The European managers, through their employers Efama, ask for support so that the Retailers invest more in funds. According to their famous 2020 'Fact Book', institutional investors are continuously eating the ground out of retailers who own the funds. In the last decade, the latter have passed from having 29.4% of the assets of the continent's funds to only 23.8%, a reality that collides with the prolonged 0% interest rate environment.
"Every effort should be made to increase the participation of retail investors in capital markets, including at the national level," asked Tanguy van de Werve, CEO of Efama, both to the European Union and to its member countries. . The persistent low demand for investment funds by retailers continues to be a concern for European institutions in view of the long-term low interest rate environment, which dwarfs the purchasing power of savers, and the worrying savings gap for retirement in most states.
Institutional investors are by far the largest owners of the funds. Insurance companies and pension funds have gained much prominence in the industry since 2009. At that time, their weight as customers was 37.6%, while in 2019 it amounted to 41.8%. For its part, another 24.8% of the assets of the funds belong to other financial intermediaries.
With this SOS message, the managers not only show concern about the financial future of citizens, they also seek to stabilize their market in an environment of high uncertainty due to Covid-19. In the corridors of the sector there is always suspicion of institutional investors. All the funds aspire to them due to the large volume of business they bring, but the managers know that they are very special clients: they take a long time to subscribe because their ‘due diligences’ are very thorough, but at the minimum exchange rate, when the market goes crazy, they shoot out. In contrast, retail investors, as studies show, show a much stronger loyalty to their fund.
Net subscriptions to European funds rebounded in 2019 to € 542 billion, more than double than in 2018, when they fell to € 258 billion in a year marked by red, the worst since the bankruptcy of Lehman Brothers. Of this new money flow, 72% went to UCITS funds, commonly known as harmonized funds, and the other 28% to alternative funds under the AIFMD directive. However, in 2020 the foundations of the managers have shaken again with the coronavirus crisis.
FLEXIBILIZE MIFID II
Just over a month ago, Efama formally asked Europe to Relax some of the most relevant points of the MiFID II financial regulation to save the business. One of their demands is to end the mandatory alert when a portfolio depreciates 10%. They also aspire to have alternative funds considered as non-complex and sold through execution in the commercial entities. In general terms, local supervisors, such as the CNMV, agree with the claims of the managers. Except for one point: incentives.
The European employers do not agree with a total ban on incentives or retrocessions – part of the management fee that the manager gives to the distributor for selling its funds – as “it would have substantial and far-reaching consequences in terms of general access investment advice for all European citizens ”. But supervisors have stood up to him in this regard. Without going any further, the CNMV welcomes the ban on rollbacks on all retail products, including unit linked, which would imply making the rule harder if possible in this regard.