Interview with Pierre Oberlé Association of the Luxembourg Fund Industry

By 13. December 2013 Interview No Comments

Pierre OberléPierre Oberlé is business development manager at ALFI, the association representing the Luxembourg investment fund industry. In his role, he takes care primarily of market intelligence, communication, promotion and training initiatives. He also contributes to the development of new activities, such as Islamic Finance. He is the coordinator of several working groups and technical committees on global fund distribution. Mr. Oberlé is a regular speaker at conferences and seminars on the investment fund industry. He holds an MBA from the University of St Thomas (Minneapolis, USA), a Master’s Degree in International Business from the University of Caen (France) and a BA in Economics from the University of Strasbourg (France). As a delegation of ALFI recently travelled to South America we were curious to find out what role UCITS funds play in that region and what opportunities there are for UCITS fund managers. Mr. Oberlé, ALFI has recently been to Columbia and Peru. What was the purpose of this trip and is UCITS a big topic in South America?

Pierre Oberlé: This visit was part of an Economic Mission organised by the Luxembourg Chamber of Commerce. ALFI decided to join this mission because of the importance of these two countries for the Luxembourg investment fund industry. Indeed, Columbian and Peruvian pensions funds are investing massively into Luxembourg domiciled UCITS funds. We thought this trip would be an ideal opportunity to strenghten our relations with the regulators, our sister associations and key pension funds players.

Latin American pension funds are very keen to invest in UCITS. It all started with Chile which was the first country in the region to reform its pension fund system in the early 1980s. Chilean pension funds have a foreign investment quota. This quota was fixed at 30% of the pension fund total assets for a number a years until it was decided in 2007 to gradually raise it to reach 60% by August 2009 and then again in 2011 to increase it to 80%. At the end of 2012, 1,277 UCITS were registered in Chile.

The pension fund system in Colombia followed the model of Chile. Pension funds can invest 40% abroad. Pension funds total assets are of USD 70 billion and 10% are invested abroad mostly in Luxembourg funds.

Since Peruvian pension funds were authorized to invest abroad In March 2001, their foreign investment has continuously increased. Peruvian pension funds assets are of approximately USD 40 billion. On July 13, 2011, the Peruvian Congress approved a government proposal to increase gradually the limit for foreign investment by Peru’s private pension funds until it reaches 50% (from the previous legal threshold of 30%). The current limit is now 36% and the vast majority is used to invest in Luxembourg UCITS. At the end of last year, 753 UCITS were registered in Peru. Why are Colombian and Peruvian investors looking for UCITS regulated investments?

Oberlé: UCITS are very safe products recognized by retail and institutional investors around the world as best in class for investor protection. They are therefore the ideal vehicles for long-term investments of pension funds. In addition, UCITS funds are investing all over the world so it is a good way for Latin American pension funds to get international exposure. How big is their investment community and how can European UCITS managers reach out to them?

Oberlé: While looking at the investment management landscape of these countries, pension funds stand out as the leading component. This is clearly where the main opportunities for European UCITS managers are. The good thing is that pension funds are administered by a limited number of Pension fund Administrators (AFPs). There are only 6 AFPs in Chile and 4 in Peru. They are therefore easy to reach out for Fund Management groups.

Beside pension funds, UCITS are also sold through private placement to local investors.

The local asset management scene is still limited and has a mostly domestic or regional focus. However, we have seen recently the first players from these countries coming to Luxembourg to set-up UCITS funds. Lately some voices in the investment industry in Asia stated that UCITS will soon be replaced in that region by an Asian fund passport that regulatory bodies intend to roll out. What is your take on this?

Oberlé: There are indeed 3 different initiatives in Asia: A Hong-Kong China mutual recognition, and two passport initiatives between several countries. All of them are still at an early stage and nothing is set in stone for the moment. There are still many details to solve and different options available for the future. ALFI is closely observing developments and analyzing the potential impact on our business with Asia. ALFI has been to Asia just last week and the feedback received was clearly that UCITS will remain a reference product in Asia in the future. Luxembourg in this context will continue to be an ideal gateway between Asia and other parts of the world such as Europe or Latin America. Thank you for the interview.