“Crypto interest can no longer be ignored”

What was the context of this conference?

Steven Libby. – “We had about 330 participants at the conference. These are basically our largest asset and asset management clients from across Europe. This is our 20e an annual conference of this kind. Having been organized in different European countries, this is the first time we have organized it in Luxembourg. So we also had a number of participants from our US company and our global management team. It is truly made to bring together all of our wealth and wealth management experts. We try to use this expertise to deepen topics that we can then offer our clients to help them meet the sector’s challenges.

What is your assessment of the European asset and asset management industry?

“The asset management industry is undergoing major changes. We believe that in the longer term we still expect the sector to grow, albeit at a slower pace. Until 2026, we have growth forecasts of around 3%. Today, the industry is therefore extremely strong. If you look at what has happened since the financial crisis in 2008, the industry has grown tremendously. So it is now much bigger with about $ 34.8 trillion in Europe.

The asset management industry is undergoing major changes. We believe that in the longer term we still expect the sector to grow, albeit at a slower pace.

Steven Libby, EMEA asset & wealth management leader, PwC Luxembourg

A growing sector despite downgraded global macroeconomic forecasts?

“One can compare the asset and asset management industry to a forest that has a number of fires that have started, such as rising interest rates, inflation, war in Ukraine, shutdowns in China. So there are a number of fires and the challenge for the asset management industry is to try It’s not that different from what happened with the financial crisis and then with Covid. The industry has nevertheless come out of it strongly. And we think that will continue to be the case for investors, whether they are retail or institutional investors, absolutely need investment solutions and pension solutions.

How do market headwinds affect asset allocation strategies?

“There are different effects. The first is a larger allocation to private assets. So when the return on public assets can be affected, there may be a shift where investors are looking for more alpha along with longer-term returns in private assets. This trend was already started and it is likely to continue.Another effect has also shifted from growth stocks to value stocks.Enother effect is probably ‘low price’ with passive products such as ETFs, these exchange traded funds.If we look at what happened to it on the other side of the Atlantic, the United States had a phenomenal growth in the flow of money to this type of product, Europe to a lesser extent, but Europe always has a delaying effect, so we will probably see the same thing happen in the coming years.

The industry is now looking at a long-term horizon. What tools does it have to help it make the necessary changes in this direction?

“Tools like distributed ledger technology (DLT) will help change that. Artificial intelligence (AI), in turn, should enable it to adopt different investment strategies. Cryptocurrencies, some like them, others may not. But investors have certainly an interest in these things.The interest in crypto on the part of investors can no longer be ignored.Managers should look into whether they can provide certain types of solutions or at least explore the possibility of having exposure to digital currencies or digital assets in general.

Managers should look at whether they can provide certain types of solutions or at least explore the possibility of having exposure to digital currencies or digital assets in general.

Steven Libby

Steven Libby, EMEA asset & wealth management leader, PwC Luxembourg

What are the main results achieved by this technological development?

“A lot of this has to do with user experience. It affects both the onboarding of a client and the ability to create more personal solutions than reporting to customers. It’s an end-to-end approach.

Another change in the industry comes from ESG products. With the development of this product segment, then, we are not beginning to observe risks to investor protection?

“First of all, all the regulation that surrounds all these types of products is focused on transparency. SFDR (Sustainable Finance Disclosure Regulation) brings transparency. So if you invest in a fund whose stated goal is to affect the climate, transparency is required. But today, the problem is, in fact, that the quality of the data on which all these investments are based is not always very good, and as a result the data available to asset managers can sometimes be questioned, which can lead to suspicion of ‘greenwashing’.

It’s not just about whether an investment is green or not. Company X may have part of its activity that can be said to be ‘green’, but it may have others that are not, like the big oil companies.

Steven Libby

Steven Libby, EMEA asset & wealth management leader, PwC Luxembourg

So data is the key to the equation?

“Very complex rules. To meet European requirements, there are many different criteria to consider. It’s not just about whether an investment is green or not. A company X can have a part of its activity that can be said to be ‘green’, but it may have others that are not what the big oil companies are, they still have parts with a focus on oil and gas, while they have divisions that switch to green energy.

Managers therefore use third-party data providers.

“Yes exactly. However, they face a challenge with homogeneity in results. We did the exercise: you have one purse that you give to multiple providers and you will get different results from each other based on their proprietary ranking systems.”

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