Agefi Luxembourg - mars 2025

AGEFI Luxembourg 24 Mars 2025 Fonds d’investissement By Ali Ejaz SIDDIQUI, Partner, Jeremy PAGES, Partner, Stephen MITZEL, Director & Yi XU, Senior at Deloitte Luxembourg T heUSpresidential electionmarked a pi- votalmoment for glo- bal financialmarkets, with the new, administration si- gnaling awave of regulatory andpolicy changes. This in- cludes appointingMarkT. Uyeda asActing SECChair- man and issuing an execu- tive order promoting crypto- currencies. These changes could significantly trans- form the global financial reporting landscape. Given Luxembourg’s leading role in cross-border investment funds, these newUS regula- tions couldhavemajor im- plications for Luxembourg- based entities, affecting their financial reporting, com- pliance requirements, mar- ket strategies, and engage- ment withUS investors. How theU.S. election could influence SECpriorities MarkT. Uyeda’s appointment as Acting SEC Chairman reflects the new administration’s prefer- ence for deregulation and mar- ket efficiency. Known for his pragmatic and industry-friendly stance, Uyeda is likely to steer the SEC towards reducing compli- ance burdens for companies, in- cluding investment funds. This couldmean less stringent fi- nancial reporting requirements under US Generally Accepted Accounting Principles (GAAP), reducing disclosure of valuation methodologies, risk in financial statements, and investor report- ing.Additionally, the SEC could refine regulatory guidance on key rules, such as the Advisers Act Marketing Rule and the Custody Rule, reshaping com- pliance obligations. The current administration’s broader deregulatory agenda is expected to influence some SEC’s priorities. For private fund managers, the SEC’s Division of Investment Management (IM) might offer regulatory relief or relax former stances, helping cre- ate products that allow them to extend their strategies to retail in- vestors. For example, the IMDi- vision could reconsider its informal stance that securities from a closed-end fund invest- ing over 15% of its assets in pri- vate funds can only be sold to accredited investors. Addition- ally, the IMCompliance Officer might be more proactive in pro- viding regulatory guidance on recently adopted rules, such as amendments to the Advisers Act Marketing Rule, compared to recent years. For Luxembourg-based invest- ment funds engagingwithUS in- vestors, these changes may require realigning financial re- porting strategies to complywith both US and EU standards. The broadening of the Custody Rule, whichnowcoversmore client as- sets (including crypto) andoffers enhanced custodial protections, may introduce newreporting re- quirements. Preparing for what SEC might require in financial statements will be critical. Hello, crypto…Goodbye, carried interest tax loophole In response to the growing crypto market, SEC Acting Chairman Mark T. Uyeda an- nounced a crypto task force on 21 January 2025. Their mission? To develop clear regulatory frameworks, streamline regis- tration, improve disclosures, and enhance enforcement. This crypto-friendly regulatory approach could boost institu- tional investment in cryptocur- rencies and strengthenUS funds’ global competitiveness. Building on this momentum, on 23 Janu- ary 2025, an executive order was issued to strengthen US leader- ship in the digital asset space. The order contains policies aim- ing to foster regulatory clarity for digital assets, amongother items. On the same day, the SEC re- scinded Staff Accounting Bul- letin (SAB) 121 by issuing new SAB122,which removed the ear- lier prohibitiononnational banks and large financial institutions from holding digital assets. SAB 122, instead, details guidance howentities shoulddisclose their obligations to safeguard crypto assets for others. This shift may encourage more large financial institutions to offer digital asset custody services, showcasing this administration’s commit- ment to creating a more favor- able regulatory environment for crypto and highlighting the im- portance of this sector in their economic policy. On one-side, even if Luxem- bourg-based investment funds with cryptocurrency exposure must reconcile these newguide- lines with the EU’s Markets in Crypto-Assets Regulation (MiCA) framework, the relax- ation of custody-related ac- counting constraints under SAB 122 could encourage more fi- nancial institutions to engage in digital asset custody services. On the other side, while there is no global standard for account- ing crypto assets, more invest- ments in themmight occur. This might create challenges for funds and companies operating across jurisdictions, especially when reconciling US GAAP, Interna- tional Financial Reporting