The European fund industry's biggest concerns are transparency, information and governance, according to the latest survey from the French EDHEC-Risk institute.
The European fund industry’s biggest concerns are transparency, information and governance, according to the latest survey from the French EDHEC-Risk institute.
The survey, entitled Shedding Light on Non-Financial Risks – a European Survey, was part of the Risk and Regulation in the European Fund Management Industry research chair, sponsored by CACEIS, the asset servicing banking group of CréditAgricole dedicated to institutional and corporate clients.
Some 77% of the more than 160 high-level European fund management companies that took part in the survey said the increase in non-financial risk was mostly due to the growing sophistication of operations.
Fewer (59%) said it was because of the reduced capacity of some intermediaries to guarantee deposits.
Uunclear or inappropriate regulation was cited by 57%, and the total absence of responsibility of management companies regarding restitution was cited by 53%.
Respondents said the priorities in regulating non-financial risks were transparency, information and governance.
Some 91% said regulators must ensure that information is genuinely fair, clear and not misleading. The financial responsibility of the industry was also seen as important.
On the same note, the survey highlighted that non-financial risks are largely the consequence of a fund manager’s decisions.
In regards the financial responsibility of managing non-financial risks, the second greatest concern – for 79% of the respondents – was that “fiduciary duties of asset managers should be reinforced, by stating that [managers] must invest for the sole benefit of their clients”.
Some 67% agreed on the proposition asset managers should have greater responsibility for non-financial risks.
A similar proportion (68%) said the responsibilities for the restitution of assets should be contractually defined between depositaries and asset managers, though 69% were concerned that the depositaries only be responsible for the assets they control, and that responsibilities should be defined by asset class.
The latest survey follows a previous study conducted last year by the EDHEC-Risk Institute, within the same research chair, entitled The European Fund Management Industry Needs a Better Grasp of Non-Financial Risks.
This study held that the responsibility for decisions and compliance with regulatory obligations did not rest with the depositary alone.
Costs of stronger protection should be largely borne by the industry, and would therefore result in a net cost for asset managers, said similar proportions of depositories (69%), custodians (73%) and respondents overall (70%).