22 Mar 2010
Alfi, the Association of the Luxembourg Fund Industry, has unveiled a study on the cross-border fund industry in Europe. The study, “Symbiosis in the evolution of UCITS,” produced by Lipper FMI, looks at the growth of the market from its early beginnings in 1988 and the future size of the industry.
The study, a comprehensive analysis of the cross border fund industry in Europe, explains Lipper FMI’s latest estimates of a cautious compound annual growth rate of 6.8% for Europe over the next five years, a substantial slow-down when compared with a 12% 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.
According to Ed Moisson of Lipper FMI, a Thomson Reuters company, “This growth rate will result in a European industry with assets under management of €6.8trn by 2014 and, with a good wind, an upper range of €8trn.”
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.
It considers the opportunities and threats faced by the European fund industry going forward, such as the growth of the UCITS brand globally to include Asian and Latin American markets; the changes brought about by the introduction of Exchange Traded Funds; long-term changes to pensions systems and the movement from DB to DC schemes; and “Newcits”.
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%, resulting in assets of €2.6trn by 2014, an increase in share of European assets from 32% (currently) to 38% (in 2014). This gives a growth in Luxembourg assets of €1trn over a five year period.
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.
The study, a comprehensive analysis of the cross border fund industry in Europe, explains Lipper FMI’s latest estimates of a cautious compound annual growth rate of 6.8% for Europe over the next five years, a substantial slow-down when compared with a 12% 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.
According to Ed Moisson of Lipper FMI, a Thomson Reuters company, “This growth rate will result in a European industry with assets under management of €6.8trn by 2014 and, with a good wind, an upper range of €8trn.”
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.
It considers the opportunities and threats faced by the European fund industry going forward, such as the growth of the UCITS brand globally to include Asian and Latin American markets; the changes brought about by the introduction of Exchange Traded Funds; long-term changes to pensions systems and the movement from DB to DC schemes; and “Newcits”.
According to Claude Kremer, chairman of ALFI: “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%, resulting in assets of €2.6trn by 2014, an increase in share of European assets from 32% (currently) to 38% (in 2014). This gives a growth in Luxembourg assets of €1trn over a five year period.
Mr Moisson continues: “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.
Camille Thommes, director general of Alfi comments: “The cross-border fund industry plays a key role in Luxembourg’s economy, but importantly Luxembourg has played a key role in the growth of UCITS, by offering a domicile which is politically neutral and commercially attractive and dedicated to the asset management industry. We are determined, going forward, to ensure that Europe retains its position as a leading cross-border fund centre and that Luxembourg continues to play a key role in the evolution of UCITS.”
