Spanish fund industry suffered high outflows in 3Q – CNMV

Spain’s asset management industry saw high levels of fund ouflows in the third quarter of this year, amid intense competition for deposits among financial institutions, according to the Comisión Nacional del Mercado de Valores (CNMV).

“The evolution of the domestic collective investment industry remains subject to a high degree of uncertainty as a result of large outflows still being observed and high risk aversion [from investors],” the regulator said in its third quarter report for 2011, looking at recent developments and prospects for Spain’s financial industry.
“Resources obtained from disinvestments in fixed income funds are being directed, at least partially, to other instruments with lesser perceived risk, such as guaranteed fixed income funds and bank deposits which continue to pose a significant competition,” the report said.

Total assets under management declined 2.5% to a little above €140bn during the first six months of this year, due to the high volume of outflows, although at about €5bn, ouflows were slightly lower than in the previous semester.

Spanish financial institutions were locked out of the international capital markets at a time when they faced higher regulatory capital requirements. Liquidity needs have encouraged banks to raise the attractiveness of deposits by offering higher interest rates and this will continue to put pressure on the fund management industry in the short term, the report said.

On the positive side, gains in competitiveness resulting from fund mergers in recent years and efficiency improvements have reduced operating costs for investment managers.

Short selling ban
The global economic downturn in the third quarter gave rise to a new period of turbulence on international financial markets with uncertainty peaking in the first half of August and leading to major falls in stock values in Europe, the report said. The Ibex stock market index which had risen 7.3% up to March, lost 2% of its value in the second quarter and another 19% in the third quarter.

Financial sector valuations posted the heaviest falls, although the temporary ban on short selling in the financial sector adopted by the CNMV in August along with other European regulators helped to mitigate the high volatility, the report said.

The CNMV decided at the end of September to keep its ban on short selling and said the measure would be maintained for as long as it was necessary.

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