IDEAL FUND

Scope of the study

This paper takes an investor-centric approach to examine the mutual fund value proposition and outlines recommendations for governments and the industry to promote sustainable solutions that will serve investors. The focus is on the long-term investment goals of European retail investors. To facilitate an investor-centric approach, it is necessary to start by identifying the three fundamental levels of long-term investor needs:

Long-term financial needs of individuals

1. Retirement planning 2. Liability management 3. Wealth accumulation

Figure 3

An overview of the long-term investor objectives is provided below in figure 3, looking at both the underlying need of the investor together with the relative time horizon.Within the long-term financial needs of the investor, retirement impacts the majority of the population, has the largest liability constraint and the longest time horizon, whereas liability management has a lower time horizon and the liability constraint is lower than for retirement needs. Wealth accumulation is not targeted towards fulfilling a liability and can have varying time horizons. Furthermore wealth accumulation does not involve the low income population. We have identified five primary dimensions around which the fund value proposition could be enhanced from an investor-centric perspective (see Figure 4) and which apply to greater or lesser degrees to each of the fundamental investment objectives noted previously.

Retirement

Liability constraints High Low

Liability Management (Housing, child education, ...)

Wealth Accumulation

Time horizon

Short-term

Long-term