.

Such labour-saving applications are welcomed by employees who are keen to do what Fèmy refers to as “less recording and logging and more analysis and thinking”, but it takes more than an appreciation of technology to provide a good service to clients. “We are very careful when we hire new people to make sure that they are very skilled, not only in terms of technology and their core responsibilities, but at maintaining good relationships.” The company’s name, IQ-EQ – which stands for intelligence quotient and emotional quotient –, reflects this need for both applied knowledge and the ability to relate to clients in a genuine, human way. “We’re building these soft skills every day to create a bridge between technical people and those who can discuss those technical aspects with our customers.”

The industry is also starting to see AI that can build predictive models of how its activities may evolve based on the current investment climate. By programming in additional variables, such as the market’s likely reaction to a soft or hard Brexit, it’s possible to model alternate financial landscapes and review fund performance within those contexts. Fèmy is already excited by the strategic advantages such software is expected to bring. “This is where people are starting to use artificial intelligence to help managers better anticipate and forecast the future.”

Blockchain-derived technology is also beginning to make its presence felt in Luxembourg’s financial sector, in particular cryptocurrencies and cryptofunds.
Fèmy Mouftaou

Fèmy Mouftaou,  chief commercial director,  IQ-EQ

Blockchain-derived technology is also beginning to make its presence felt in Luxembourg’s financial sector, in particular cryptocurrencies and cryptofunds. IQ-EQ already has clients who are keen to embrace this new way of investing. “More and more people want to tokenise certain assets. We also have cases where the shares in liquid funds could be separated into a tokenised blockshare.”

But questions remain. “If the fund is illiquid, would the tokens of illiquid shares also be illiquid?” Fèmy muses, voicing one of the many unanswered issues surrounding cryptofunds. This is also a challenge for regulators, who are already preparing white papers to ensure that proper safeguards are in place for this new style of investment. “The increased scrutiny by regulators is certainly prompting fund managers to embrace technology that will allow them to meet the various regulatory requirements,” Fèmy highlights, noting that IQ-EQ also has its own RegTech compliance software, MaxComply.

As ever, regulation is the tortoise to FinTech’s hare, but a solid regulatory framework is essential when it comes to reassuring investors about the use of digital innovations in the financial sector. “We cannot adopt or onboard any digital solutions or technology without the approval of the financial regulator,” Fèmy says. “All those entities are regulated to protect investors, stakeholders and individuals.” So, while traditional types of investment may be slower, they are, for now, more secure.