French regulator identifies fees disparities in fund offering
French financial market regulator AMF has conducted research on the fees of 8,038 funds registered for distribution in France as of 31 December 2015, forming around 80% of all funds available to French investors at the end of 2015.
One third of the funds studied were domiciled in France (2,638 funds) and the remaining two-thirds in other countries (5,400 funds).
Excluding ETFs of the research’s scope (1,008 funds), the study highlighted that France-domiciled funds’ fees were cheaper than these of foreign funds distributed in the country in 2015. Charges for a fund domiciled in France are 2 basis points lower than those of a foreign fund on average, the study reveals.
However, disparities were found among asset classes. Bond funds are 16 basis points less expensive in France than abroad, while equity funds are 14 basis points more expensive in France.
Average fees – pondered with the funds’ AUM – on mixed asset funds were 1.58% for French funds against 1.62% for foreign funds while these on money market and fixed income funds amounted to 0.10% and 0.69% for France-domiciled vehicles against 0.20% and 1.10% for their foreign peers respectively.
French funds had higher fees than their foreign counterparts on the equity segment only (1.80% vs 1.68%).
AMF has dug into funds with the highest level of charges. The French regulator said that in 2015, 148 funds – representing 0.33% of the total AUM managed by the funds studied – had largely higher fees than their peers. They were run by 65 different asset management companies.
Within these 148 funds, 70% had net assets under €20m in 2015. Hence the French regulator underlined a correlation between the fund size and the level of charges by the manager, arguing that charges decrease with the size of the funds, reflecting the economies of scale generated when fund assets soar.
Also the French regulator noted that most of the French funds identified charged additional turnover fees to their clients and that part of these 148 funds had been either liquidated or merged into other funds since December 2015.
In detail, AMF found 39 mixed asset funds that had average fees of 3.47%, 86 equity funds whose average fees were 3.26%, four money market funds with average fees of 0.65% and 19 fixed income funds with average fees of 2.06%.
The French regulator observed 13 foreign funds distributed in France at the end of 2015 that were not following recommendations of the International Organisation of Securities Commissions (IOSCO) on performance fees, that are not included in ongoing charges disclosed in key information documents.
AMF said it would promote European convergence in this area.
To read the whole research, click here.