Shedding Light on Non-Financial Risks – a European Survey

Shedding Light on Non-Financial Risks – a European Survey — January 2012

Executive Summary

types of measures since they are already of the opinion that the fund management industry should be prepared to assume its fiduciary duties. Responses to our survey contrast with those of AIMA (2011), as greater protection on aggregate would be a net cost or a high net cost to asset managers for 70% of our respondents, to depositaries for 69%, and to custodians for 73%. Only a minority think it will be a net benefit (7%, 5% and another 5% respectively). The three categories would mostly share the costs of greater protection regarding the financial responsibility of the industry. It would be a net cost or a high net cost to asset managers for 68% of respondents, to depositaries for 60% of respondents, and custodians for 67% of respondents. Costs of greater protection regarding regulation on distribution would mostly be borne by asset managers. It would be a net cost or a high net cost to them for 59% of respondents, while only 28% think it would be for custodians (as many as 69% are unsure), and 32% for custodians (62 % are unsure). On the other hand, the costs of greater protection regarding

Securities and Markets Authority (ESMA) could play this role. Only 38% agree that a European savings protection authority (rather than just a savings regulation authority) should be created (30% disagree) to complement the powers of the ESMA. This appears to be more positively seen by the respondents from France, and significantly less by those from the United Kingdom. Greater protections against non- financial risks are expected to be a net cost to all parties An important aspect when discussing protection is the question of its costs, as there is usually a trade off. Respondents are ready to pay for greater transparency more than for any other measure. If fiduciary duties can be enforced without much cost, the more general theme of greater financial responsibility of the investment management industry, which included capital requirements, higher depositary protection and insurance as sub-themes, is expected to be a net cost for the investment management industry, probably also because in practice investors are less ready to pay for these

Figure 8: Would greater protection be a net cost to asset managers?

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An EDHEC-Risk Institute Publication