To serve the investors of tomorrow, leading asset managers need to react quickly to the COVID-19 induced volatile market. In an industry normally held back by legacy, the time is now to act as swiftly as possible to implement changes to operating models, digital innovation, regulatory issues and the work environment.
Here in Luxembourg, the collective sense of urgency amongst asset managers, asset servicers, professionals, fund associations, regulators and legislators has worked wonders in providing clarity and transparency in finding solutions at a time of need. We saw that such a joint effort has worked very well. This in turn contributed to more stability and business certainty despite what was going on around us.
The COVID-19 crisis has inspired change in many long-standing pillars of the Luxembourg asset management industry. At present, we are witnessing digital innovation initiatives taking center stage through the Association of the Luxembourg Fund Industry’s 2025 Ambition Paper. Changes to intercountry agreements for cross-border workers are also being discussed, which will possibly bring about a permanent increase in the number of days that the tax authorities allow French, Belgian and German residents to work from home. Last but not least, a renewed focus on ESG means an acceleration in mainstream adoption seems likely in the coming months. Positive change is on the horizon, and the industry is buzzing with innovation.
1. Redefining business and operating models
What it means
COVID-19 has crystallized the need for asset managers to transform business and operating models to become more resilient, agile and flexible in a challenging environment.
Potential impact on asset managers
What to think about:
2. Accelerating digital, transforming through technology
What it means
The industry has been slower to adopt new technologies than many other sectors. COVID-19 has been an awakening
Potential impact on asset managers
What to think about:
3. An evolving risk & regulatory landscape
What it means
Regulators want to encourage recovery and growth, but ensure that happens in a controlled way that protects financial stability and takes greater care of customers.
Potential impact on asset managers
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4. Redesigning the future of work
What it means
Operating in a more decentralized environment has focused minds on the need for change as a new future of work emerges.
Potential impact on asset managers
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5. Embedding ESG across the investment approach
What it means
The shift towards sustainable finance has markedly accelerated. In the wake of COVID-19, this trend will be even more pronounced.
Potential impact on asset managers
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6. Look East: navigating business opportunities in China
What it means
China has long been recognized as the biggest single opportunity for new business and growth in the asset management industry – COVID-19 hasn’t changed that.
Potential impact on asset managers
Beyond a world dominated by COVID-19-related restrictions on economic activity, we anticipate opportunities for fund managers to either expand their existing footprint or enter China for the first time.
What to think about:
Whatever the strategy and model may be, it is clear a considerable amount of investment is needed for entering the Chinese market, meeting local regulations and guidelines, setting up infrastructure, building up brand recognition, hiring the right talent and adapting to the local culture. But given the potential size of the reward, many (if not most) non-Chinese asset managers are thinking long and hard about what it will take to succeed in this growing, dynamic and volatile market.