Luxembourg Fund Governance Survey 2018

At a time when governance models have never been under more scrutiny, this ninth edition of our Luxembourg Fund Governance Survey continues to delve into the various approaches to governance taken by the Luxembourg fund industry. Since 2010, regulators and industry associations - at both national and international levels - have considerably increased the number of rules and guidelines applying directly and indirectly to boards of funds and management companies.


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Conducted every two years, the survey aims to gather insights from boards of Luxembourg-based investment funds and management companies in order to obtain a comprehensive assessment of how governance practices within the Luxembourg fund industry.

The current edition of the survey was completed over a period of five months, between June and November 2018. It combines answers from 96 respondents who serve in the capacity of board chairpersons and directors, or as conducting officers or company secretaries supporting the boards, all with first-hand knowledge of the governance practices at their management companies and funds.

Highlights and key findings

The survey delves into the various aspects of governance organisation, from the composition of the board, the practical aspects of board sessions, the roles & responsibilities of the board, the management of conflicts of interests and legal liabilities, the adoption of a code of conduct and the implications of the latest regulations.

Reflecting market response to both growing regulatory pressures, as well as increased calls for transparency from investors, responses show improvements across most areas.

1. Increased appointment of independent directors and chairs

Over the last decade independent and non-executive directors have come to play an increasingly important role in improving corporate governance and in ensuring companies follow ethical practices.  This year we found that the proportion of Luxembourg boards with at least one independent non-executive director has increased since previous surveys. Likewise the appointment of an independent chairperson, also considered good governance practice, has seen an upwards trend. It is encouraging to note that the majority of AIFs who responded to our survey now have an independent chairperson.

2. Increased use of formal sub-committees

Specific sub-committees have become increasingly common among Luxembourg boards. These committees tackle specific issues, such as risk, audit, valuation or remuneration, and consist of members specifically responsible for oversight of those areas. Of course, the existence of sub-committees depends to some extent on the size of the board.

Approximately 78% of Super ManCo boards have established one or more sub-committees.

Proportion of boards with at least one independent director

Proportion of boards that have established one or more sub-committees

3. Enlarged involvement outside of board meetings

The roles and responsibilities of board members do not stop at board meetings. There is an increasing demand on director’s time outside of board meetings. Our respondents this year confirmed that outside of scheduled board meetings they were largely involved in ad-hoc meetings (84%) and signing agreements (75%). More than a third were also involved in performing due diligence on investment managers and other service providers, instructing payments, meeting with investors and other various tasks.

As institutional investors become more involved with their investments, directors have begun to perform or undergo due diligence at the request of investors. This trend was unheard of five years ago, with now 27% of respondents performing this task.

4. Uptake of the ILA Certified Director Programme

In 2012, ILA introduced a certification programme for directors sitting on Luxembourg boards. This forms part of its aim to develop members into highly qualified, effective and respected directors.

Once certified, directors are required to maintain-their knowledge by participating in training to hone their professional skills, and have annual continuing development requirements. Since the programme’s inception there has been clear interest from directors. The number of Super ManCo boards with at least one director in the programme or having completed the programme rose from 18% in 2014 to 44% in 2018. At the same time, the number of UCITS boards with one director having been certified rose from 19% to 58%.

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Michael Delano


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