wrapper

Even though the European mutual funds industry enjoyed overall record net inflows of €173.0 billion into mutual funds over the course of first quarter 2015, it seems the industry was still in a consolidation mode at the product level.

As of the end of March 2015 there were 32,040 mutual funds registered for sale in Europe. Luxembourg continued to dominate the fund market in Europe, hosting 8,983 funds, followed by France, where 4,712 funds were domiciled.

For Q1 2015, 399 funds were created in Europe. During the same period 387 funds were liquidated and 194 were merged. In other words, 581 funds (387 liquidations and 194 mergers) were withdrawn from the market, while only 399 new products were launched.

Figure 1 - Launches, Liquidations, and Mergers of Investment Funds in Europe

Launches, Liquidations, and Mergers of Investment Funds in Europe

Source: Lipper, a Thomson Reuters company

As shown in Figure 1, the numbers of launches, liquidations, and mergers during Q1 2015 were generally in line with the long-term market trend established in Q1 2012.

Quarterly Comparison

As shown in Figure 2, there were 399 funds launched in Europe during Q1 2015. The quantity of newly launched products showed the lowest value, comparing the previous five first quarters (since 2011).

A comparison with the peak in Q1 2011 shows that the number of newly launched products for Q1 2015 decreased around 50%. Compared with Q1 2014, the number of 399 newly launched products was still a decrease of 26%.

Figure 2 - Overview of New Fund Launches, Mergers, and Closures of Investment Funds in Europe

Overview of New Fund Launches, Mergers, and Closures of Investment Funds in Europe

Source: Lipper, a Thomson Reuters company

During the same period the number of fund mergers went down a similar 26%, from 263 for Q1 2014 to 194 for Q1 2015, meaning that Q1 2015 also showed the lowest number of fund mergers in the observation period.

The number of liquidations went down approximately 11%, comparing Q1 2015 (387) with Q1 2014 (437). This was the lowest number of liquidations in the five-year observation period of this report.

With regard to the above, it can be concluded that Q1 2015 showed lower activity of European fund promoters in all areas. Comparing the first quarter numbers of the last five years, closures and mergers showed their lowest numbers as did the launch of new products. This means that the overall positive trend in the industry, reflected in the high net inflows over the last 27 months, did not appear to be underpinned by significant efforts with regard to the launch of new products. It appears that existing and established products would be the winners of the trend toward investment in mutual funds by European investors.

A Closer Look at Promoter Activity

The first quarter of the year 2015 witnessed the launch of 399 funds, divided into 144 equity funds, 100 bond funds, 121 mixed-asset funds, 33 “other” funds, and 1 money market fund.

During the same period 387 funds were liquidated: 108 equity funds, 76 bond funds, 76 mixed-asset funds, 105 “other” funds, and 22 money market funds.

For Q1 2015, 194 funds were merged: 55 equity funds, 51 bond funds, 61 mixed-asset funds, 7 “other” funds, and 20 money market funds.

Figure 3 - Overview of New Fund Launches, Mergers, and Closures for Q1 2015

Overview of New Fund Launches, Mergers, and Closures for Q1 2015

Source: Lipper, a Thomson Reuters company

The net changes for Q1 2015 showed negative totals for all analyzed asset classes. Noticeable were the changes in the money market asset class, where we saw a net decrease of 41 products in total. Considering that 1,289 products were listed in the European market, it was a decrease of more than 3% of the instruments in this asset class. Also significant was the negative net trend in asset class “others,” where only 33 new products were launched, while in parallel 112 closures took place.

Summary

It seems European fund promoters are in a standby mode, since the activity regarding fund closures, mergers, and launches slowed down in Q1 2015. One reason for this can be seen in the record net inflows witnessed by the European fund industry during Q1 2015, since higher assets under management (AUM) lead to a higher income stream and therefore to lower pressure with regard to the profitability of single funds within the product ranges. In addition, we have already seen a lot of activity with regard to the cleanup of product ranges, meaning European fund promoters have done a lot to realize economies of scale within their product offerings, which might have eased pressure on profits.

It is remarkable that the industry has not started to launch a massive number of new products to profit from the ongoing trend toward asset allocation/multi-asset and income products as has been seen in the past. Nevertheless, the European fund industry still has a lot of room for consolidation, since the AUM in Europe is still far behind the average AUM in the United States.

Since there is still a lot of activity regarding mergers and acquisitions in the European asset management industry, the alignment of product ranges and the resulting mergers and closures of funds will be one driver of future consolidation in the industry. This is the easiest way to increase the potential profits from an acquisition.

That said, we see no lack of innovation in the European fund industry, and therefore we still expect the European asset management industry to show net growth in terms of new funds at some point in 2015. That would depend on general market conditions staying in the favour of investors, i.e., no negative trend hitting the stock or bond markets; the growth pattern of the industry is heavily dependent on market conditions and investor confidence.

The views expressed are the views of the author, not necessarily those of Thomson Reuters.

Tagged under
Detlef Glow

Detlef Glow is Head of EMEA Research at Lipper, a Thomson Reuters flagship brand. In this position he is responsible for the Lipper research reports on the European ETF industry and special research reports on newsworthy market topics. Besides these tasks, he is acting as spokesperson for Lipper on TV and in print media, as well at conferences and expert panels. Detlef joined Lipper in mid 2005 from Feri Wealth Management, where he was Director of Portfolio Management, managing segregated accounts for high net worth individuals (HNWI). Prior to this he spent nine years with Tecis Holding AG, most recently as Head of Fund Research for Tecis Asset Management AG. In this role he was responsible for the quantitative and qualitative fund research for the Tecis fund of funds, the HNWI accounts and the recommendation list of funds for the financial adviser arm of Tecis. Detlef has an MBA focusing on Financial Services from the University of Wales/Cardiff, as well as a BA in Business Administration.”

Website: www.lipperweb.com

Press

Les clients vont-ils bientôt investir en ayant ...
La sortie de l’Union européenne va-t-elle faire ...
La mission du cycle de conférences organisé à ...

Press

Even spoilt Muscovites are surprised by the ...
Embraer presents the Phenom 300 Jet at ...
Following the success of “The Most ...

About Us

Shorex is a specialist media group for the wealth management industry and the high-end luxury market. Our purpose is to provide our partners, delegates and visitors with an effective networking platform where they can forge productive relationships and come away with strong ideas... read more