The sector has benefited from international agreements enabling cross-border commuters to work from home, along with “smart working models” encompassing tools such as e-signatures and liquidity management tools that helped fund managers to manage the funds’ liquidity. Unlike what had been seen in previous economic crises though, there have not been large-scale redemptions across all funds.
On the contrary: fresh inflows have demonstrated investor confidence in the industry even in turbulent times. “We are almost back to the ‘old normal’,” Ms Lamesch said, noting that after a fall in February and a bigger one in March, assets under management had rebounded to €4.6 trillion at the end of July, not far off their peak in January.
Some fund businesses in Luxembourg responded rapidly to the lockdown by rolling out new IT equipment and software for staff working at home; other found they were already prepared. “We didn’t need a huge amount of new technology – in some areas, like videoconferencing, we had more options than we needed” after a reorganisation in 2018, said Schroders Investment Management (Europe) CEO Finbarr Browne. “The technology was already there, it was just about doing the job somewhere different.”
State Street used its international network of offices to move work between jurisdictions to relieve pressure on employees. “Our staff went from resisting working from home to acceptance, to enthusiasm to wanting to stay,” said the bank’s vice-president Eduardo Gramuglia. But he added: “A lot more thinking and planning has to go into making it sustainable over the long term, including re-imagining the office and the things that are easier face to face, including building morale, team bonding and training.”
Fund industry members praised the CSSF for its flexibility and understanding of their constraints in managing remote employees and operations. Equally, the regulator’s Director General, Claude Marx, told Ms Lamesch in an interview that the sector has proved very resilient, although he says fresh economic difficulties may lie ahead: “We need to be ready for another rough ride in the markets over the next three to six months as loan moratoriums come to an end and companies face challenges in repaying loans.”
Mr Marx also warned that Luxembourg could be facing a challenge to the reliance of delegation in its fund business model. Noting pressure to reform delegation and outsourcing rules as part of changes to the EU’s AIFMD legislation, he said: “We may be trying to fix something that is already working.” And it may have implications for any longer-term switch to more extensive use of remote working: “Countries like Luxembourg have to be careful to avoid fund ManCos being accused of lack of substance if all their employees are working from abroad.”