Countdown for Spanish fund hub launch

Bolsas y Mercados Españoles (BME), the Spanish exchange operator, has reportedly asked for authorisation to launch a platform for mutual funds.

The request was made to financial regulator CNMV and the platform is expected to be launched in Spain by the end of 2016, local media reported in September.

BME declined to comment to InvestmentEurope, and CNMV said more details will be released only if an eventual authorisation is issued. Despite the current caution discussing the new project, it was already previously announced in 2015, when BME said it planned to set up a subscription, redemption and transfer fund platform in order to diversify its business.

The company said then that the platform would be open to all types of investors, market members and collective investment institutions and communication of orders would be executed through the Spanish stock exchange.

More recently, Beatriz Alonso, deputy director of equities at BME told local mediathe initiative was aimed at national – and international – mutual funds that are registered with the Spanish regulator and euro denominated.

Alonso explained that the cost for an investor who wants to buy or sell a fund on the BME platform will be similar to current stock exchange contractual charges for buying shares, plus commission charged by the broker; while asset managers will pay a premium but the amount is yet to be determined.

LOCAL PLAYERS

Private investors in Spain have access to funds mainly through their bank, asset manager or “business to client fund platforms like those offered by Self Bank, Inversis or Renta 4.

Cristina Martínez, product manager at Self Bank, says the initiative is “strongly positive” for retail investors, as it makes operations more simple and accessible. “We cannot forget that the picture of the distribution in Spain was, until recently, dominated by large banking networks, which made their own products available to retail clients, , without offering the possibility to buy third-party funds,” Martínez says.

The new platform could compete directly with other “business to client” fund platforms, but the success of the BME project will depend on a series of operational, fiscal and commercial factors – details of which remain unknown.

“[The BME fund platform] is an interesting development but we don’t see it as a game changer in a country where DIY [do-it-yourself] investing, while growing, is still niche. The Italian experience so far, where a similar service has assets worth around €65m and has attracted 125 funds since its launch in December 2014, suggests that the BME’s platform can help investors connect with a limited number of boutique asset managers,” says Rodolfo Crespo, senior analyst at Platforum.

“However, these boutique players tend to have lower brand recognition levels and we know this is a key factor in DIY investing. For BME’s platform to gain the scale it would need to get onboard some high profile fund groups,” Crespo adds.

In theory, larger asset managers would be interested in being listed on this platform, he explains, but the Spanish distribution model is dominated by rebate based channels such as banking.

‘PAY TO PLAY’ MODEL

These large asset managers have been successful in distributing their funds in a ‘pay to play model’, which has helped the strong growth of foreign funds and open architecture in Spain over the last few years.

“Asset managersmight prefer to focus on these big distribution agreements rather thancreating more competition through the new fund platform,when DIY investing is still niche anyway,” Crespo says.

“In the long-term large asset managers might be interested due to the impact of MifidII on rebates, but in the short-term the Italian experience shows this is very unlikely,” he says.

According to Javier Gazulla, responsible for investment strategies at Barcelona-based DiverInvest, new fund platforms can create “healthy competition” among banks and current fund supermarkets.

“This is the beginning of a new stage. Eventually, those who offer really good value-added products, easily accessible and are cheap, will prevail,” Gazulla says.

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