ALFI: Shaping the Future of Fund Management in Europe

Jean-Marc Goy and Serge Weyland, respectively Chairperson and CEO of ALFI, lead Luxembourg's fund industry through evolving regulations, market changes, and future growth prospects.

Can you present ALFI in a few words?

Jean-Marc Goy: Created in 1988, ALFI brings together about 350 corporate members and more than 1,400 members in total, including asset managers, investment funds, and a wide range of companies spanning the sector’s value chain.

We have several focus areas: the first consists of ensuring that European regulations and their transposition into Luxembourg law are appropriate and balanced, contributing to the development of the fund management industry, which represents over 21 trillion in total net assets in Europe (source: EFAMA at 31 March 2024).

Furthermore, ALFI works on seizing new opportunities for the Luxembourg fund sector, including mainstream investments, private assets and sustainable finance. It is important to create and share good practices among our members and help them to implement regulatory changes as smoothly as possible.

Another goal of ALFI is to advocate for Luxembourg investment solutions in Europe and globally. An impressive €6 trillion in EU-domiciled fund net assets are distributed beyond the EU (Source: EFAMA at 31 December 2023), making this a significant European export. Europe’s strong position is due to its two key regulations: the UCITS directive and the AIFMD, which provides the framework for alternative investment fund managers and alternative investment funds.

"Mobilising household savings into investments is both an exceptional opportunity and a challenge for the industry." - Jean-Marc Goy

How are you adapting to market changes?

Serge Weyland: ALFI’s focus is on asset management across all asset classes. Therefore, we support our members in harnessing new business opportunities that existing and emerging types of investments may bring. A very illustrative example is the ELTIF (European Long-Term Investment Fund), which could become the next UCITS, with strong potential not only in Europe but also beyond its borders.

Keeping up with evolving regulation is one of the main challenges facing the fund industry. We help members in navigating regulatory changes through advocacy efforts and the invaluable support of our working groups. This requires a thorough understanding of the business and its practical aspects. It is also very important to us to work closely with regulators and policymakers such as the CSSF, the Ministry of Finance, the EU Commission, EU MEPs, and ESMA.

Another factor that the asset management industry, especially the European one, will have to deal with in the coming years is consolidation. In fact, one in six companies is destined to disappear by 2027 as a result of mergers or acquisitions, according to a survey published last year. Market volatility, high interest rates and fee pressure will fuel this phenomenon as companies seek to control costs and expand into new areas of the market.

A fourth driver of change is technology: digitalisation will transform the entire value chain, from product research and product development to distribution, pushing companies to innovate and adapt.

In all cases, we will continue to gather insights and perspectives from our members and stakeholders, developing solutions and establishing best practices that benefit the entire industry.

What is the ALFI vision for the next 5 years?

Jean-Marc Goy: In one sentence, ALFI’s mission is to empower investors to achieve their life goals by allowing them to chose between a broad set of appropriate investment structures.

In terms of potential for further growth, there are approximately €14 trillion of household savings in cash and bank deposits across Europe. The mobilisation of these savings into investments is both an exceptional opportunity and challenge for the industry. It requires to educate the public about the benefits of investing, promote financial literacy, build trust through transparency, simplify the investment process through digital platforms, etc. In addition, ALFI will continue to foster innovation and strengthen workforce training initiatives for the financial sector, as well as in investor education.

Serge Weyland: ALFI’s unwavering support to the digital transformation of the Luxembourg fund industry will continue. Digitalisation, and more specifically AI, could help Luxembourg address the capacity issues we have due to the strong growth in private assets we’ve seen over the past decade.

Innovations such as AI-powered financial advisory platforms could reshape traditional consultancy. Furthermore, generative AI has the potential to enhance productivity in coding, creative content generation, and customer engagement.

In the coming years, the primary challenge for both active and passive investments will be enhancing efficiency. Technology will play a crucial role once again: if companies can take advantage of AI to optimise internal processes such as research and data analysis, active funds will continue to grow. There will always be investors looking for funds that outperform the benchmark rather than merely track the market.

And finally, although Europe leads the way in terms of assets allocated to environmental, social, and governance (ESG) investing, growth has slowed down significantly. However, after a turbulent period of regulatory and market uncertainty, we must be prepared for a high degree of customisation based on client preferences.
Additionally, we are likely to see an increase in sustainable thematic investing and impact funds that clearly define and track desired outcomes for investors.

Sustainable finance products present a compelling opportunity for all market players to develop unique offerings, which is especially crucial given the growing imperative to secure capital for achieving net-zero goals.