Ucits growth rate points to €42trn asset base by 2048

Extrapolations of industry data published by the Association of the Luxembourg Fund Industry, Alfi, suggest that at the current historical rate of growth, the total asset base of the Ucits industry will hit €42trn by 2048.

The figures are based on the rate of growth experienced by the Ucits sector over the past three decades, since the funds regime came into effect. This has been identified in a report produced by Broadridge on behalf of Alfi, which suggests assets could experience compound growth of 5% annually over the next 30 years, taking net annuals sales from €201bn in 2017 to €890bn in future.

Growth in the asset base will be spurred by developments such as the EU’s Capital Markets Union, and initiatives to boost pension savings in the face of the region’s demographic challenge. The region’s dependency ratio is forecast to double to 51% in the next 30 years [1].

Ucits is also likely to see continued growth outside Europe, despite efforts of local regulators to protect their own markets.

Denise Voss, chairman of Alfi, said: “The global footprint of Ucits bodes well for the coming decade as populations in many of the newer markets are encouraged by their governments to take on the mantle of pension provision. Regulators in most non-European countries will wish to build a local fund franchise, but the regulatory structures they use are most likely to be based on Ucits. This can only be good news for Ucits when doors begin to open.”

“We can also expect Ucits to be a key beneficiary of the launch of the Capital Markets Union, which aims to increase investment and the choices available to retail and institutional investors and migrate some of the vast pool of deposit savings into managed investments.”

“However, we recognise that further work must be undertaken by the industry to ensure that Ucits fulfil their role of providing long-term financial stability for people and economies. A key element is to set in place effective financial education so that people both recognise the need to build their long-term wealth and know how they are going to achieve that.”

Among the key developments that the Broadridge report identifies are:

  • The Ucits Directive gave investment funds regulatory credibility, making funds acceptable vehicles for retail investors, thereby kick-starting a period of explosive growth that took assets in long-term Ucits from €300bn to nearly €10trn in their first three decades of life. More recently AIFMD has added a further €6trn of assets.
  • More than one third of funds domiciled in Europe are sourcing assets from multiple European and global markets and, of these, 64% are based in Luxembourg and a further 25% in Dublin, and Ucits is increasingly becoming the most commonly accepted regulatory standard for funds around the world.
  • Although designed for European investors, Ucits has proved to be a successful export: Asian markets account for 13% of cross-border assets, with Latin American markets contributing 3%.
  • Ucits has made Europe an attractive centre for fund groups worldwide: Groups from EU countries manage 56% of assets, with US groups accounting for 30%
  • Cross-border groups source 77% of their assets from Europe, with five countries (Italy, Switzerland, Germany, the UK and Spain) accounting for 70% of assets
  • Mifid II has been a game changer, disrupting the traditional value chain, and the impact has been increased transparency and pricing pressure, leading to a new focus on low-cost passives.

Diana Mackay, managing director, Global Distribution Solutions of Broadridge, added: “The success of the Ucits brand is remarkable but the industry cannot afford to be complacent. Like any brand it must be guarded by all those who benefit from its recognition because any lapse will be destructive not only to the pool of assets invested in Ucits, but potentially to the investors that have been persuaded to believe in the brand.”

Click here to download the report:Galaxy-of-Stars-FINAL

 

[1] European Commission, The Demographic Future of Europe – from Challenge to Opportunity.  2006

ABOUT THE AUTHOR
Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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