RESHAPING RETAIL FUND DISTRIBUTION

SETTING THE SCENE

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In the midst of monumental change, the industry has bounced back after navigating the turbulent waters of the last few years. Total assets under management (AuM) in Europe reached an estimated €19.3tr at the end of 2014; institutional clients represent the largest client category, accounting for 74% of total AuM (insurance companies and pension funds acting on behalf of millions of households comprise 39% and 33% of total institutional AuM, respectively), while direct investment of retail investors account for 26% 1 (see figure 1). In this regard, retail sales are mainly driven by institutional investors via pension or unit-linked products sold by insur- ance companies. According to the European Fund and Asset Management Association (EFAMA), the percentage of direct financial holdings of euro zone households in insurance and pension funds soared from 31.8% in 2003 to 37.4% in 2013. On the contrary, European households placed 12.5% of their total financial wealth in investment funds in 2003, while in 2013 that figure decreased to 8.5% 2 (see figure 2). Moreover, according to the European Central Bank (ECB), 96.4% of Euro- pean households have deposit accounts while only 11% have mutual funds 3 . Several steps have recently been taken to make it simpler for an individual investor to participate in the investment funds industry. For example, the idea of creating a “digital passport” that would allow investors to purchase investments, including UCITS funds, and manage them online was recently proposed to the European Commission by EFAMA, the Association of the Luxembourg Fund Industry (ALFI) and the UK’s Investment Association. In addition to these efforts to reconcile retail investors and investment vehicles, other trends have also recently emerged.

BREAKDOWN OF TOTAL AUM, BY TYPE OF INVESTORS

FIGURE 1

Source: EFAMA

33%

74%

26%

39%

25% 3%

Pension Funds Insurance companies Other institutionals Banks

Retail Institutional

Sources:EFAMA.

DIRECT FINANCIAL HOLDINGS OF EURO AREA HOUSEHOLDS (SHARE OF THE TOTAL, %)

FIGURE 2

Source: EFAMA

100% 10% 20% 30% 40% 50% 60% 70% 80% 90%

31,8

34,4

35,1

37,1

37,4

12,5

8,6

11,5

8,1

8,5

3,7

5,9

4,5 8,4

3,7

5,2 7,3

10,5

10,0

10,6

42,7

41,9

41,6

39,8

39,2

0%

2003

2007

2008

2012

2013

Currency and deposits

Debt Securities

Quoted Shares

1 EFAMA, Asset Management Report 2015, April 2015 2 EFAMA, Trends in European Investment Funds, Fact Book, 2014 3 ECB, The Eurosystem Household Finance and Consumption Survey, 2013

Insurance & pension fund reserve

Investment Funds

Source:EFAMA

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