This 12^th edition provides insightful information that is especially important in these turbulent and dynamic times to assist, direct and improve governance processes in Luxembourg’s fund business. Between 20 June and 20 October 2024, 115 participants filled out the survey, with respondents falling into five categories, Super ManCo, UCITS ManCo, AIFM, UCITS, and AIF.

The year 2024 has been monumental for geopolitical shifts, marked by a ‘super year’ for elections, where around 3.7 billion people across 72 countries had the opportunity to vote, leading to widespread political turnover. This has significant implications for the global business landscape, particularly in the fund industry in Europe, notably Luxembourg. Political changes have introduced policy uncertainty and market volatility, necessitating recalibration of risk assessments and investment strategies for funds. The developments highlight the need for robust governance practices and adaptation to new geopolitical risks, regulatory landscapes, and economic priorities. Emerging markets may offer new investment opportunities amidst these changes. The Luxembourg Fund Governance Survey by the ILA and PwC Luxembourg underscores the importance of governance processes, addressing key issues such as board composition, AML, ESG, and preparedness for regulatory compliance, emphasising the critical role of governance in navigating these turbulent times.

The 12^th edition of the Luxembourg Fund Governance Survey, prepared by PwC Luxembourg, in partnership with the Luxembourg Institute of Governance (ILA), provides insightful information that is especially important in these turbulent and dynamic times to assist, direct and improve governance processes in Luxembourg’s fund business. Like its predecessor, this edition of the Luxembourg Fund Governance Survey addresses a number of subjects and issues, such as the board composition, board organisation, remuneration, directors’ lifecycle, roles and responsibilities of the board, conflicts of interest and liabilities, AML and ESG. The preparedness of boards for the Digital Operational Resilience Act (DORA), board consultation on Information and Communication Technology (ICT) Risk Appetite, board involvement on Self-Assessment Questionnaire (SAQ) (that replaced the Long Form Report (LFR)), and board engagement of new resources for regulatory compliance are among the new issues that are highlighted in this edition.  

Highlights and key trends

The survey this year identifies important topics that investment funds and Investment Fund Manager (IFM) boards need to focus on. Boards are concentrating on regulatory changes as they strive to conform to new international norms. Recognising the significance of good governance, boards have adopted frameworks to adapt to evolutions in oversight and decision-making. Deliberations continue to prioritise market trends and investment performance in the face of macroeconomic difficulties.

Some key highlights of the Luxembourg Fund Governance Survey 2024 include:

Board composition

• A significant increase in the appointment of independent directors is noted, up from 39% in 2022 to 41% in this edition.
• Data reveals that 26% of boards now have a female member, reflecting progress in gender diversity.

Board organisation

• Enhanced board organisation practices are evident, with boards now meeting an average of 10 to 11 times per year.
• The use of circular resolutions remains widespread with 92% of boards reporting their use.

Roles and responsibilities of the board

• Clear delineation of roles and responsibilities has improved, ensuring better governance and accountability.
• There is an increased focus on strategic oversight and risk management.

Strengthening of conflict-of-interest policies in 2024

• The 2024 survey reveals positive trends in conflict-of-interest management among UCITS and AIF boards. The percentage of UCITS boards maintaining a conflicts-of interest-register increased from 86% in 2022 to 95% in 2024, and AIFs from 72% to 78%.

Anti-Money Laundering (AML)

• AML measures are a priority, with 85% of boards implementing stringent AML policies and procedures.

Environmental, Social, and Governance (ESG)

• ESG considerations are increasingly integrated into board discussions, with 65% of boards having an ESG committee or dedicated ESG roles.

New regulations

• Boards are proactive in adapting to new regulations, with 90% of respondents expressing confidence in their regulatory compliance frameworks. 

Andrea Montresori ILA Fund Committee Chairman and PwC Luxembourg Partner, said: “Amidst the 2024 election super-cycle and significant geopolitical shifts, Luxembourg’s fund industry shows strong governance practices. Despite these challenges, boards continually refine their practices and engage in their education. They align ESG strategies with business goals, fostering sustainability and complying with SFDR and taxonomy criteria. Observing robust governance practices among Luxembourg fund boards is encouraging, significantly contributing to the sector’s strength and resilience. This underscores the ongoing relevance of the Luxembourg Fund Governance Survey as a key resource for understanding governance practices, challenges, and opportunities. I extend my sincere appreciation to the survey respondents for their valuable insights, and I invite you to deep dive into its contents and analysis.”