How does the current macroeconomic context influence the fund industry?

. — “The current macroeconomic trends include inflation, increase of interest rates, sharp increase in commodity and energy prices and greater volatility in financial markets.

Assets under management of Luxembourg investment funds have decreased by 314 billion euros from a record high of 5.8 trillion since the end of December.

The direct, immediate impact on portfolios managed by Luxembourg asset managers is, however, relatively limited. Luxembourg investment funds only had around 20 billion euros invested in Russian and Ukrainian securities (debt and equity combined), so roughly 0.33% of assets under management.

The profile of investors is changing, how is fund distribution adapting?

“Today, almost everything can be done digitally or from a mobile phone. Investors, especially the younger generation, will want to invest in funds via innovative investment applications.

Furthermore, the impact of their investments must go above and beyond financial gain. Sustainability criteria and environmental, social and governance factors will increasingly influence how the investor of the next generation will decide to invest.

Finally, low interest rates in the financial markets stimulate investor appetite for asset classes offering higher returns or low costs. Alternative assets (real estate, private equity, private debt, etc.) have become particularly attractive to investors around the world.

Speaking about energy transition, how can the financial world help to decarbonise the global economy quicker?

“The fund industry has the opportunity to play a vital role in helping to implement the European Commission’s Green Deal. In the climate area alone, investments of around 200 billion are needed annually to reach the reduced emission targets of the EU. The bulk of the funds will have to come from private capital, even more so since Covid-19, which has added a further stress on state budgets.

For investors, the impact of their investments must go above and beyond financial gain. The key to success will be to translate sustainable client preferences from the demand side into fund products and strategies. The figures of growth in sustainable products are already very encouraging: net assets in sustainable fund products have more than doubled since 2018.

While we have reached a turning point in the area of sustainable investing, a lot remains to be done. The current crisis has highlighted the urgency to reduce our dependency on fossil fuel imports and the need to accelerate the green transition even more.”