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Even though the European fund industry enjoyed overall estimated net inflows of €278.7 billion during first three quarters of 2015, the fund promoters seemed to be consolidating their product ranges further; 1915 funds (1068 liquidations and 847 mergers) were withdrawn from the market, while only 1311 new products were launched during the year so far.

With 453 newly launched products for Q3 2015, we noticed a slight decrease of 1.3% compared with Q2 2015 and a decrease of 5.6% compared with Q3 2014. The number of mergers (324) showed an decrease (-1.5%) compared to Q2 2015. Liquidations (322) showed an increase (+0.6%) and set off the downward trend which started in Q4 2014.

Figure 1 Launches, Mergers, and Closures of Investment Funds

15 11 30 Graph 1

Source: Thomson Reuters Lipper

Quarterly Comparison

During Q3 2015, 453 funds were launched in Europe. The quantity of newly launched funds showed the highest number of launches in a third quarter since 2011. Compared with the peak in 2011, the number of newly launched products for Q3 2015 showed a decrease of around 27%.

Compared with the number of funds closed between 2011 and 2013, the number of liquidations for Q3 2015 stabilized at the low level we saw for Q3 2014.

The number of fund mergers went up from 318 for Q3 2014 to 324 for Q3 2015, which is the highest number for a third quarter over the last 5 years.

Figure 2 Overview of New Fund Launches, Mergers, and Closures of Investment Funds Q3/ 2011 – Q3/2015

15 11 30 Graph 2

Source: Thomson Reuters Lipper

The overall positive trend, measured by the fund flows, in the fund industry cannot be attributed to significant efforts at issuing new products; it seems that existing and established products were the winners of this trend towards mutual funds.

A Closer Look at Promoter Activity

Q3 2015 witnessed the launch of 453 funds: 166 equity funds, 97 bond funds, 137 mixed-asset funds, 45 “other” funds, and 8 money market funds. During the same period 322 funds were liquidated: 101 equity funds, 43 bond funds, 84 mixed-asset funds, 71 “other” funds, and 23 money market funds.

For Q3 2015, 324 funds were merged: 144 equity funds, 94 bond funds, 53 mixed-asset funds, 4 “other” funds, and 29 money market funds.

Figure 3 Overview of New Fund Launches, Mergers, and Closures, June 30, 2015 - September 30, 2015

15 11 30 Graph 3

Source: Thomson Reuters Lipper

The net changes for Q3 2015 were consistent ; all asset types other than mixed-asset funds (with a net change of zero) showed negative net numbers; i.e., liquidations and mergers were on the same level with launches (137). Of significance was the decrease in money market products; 52 products were removed from the market, while in parallel only 8 were launched. (This asset type has only 4% European market share–measured by number of available products.)

Summary

Since the European fund industry is enjoying high net inflows for 2015, it is surprising it is still cautious with regard to fund launches. There have been a number of mergers between asset managers over the last few years.This has led to a number of duplications in the respective product ranges that need to be cleared to achieve economies of scale. Additionally, there is still a lot of pressure on asset managers with regard to profitability, which is also driving consolidation of product ranges. This pressure might even increase, once the new regulatory frameworks are fully applied, since not all the costs related to regulation can be passed on to investors. These will inevitably become a burden for the asset management industry.

In this regard, the consolidation of the European fund industry may continue over the foreseeable future. Even a supportive market environment, with rising equity and bond markets, might not stop this trend. However, it should at least slow down the consolidation, since increasing assets under management lead to higher income for fund promoters.

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

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

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