EFAMA goes on offensive with new strategic plan

EFAMA, the trade association for the European funds industry, has released a two year strategic plan which it says aims to put the end investor at the heart of proposed changes to the practices in the asset management industry.

Newly elected EFAMA president Claude Kremer, formerly head of ALFI, the Luxembourg funds association, said that after the financial crisis, there was “understandable scepticism” among consumers regarding financial institutions. The industry needs to focus on reinforcing investor trust.

“Without it, we have no hope of attracting people’s savings, and without it, we cannot hope to convince regulators to support the industry,” he said. “We want a win-win approach that demonstrates that demand shapes practice, and that financial institutions can serve society.”

With that driving principle, Kremer, along with EFAMA director general Peter de Proft (pictured) and other senior officials plan to meet regulators across Europe and in other jurisdictions around the world. EFAMA is likely to become affiliated to IOSCO (the International Organization of Securities Commissions), ahead of its next meeting in Beijing in early 2012.

EFAMA has identified five working priorities, comprising promoting savings, investor information and education, interaction with regulators, protecting and supporting the UCITS brand, and demonstrating the importance of the industry to the economy. A new working group, headed by EFAMA vice president Christian Dargnat is set to tackle financial market mechanisms suitable for evolving markets and the “deluge” of regulation about to hit the industry.

EFAMA has also just released an independently commissioned report on total expense ratios (TERs) across asset classes and fund types, as well as comparing the European fund industry to that in the US. The report subject was chosen in a move to promote transparency about the asset management business. Data was derived from 17 large cross border EFAMA member organisations, excluding affiliated businesses.

Dargnat said complex issues needed to be openly discussed, and he wanted to “highlight the voice of the buyside rather than that of the sellside, which is usually so vocal”. There is some frustration that measures already proposed to increase transparency and client choice have taken so long to be processed and approved by regulatory bodies, and the European Commission.

Pan-European rules governing PRIPS (Packaged Retail Investment Products) are seen as a critical development because they should level the playing field between asset management, bank and insurance products. But initial provisions had been diluted, to the disappointment of EFAMA and individual product providers. While the EC is debating the finer points of structure of niche products like social investment and venture capital funds, there was not yet agreement on the wider picture.

“There is not yet a spirit to group all these products in one document,” noted de Proft. “We are getting to a Balkanisation of selling practices, which is not helpful.”

Dargnat said it was not only end investors who did not differentiate between different types of product provider.”Regulators sometimes appear to do this as well. For example, you can’t really apply to same constraints regarding equity investments to pension funds that you might to insurance funds.” On a wider point, liquidity and transparency were not always compatible goals. Regulators and investors might have to prioritise one over the other.

De Proft sees further mergers of funds in Europe in coming months, especially if tax barriers are removed. The risk was that providers would then shift distribution to other products that are easier to market and cheaper to run, typically structured products.

Asked about fund sizes in Europe, which are usually smaller than in the US, he said bigger funds which could use economies of scale were a luxury of larger, longer established markets like the US. “Coming from a background of different national markets, we are making progress. We would like to have bigger funds.”

EFAMA vice president Massimo Tossato, who is also vice chairman of Schroders, said there were in fact very few inefficiencies left in the highly competitive fund management sector. “Those that are, are driven by tax regulations, the 27 different languages and different regulations across the region.”

 

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