As soon as , the press commented on her programme – or rather, on those priorities that she had picked up from across the party spectrum in a bid for the highest approval rating possible. So if the investment fund and asset management industry were asked, what would be on our wish list?
Let us look at three main aspects: (i) regulatory developments, (ii) business opportunities and (iii) policymaking.
Sustainable finance is at the forefront of everyone’s mind. The industry eagerly awaits the third leg of legislation, the taxonomy, which plays a key role both in product design and when it comes to investor perception. In order to avoid greenwashing, the industry needs clear yet adaptable definitions that leave room for innovation: what counts as green today may no longer be sufficient in five years.
It would not harm the Commission to admit that in some (rare) instances, legislation probably didn’t achieve its goal and could be worth revisiting without bias.
The Capital Markets Union is not yet fully completed. Against this background, and given that the Commission is about to carry out a review of AIFMD and Ucits, the focus should be on modernising these frameworks without revolutionising them.
This goes in particular for AIFMD which is fairly recent, with a burgeoning true common market for alternative investments. Whether it is technical subjects such as using and measuring leverage or the liquidity mismatch, or discussions on amending Ucits rules as a result of the Woodford case, it is paramount that changes to regulations be based on facts and evidence and always bear in mind what is best for investors.
It would not harm the Commission to admit that in some (rare) instances, legislation probably didn’t achieve its goal and could be worth revisiting without bias. This is definitely the case for PRIIPs, where the current provisions are confusing, if not misleading for retail investors.
It makes no sense in their case to require the publication of future performance scenarios – which are hypothetical by nature – and to prohibit, at the same time, information on past performance. In addition, the calculation methodologies for transaction costs have regularly brought strange results, even negative figures.
While households in the US invest 23% of their wealth in mutual funds, that proportion is merely 8% in the EU.
In terms of business opportunities, there is huge potential for asset managers to grow their businesses by reaching out to more investors and financing the real economy. While households in the US invest 23% of their wealth in mutual funds, that proportion is merely 8% in the EU. European investors basically sit on a pile of cash (between 30% and 40% of their wealth depending on the estimate), and given the demographic trends in our Western societies, third-pillar solutions, be it through PEPP or other pension vehicles, are needed more urgently than ever.
In order to thrive, our industry needs predictability, stability and legal certainty. The role of the Commission and the three co-legislators in general in this goes beyond legislating – it extends to supporting the asset management industry by facilitating its agility, innovation and use of new technologies.