MiFID II set to impact fund industry most – Fund Platform Group report
Of all regulatory measures in the pipeline, MiFID II is likely to have the biggest impact on European fund buyers, sellers and platforms, according to a report from the Fund Platform Group (FPG).
This was followed by Ucits IV for fund buyers and fund platforms and Solvency II for fund sellers. MiFID II and Ucits IV were further identified as the regulations that would have the greatest effect on fund buyers’ and sellers’ future revenue generating potential. Fund platform professionals, however, felt AIFMD was more important in terms of its likely impact on revenue streams.
The report, A Snapshot of European Platforms, was commissioned by the Fund Platform Group, an industry association that aims to ensure the coordination between all the fund distribution platforms worldwide. Research was conducted by Cerulli and The Platforurm.
Edouard Bokuetenge, chairman of the FPG, said the squeeze on fund managers’ margins has been well documented. “…But the reality is that the entire distribution value chain is likely to be impacted by regulatory change. Given the focus of new legislation is largely focused on protecting consumers, the biggest material impact will be faced by firms that are closest to the end investor.”
“In this cost-cutting context, Fund Platforms have a key role to play, given the numerous efficiencies that we have brought during the last decade and continue to bring to the industry today. Moving forward, we will have to continue proactively to redefine ourselves by increasing our value proposition to products, and exploring new client segments or geographies that remain untapped today.”
In total, 70 institutions, comprising fund buyers (13%), fund sellers (51%), fund platforms (26%) and a selection of trade bodies and other industry players (10%) were surveyed as part of the study. Approximately 50% of those interviewed anticipated falling profit margins in 2013 as a result of upcoming industry regulation.
Bokuetenge noted that regulation can have a “potentially revenue enhancing” effect as well. “The Ucits brand, for instance, has been further strengthened by Ucits IV, the benefits of which will be felt across the fund distribution value chain.”
“Our research also reveals that despite the anticipated cost of regulation, 25% of platforms anticipate greater profit margins in 2013, driven by scale, global expansion and cost control. There is also a general consensus that many groups are looking to outsource non-core functions, and so the pipeline for platforms in Europe is looking healthy.”
The Fund Platform Group was established in 2011 in Luxembourg as a trade association made up of the largest fund platform providers, with a European reach to build relationships and promote understanding between all stakeholders in the global fund distribution platform business.