Stan- dards (IFRS), and Lux GAAP. Accountingpoliciesmust clearly disclosed, particularly for funds using Lux GAAP, in the absence of specific guidelines. In addition, Luxembourg-based investment funds preparing US GAAP financial statements will need to measure certain crypto assets at fair value, with changes shown in net income, following the Accounting Standards Up- date (ASU) 2023-08 on 13 De- cember 2023. This update is a significant step toward stan- dardizing crypto asset reporting under US GAAP. Regarding carried interest taxes, the new president has proposed removing a tax benefit used by private equity fund managers, known as the carried interest “loophole.” It allows it to be taxed at favorable capital gain rates rather than ordinary in- come. This could have a pro- found effect on US and Luxembourg-based funds alike. If carried interest continues to be taxed at lower capital gains rates, fundmanagersmaybenefit from reduced tax burdens. However, if political pressure or broader tax reforms lead to policy, Lux- embourg-based funds engaging with US investors may need to reassess their tax-efficient struc- tures to mitigate potential in- creases in tax liabilities. Changes in the US carried inter- est taxation rules could also re- quire financial reporting to include effects from and disclo- sures related to new instru- ments, fund compensation structures, and deferred tax lia- bilities as well as updates to ac- counting policies under IFRS, Lux GAAP and US GAAP. Stance on sustainability: Valuation of ESG actions and instruments The new administration’s skep- ticism toward climate change and ESG initiatives is likely to slow the adoption of ESG-re- lated disclosure requirements. This contrasts with EU regula- tions like Sustainable Finance Disclosure Regulation (SFDR), which push firms to formalize ESG commitments. While the EU remains committed to strict ESG disclosure frameworks under SFDR, the US may roll back requirements, leading to discrepancies in financial and nonfinancial reporting. Luxembourg-based funds that integrate ESGmetrics in their fi- nancial statementsmust address these differences between US and EU regulations to maintain compliance and investor confi- dence in sustainable investment strategies. For example, if the SECrescinds orweakens existing climate-related financial disclo- sure requirements, these funds with US market exposure may face uncertainty in reporting en- vironmental risks. If ESG is de- prioritized by the sitting president, it could impact how funds value sustainability-linked financial instruments (due topo- tential decrease in their attrac- tiveness) and disclosure of carbon emissions, environmental risk provisions, and risk-ad- justed asset valuations. Potential regulatory rollbacks on climate-related financial dis- closures in the US could impact risk assessments, asset valua- tions, and contingent liability re- porting for investment funds. A key challengewill be aligning fi- nancial reporting frameworks across jurisdictions. If the US weakens ESG-related account- ing standards, Luxembourg- based funds may need to develop supplementary reports to meet EU investor demands for sustainability disclosures. Additionally, funds exposures to industries affected by envi- ronmental policy changes (such as energy, mining, and heavy industry) must assess how US regulatory shifts influence asset impairment testing, contingent liability recognition, and long- term investment strategies. These questions pertain to ac- counting under USGAAP, IFRS and Lux GAAP. What about tariffs? The newpresident intends to in- crease tariffon imports as part of the trade policy. The main goals are reportedly to reduce the US trade deficit, protect domestic in- dustries, and incentivize compa- nies to move manufacturing operations back to the US. How- ever, these tariff hikes have broader implications, especially in financial reporting for the af- fected businesses. Higher tariffs result in increased costs for companies relying on imported goods and materials, reducing their profit margins and overall financial perform- ance. Tomitigate these expenses, firmsmay raise consumer prices, potentiallydriving inflation. The unpredictable and volatile tariff policies can create financial mar- kets uncertainty and disrupt supply chains. Companies may also need to reassess their inven- tory valuation and long-termas- sets due to increased costs and changing market conditions. While these measures impact in- dividual businesses, they also have notable consequences for investment funds. Portfolioman- agers must closely monitor sec- tors andcompaniesmost affected by increased tariffs, suchasman- ufacturing, technology, and con- sumer goods. Investment