PwC and ILA publish research on Luxembourg fund industry governance standards

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Fund Governance: practices are strong in Luxembourg

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  • Cover Luxembourg Fund Governance Survey 2014

Fund governance has long been a priority for the Luxembourg fund industry with a focus on robust oversight and investor protection. Once again, the high response rate underscores the central role governance plays in the Luxembourg fund industry

John Parkhouse, ILA Fund Committee Chairman and PwC Luxembourg Deputy Managing Partner

Governance practices have improved in the Luxembourg funds industry according to the 7th edition of the Luxembourg Fund Governance Survey, released by PwC Luxembourg and the Institut Luxembourgeois des Administrateurs (ILA) during a dedicated conference at Crystal Park on 21 January 2015. The research takes an in-depth look at governance practices within management companies and investment funds domiciled in Luxembourg.

Commenting on the survey, John Parkhouse, ILA Fund Committee Chairman and PwC Luxembourg Deputy Managing Partner, says: “Fund governance has long been a priority for the Luxembourg fund industry with a focus on robust oversight and investor protection. Once again, the high response rate underscores the central role governance plays in the Luxembourg fund industry.”

Improvement noted in transparency, independent directors and conflict management
This year’s survey found that transparency has greatly improved with survey respondents reporting increased disclosure of public information to investors about directors. Case in point: 75% of UCITS-related entities disclose directors’ remuneration in their annual report from 39% in 2012.

On independent directors, findings show that the practice has become common. 54% of the board members of an AIF fund are independent, from 45% in 2012.

“While a majority of directors continue to be employed by the promoter or the fund sponsor, the trend of appointing independent directors has accelerated. Appointing independent directors is becoming critical as closer scrutiny is applied to board composition and having such members is a sign of strong corporate governance,” adds Mike Delano, partner at PwC Luxembourg.

Improvement this year was also noted in the identification and management of conflicts of interests. Most boards have established mechanisms to oversee identified conflicts, especially within UCITS (up from 67% in 2012 to 83%) and AIFs (up from 58% in 2012 to 86%).

Distribution is, and will remain, a focus for fund boards as it was noted consistently by survey respondents as one of the top five areas of attention for boards in the coming 12-24 months.

The report also found that women are still under-represented in the majority of boards. Changes in this respect are likely to be driven by improving the board recruitment process.

The survey findings were presented during the ILA and PwC Fund Day which brought together nearly 200 ILA members, fund board directors and industry representatives. During this milestone event, industry experts shared their views on the regulatory landscape, governance frameworks and the latest professional standards in the fund industry. 

The Luxembourg Fund Governance Survey 2014 is available on the website of PwC Luxembourg and ILA.

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