Fund Governance in Europe - Luxembourg, Ireland and UK compared
Andrea Montresori, PwC | Jon Griffin, Non-Executive Director | Shiv Taneja, Fund Boards Council | Lisa Martensson, IFDA
Lisa Martensson, the chair of the Irish Fund Directors Association, Shiv Taneja CEO of the London-based consultancy Fund Boards Council, and Luxembourg fund industry stalwart and non-executive director Jon Griffin give different perspectives on current fund governance challenges in Europe. Andrea Montresori, a partner with PwC, was in the chair.

Hot topics in Ireland

The hottest topic in Ireland at the moment is the recent Individual Accountability Framework Act, said Ms Martensson. “It applies widely across the business world, with fund boards impacted,” she said, comparing it to the Senior Managers and Certification Regime in the UK. It covers aspects such as conduct standards and enhanced fitness and probity rules, and there are new sanctions procedures too. Independent directors are now investigating potential personal liabilities in light of this change, she added. SFDR is the second major priority in Ireland, followed by the results of their central bank’s thematic review of third-party ManCos, particularly their governance framework. 

Awareness of costs

In the UK, Mr Taneja highlighted how the ManCo business is small, with fewer than 100, and that this is now governed by subtly different rules than in the EU. More generally, he mentioned the debate in governance circles about how margins are shrinking, down from around 45% of AuM in the 1990s to about 33% now. This downward trend is ongoing he added. 

“Directors need to ask themselves, ‘What value are we providing’,” he said, and he would like this analysis to feature questions around the effectiveness of boards, and how this can be measured and tracked. He predicted that the governance and costs of distribution would come under greater scrutiny in years to come. While the regulator has responsibility for the amount of costly regulation, Mr Taneja said this is shared somewhat with the industry.

Irish-Luxembourgish positioning

A discussion followed on how Ireland and Luxembourg interpret where ultimate responsibility lies for certain decisions: with the fund or with the ManCo. Mr Montresori suggested that in Ireland it tends to be the ManCo driving the relationship, but in Luxembourg, fund boards have more of the upper hand. Mr Griffin agreed noting that this situation is probably a function of how the industries have grown in each jurisdiction. “An evolution of understanding is ongoing, a journey,” he said.

The panel agreed that there is a broadly cooperative relationship between the Irish and Luxembourgish fund industries, with both having their areas of specialisation. Mr Taneja added that while Dublin used to be seen as a less expensive jurisdiction than the Grand Duchy, costs are now broadly similar. 

Few fund companies in Ireland and the UK take the opportunity to hire directors based outside these countries. “Cross border expertise is absolutely invaluable, but 93% of independent directors on UK ManCo boards are UK residents,” said Mr Taneja. He would also like to see boards recruit people with non-fund financial services expertise. 

Ms Martensson noted that there has been a major change in the independent non-executive director community in Ireland, with the regulator asking directors to do more, as well as seeking greater diversity on boards. The nature of the independent non-executive role and training in the different jurisdictions were discussed, as were attitudes toward the CoSec role and how the delegation of activity by funds and ManCos is handled. 

20 regulatory hot topics in 25 minutes
Michele Eisenhuth, Arendt | Nathalie Dogniez, Non-Executive Director