"Commitment and transformation to create the financial centre of the future”
Mathieu Maurier, CEO of Societe Generale Securities Services (SGSS) in Luxembourg, addresses the challenges facing the asset servicing business in Luxembourg. He believes that just as his own teams are conducting many transformational projects, the Luxembourg fund industry needs to rethink its own operational model. To maintain its position as world leader it needs to become more agile in the face of major developing trends.
This year 2022 has been marked by uncertainty in financial markets. How do you assess recent months?
In Luxembourg, our business is to serve investors and investment fund managers. The year 2022 has indeed featured major macro-economic upheavals. Developments such as the return of inflation continue to have an impact on our clients' investment policies, resulting in reallocations across asset classes. Our role is to work with our clients as they deploy new strategies adapted to the current market context. We are managing this change, serving investors whatever growth investment strategy they choose, whether this is via listed and unlisted securities, or emerging assets. This flexibility is indicative of our resilience as part of the Luxembourg financial services ecosystem.
How do you assess the many major transformational future challenges for businesses such as yours?
The main challenges we and the whole Luxembourg financial centre face concern achieving the level of change that’s needed. Current operating models were put in place in the 1980s and 1990s, based on the development of expertise around the European passport. This enabled Luxembourg to become the world's leading centre for cross-border funds1. We are now at a pivotal moment in the industry’s transformation, and this process is already well underway at SGSS. This includes the overhaul of our operational processes and numerous changes in technology platforms which give us greater data management agility. The challenge is to evolve the current model (which has proven itself over the last 30 to 40 years), to take advantage of the opportunities offered by this technological evolution and meet the challenges of tomorrow. More than ever, we need to transform so that we can better enable clients, investment managers, and fund distributors, to focus on their essentials: asset allocation, implementation of investment policies, risk management and marketing.
A challenge for the future is sustainable finance. How do you see this development?
The transformation I spoke about earlier will enable us to be more agile in supporting major trends such as responsible finance.
Our approach to this trend is based on four main pillars:
The second is the provision of a B2B offering - CrossWise – which includes access to the output from data providers. This enables asset managers to better manage their portfolios while assessing their assets and investment policy against ESG2 considerations.
Thirdly, as a custodian bank, we also need to integrate this component into our own asset investment policy operations.
The fourth pillar concerns data, with the need to assess the ESG nature of unlisted alternative assets; work which must be conducted in a highly transparent fashion.
This is a new era, and there is still a lot of construction to be done. Only recently, sustainable finance was considered as just a sub-sector of a large investment universe. Now, finance has to be seen to be an intrinsically sustainable and responsible activity.
Luxembourg is driving this change, but this will not be sufficient if we want to defend and develop our position as a leader in this field. It is essential for the whole Luxembourg financial centre to work together to understand these developments, including the local supervisory authority the CSSF3 and ALFI4.
Digital assets continue to be widely discussed. What are the key challenges in this area?
Our vocation is to support all fund managers in the implementation of every investment strategy, whatever the assets involved. With digital it is difficult to know what tomorrow will bring, with players in the sector continuing to experiment. Regardless, it is up to us to understand the nature of these investments so that we can incorporate this asset class into our service range. We are now very well positioned in this area, particularly thanks to the partnership with METACO, via our subsidiary Societe Generale - FORGE. SGSS has recently announced a for asset management companies wishing to develop solutions for fund ranges invested in digital assets. SGSS in France now offers fund custodian, valuation and liability management services to asset managers working with crypto-currencies. This allows asset managers to enrich their product offering easily in a way that complies with the European regulatory framework.
Moreover, the distributed ledger technologies that underpin these digital assets are also relevant when redesigning our own operating model.
How should the Luxembourg fund industry evolve to maintain its position and competitiveness in a highly competitive global market?
It is important to ask ourselves where we want our fund industry to be in ten years' time. While 2022 has been an extraordinary year, we know that there will be significant future growth for investment products. In order to maintain our leadership position, and in view of current developments and trends throughout the industry, the Luxembourg financial centre must avoid complacency. Just as we ourselves are transforming our business, the financial centre must consider the major issues and not be afraid of change. We must continue to develop skills and innovate, acquiring new capacities to support our clients over the long term. We must commit ourselves to the future, taking major trends into account, even if this means taking a step-by-step approach.
1Source: PWC 2022 (figures at end Dec 2021)
2 Environmental, Social and Governance
3Financial Sector Surveillance Commission
4 Association of the Luxembourg Fund Industry