Assets under management in the European fund industry could reach EUR6.8trn by 2014, according to a study published by Alfi, the Association of the Luxembourg Fund Industry, and produced by Lipper FMI.
The study explains Lipper FMI’s latest estimates of a cautious compound annual growth rate of 6.8 per cent for Europe over the next five years, a substantial slow-down when compared with a 12 per cent growth rate achieved since the early 1990s.
According to Lipper, the size of the industry currently means that it is likely to develop at a slower rate and the additional burden of weak economic fundamentals in the foreseeable future will also act as a break.
Ed Moisson of Lipper FMI, a Thomson Reuters company, says: “This growth rate will result in a European industry with assets under management of EUR6.8trn by 2014 and, with a good wind, an upper range of EUR8trn.”
The study looks at the integral factors shaping the landscape of the European international fund industry, including the changing role of banks from fund manufacturers to distributors, the rise of open architecture, as well as changes in the relative importance of each cross-border market over the years – with the largest penetration of cross-border funds into European markets being in Switzerland, Italy and Germany.
Claude Kremer (pictured), chairman of Alfi, says: “This study demonstrates that, despite its success over the past two decades, the European fund industry cannot rest on its laurels. We must address investor expectations in terms of clarity, governance and costs so as to be perceived as the best tool for pensions, savings and wealth protection in a low-growth economic environment. With the internationalization of investment patterns and fund distribution, it is essential that Europe retains its competitive edge in order to attract assets worldwide. I believe that Ucits is key to Europe’s leadership in this industry and it is essential that we continue to build its reputation as a world-wide brand.”
The study further examines the position of Luxembourg within the industry, looking at the role the Grand Duchy has played in the development of the industry. The study predicts Luxembourg’s progress with an estimated growth rate of 10.4 per cent, resulting in assets of EUR2.6trn by 2014, an increase in share of European assets from 32 per cent currently to 38 per cent in 2014. This gives a growth in Luxembourg assets of EUR1trn over a five year period.
Moisson says: “The introduction of the Ucits passport gave Luxembourg an opportunity to build a unique infrastructure – a fund centre that was a host for regulated retail products. Such a concept did not exist before Ucits. Ucits gave new life to Luxembourg but the relationship has been symbiotic and, arguably, over the years, Luxembourg has breathed life into Ucits.”
The report predicts that Luxembourg’s future growth will partly be the result of organic growth – notably in Asia, Latin America and Eastern Europe – but also of the migration of assets from other domiciles, reflecting the attraction for fund companies of having a single cross-border base, as well as the increased acceptance of Luxembourg products globally.