funds may need to reassess their expo- sure to these industries and con- sider rebalancing their portfolios tomitigate potential losses. Conversely, certain industries and companies, like domestic producers, may benefit from the tariffs. Overall, the substantial increase in tariffs could affect the fair value estimate of invest- ments and require extensive dis- closures in financial statements. Next steps: Stay agile and critically consider financial reporting The US administration’s regu- latory approach can reshape the compliance landscape. As it includes financial reporting, in- vestment funds and their man- agers will face both challenges and opportunities. Whether it is tax treatment, ESG disclo- sures, or cryptocurrency ac- counting, easily adapting to these shifts will be key. Complyingwithmultiple regula- tory frameworks while ensuring transparentandaccuratefinancial reporting will be critical to main- taininginvestortrustandcompet- itivepositioninginanincreasingly complex global market. How Luxembourg-based funds navigate diverging financial re- porting standards, assess valua- tion impacts, and enhance nonfinancial disclosures will be crucialintheirlong-termresilience and attractiveness to investors. US Elections 2025: The potential repercussions for reporting and accounting practices Par Christopher DEMBIK, Senior Investment Strategy Adviser Pictet Asset Management L e protectionnisme de l'admi- nistration Trump ne fait pas peur, pour le moment. C'est lié au fait que les mesures annon- cées sont surtout symboliques et re- présentent moins de 5% du PIB américain. Conséquence de cela : les actions sont au beau fixe. Le rattrapage des marchés européens continue, notamment les valeurs bancaires et finan- cières. Même le marché boursier américain ne se porte pas trop mal. Les fonds spéculatifs sont toujours ven- deurs d'actions américaines. Mais, à chaque excès baissier, les particuliers se ruent pour acheter des valeurs décotées. La bonne performance de la Chine est certainement la surprise de ce début d'année. Le Hang Seng Tech a bondi de 25% depuis son plancher de janvier 2025. Les flux via Stock Connect qui relient les bourses de Hong Kong et de Shanghai explosent : +67% de transactions quoti- diennes en février par rapport à janvier. Cela confirme un vrai inté- rêt des investisseurs pour les actions chi- noises. Tout va pour le mieux dans le meilleur des mondes, apparem- ment. Qu'est-ce qui pourrait se gripper ? L'année boursière n'est jamais un long fleuve tranquille. En 2024, ce fut le débou- clage de positions non hedgées sur le yen en plein été qui a provoqué une correction. Pour 2025, il y a déjà des signaux d'alerte. La volatilité reste contenue sur les actions. En revanche, elle est à des niveaux anormalement élevés sur les devises. Prenons la paire livre sterling/dollar US. Depuis le début de l'année, elle a connu des fluctuations supérieures à 1% pendant plus de la moitié des journées de trading. En 2024 moins de 20% des sessions ont connu de tels écarts. Ce niveau de volatilité est inhabituel, d'autant plus que cela survient alors que le calme règne sur les actions. Historiquement, c'est la volatilité sur les actions qui cause un regain de volatilité sur les devises. C'est plus rarement l'inverse. Mais il y a des exceptions. En 2007, 2010 et 2022, la volatilité sur les monnaies a été l'élément déclencheur. Il faut toutefois une condition sine qua non pour que ça se produise : des taux d'intérêt élevés. Même s'ils diminuent depuis l'an dernier, ils res- tent à des niveaux historiquement hauts dans les pays développés. Faut-il craindre une contagion de l'instabilité des devises vers les actions ? Ce n'est pas exclu. La volatilité des devises est clai- rement un avertissement envoyé à tous les inves- tisseurs. Les facteurs de risque sont nombreux : la guerre commerciale évidemment, l'inflation plus prégnante que prévu aux États-Unis, la concentra- tion du marché, des valorisations élevées, les posi- tions non hedgées sur le yuan etc. On peut même imaginer qu'une vaste cyber-attaque survienne à cause du développement à tout-va de l'IA. Selon Palo Alto, les attaques détectées contre l'environ- nement cloudont augmenté de 66%enun an. Et ce n'est qu'un début ! Tout ceci renforce la probabilité d'un rebond de la volatilité et accroît bien-sûr le risque de correction. Comment se protéger ? En optant pour les stratégies long-short qui per- mettent de réaliser des Performances peu importe l'orientation dumarché, et en élargissant son allocation à d'autres classes d'actifs que les actions, par exemple les obligations ou le private equity. Cela devrait vous permettre de faire le dos rond lorsque la tempête éclatera. Le calme avant la tempête