DEVELOPMENTS IN THE INDUSTRY
1. The resiliency of the asset management industry can be explained by the wide range of funds following different types of investment strategies on offer: investors can shift their portfolio between fund categories according to changes in the global economic outlook and the perceived investment risks.
2. The sustained sovereign debt crisis in the euro area led to outflows from government bond funds in December, whereas corporate bond and equity funds benefited from an encouraging economic outlook for 2011.
3. Investors are turning to greater diversification in asset classes to protect their portfolios from market movements and generate higher returns.
4. With asset allocation re-established as the most important factor explaining returns, asset allocation products have shown strong growth. Investment products with an element of active asset allocation are now being engineered both for defined-contribution plan members and for retail investors.
Note: The only period when diversification has not helped was in the aftermath of the Lehman crisis, when correlation amongst most asset classes shot up and most investment strategies could not protect investors from suffering heavy losses.
DEVELOPING IN THE EUROPEAN ASSET MANAGEMENT INDUSTRY
1. Institutional clients represent the dominant segment of the European asset management industry, accounting for around two thirds of total AuM in Europe.
2. These investors continue to manage part of their assets in-house and increasingly rely on the expertise of third-party asset managers.
3. Asset managers serve other institutional clients by managing financial reserves held by non-financial companies, banks, government, local authorities, endowments and others as many of these clients invest through a combination of investment funds and discretionary mandates.
4. Many of the institutional clients provide intermediary services for households which accounts for a significant share of the institutional client segments through their ownership of unit linked products offered by insurance companies, or defined contribution schemes offered by pension funds.
5. Retail investors increasingly access investment funds through platforms, funds of funds and similar approaches that are considered as institutional business. This is an important reason why institutional investors represent the largest client category of the European asset management industry.
DISTRIBUTION NETWORK
1. The border between different asset management product types is blurred. Apart from the frequent allocation of discretionary mandates to investment funds, certain investment funds display similar characteristics as discretionary mandates.
2. Discretionary mandates may also be retail oriented and mimic the investment strategies and structures of investment funds. Thus, product types with similar properties may be categorized differently, although differing primarily in terms of the wrapper used for their distribution.
3. Different investment product categories might have to submit to different transparency and selling rules. The resulting distorted competition hampers investors? ability to compare alternative investment options and weakens their position with both distributors and product providers.
4. Therefore we should support the EU initiative on Packaged Retail Investment Products (PRIP) to introduce a horizontal approach that will provide a coherent basis for the regulation of mandatory disclosures and selling practices at European level, irrespective of how the product is packaged or sold”.
