French AM on the rise
The French asset management association AFG, together with local market regulator AMF, has set up Frog to work on increasing French funds’ competitiveness.
‘Frog’ has been adopted as the acronym referring to French routes and opportunities garden, the group set up by the AFG and the AMF to increase the competitiveness of France domiciled funds and to enhance the positioning of French asset management internationally.
According to Efama’s 2015 figures, France ranks third in terms of assets managed through funds with a market share of 15.8%, behind the UK (21.4%) and Germany (18.1%).
When including assets managed through mandates, France comes second with a market share of 20% in Europe.
As for the domiciliation of funds, France is ranked second for alternative investment funds (21%) and fourth for Ucits funds (9%) in Europe.
Frog’s mission is to figure out how to better export French funds abroad, focusing on two axes: their legal structure and the fund distribution channels outside France. The group, having started meetings in February, gathers professionals from the asset management, infrastructure and fintech industries.
A report is to be delivered before the summer, consisting of initiatives and ideas that will be implemented effectively and promoted to politicians during summer.
“From a banking point of view, it does not change much having funds domiciled in one country or another. But from an asset manager perspective, we must sound the alarm,” says Didier Le Menestrel (pictured), chairman of Frog and head of the AFG Competitiveness Commission.
“Funds are being moved and domiciled at a higher pace in other European countries than France. That pace speeds up ever more.”
Le Menestrel, also chairman of Financière de l’Echiquier, assesses Luxembourg currently takes most profits from the ‘Europeanisation’ of the asset management industry. He fears a non-reaction from the French industry would
raise questions about its utility function.
“An ecosystem is a whole. When institutional clients are based in the UK, deposits held and private banks located either in Switzerland or Luxembourg and most complex funds registered in Ireland, what do we have left in Paris?
“Our asset management industry is renowned for its know-how and that coupled to the French art of living gives us arguments to back our claims. However, it is not enough. We have to develop tools to reach the level of other places such as Ireland, the UK and Luxembourg,”
Le Menestrel argues, depicting an ecosystem changing abruptly. For him, all hurdles to the international distribution of French funds should be lifted.
“The legal regime of France-domiciled funds, mostly relying on co-ownership, remains a huge brake to their export, in particular into the Anglo-Saxon markets. It also includes taxation that must be removed,” he says.
2015 has already seen a first step with the creation of “sociétés de libre partenariat”based on the model of English limited partnerships, allowing French and foreign institutional investors to jointly invest in significantly sized funds.
Le Menestrel believes it has opened a path for further changes in the structure of French funds.
Frog’s chairman claims the French AM industry must back French ministry of Economy Emmanuel Macron’s recent statements in the Financial Times. Macron suggested UK financial services workers would relocate to France in the event of a Brexit.
“We have to recall ourselves 2012, when David Cameron and Boris Johnson said they were ready to roll out the red carpet to French companies and investors.
“If a Brexit is to happen, we must be ready to welcome UK and US managers that have their European headquarters in London, since they would be forced to add teams in Continental Europe with the loss of the European passport.
“Claiming our love of finance through political statements would be our best chance to draw them,” he concludes.