The European investment fund industry is approaching the end of 2024 with asset volume estimates of 33 billion eurosaccording to the annual report of Efama, the supranational association of the sector, which would be a historic level. This means a 9.1% growth compared to the size it had at the end of last year and in this way is chaining its second year of consecutive growth, after the abrupt decline that 2022 meant (see graph). And this figure may be even higher, since the estimated volume is for the end of the third quarter, so in the end it could far exceed those 33 billion.
To put this figure in context, it must be taken into account that in the United States the volume of the investment industry reaches 28 trillion dollars in active investment funds and almost 10 trillion dollars in passive management products, with data up to October of the North American employers.
In Europe, investment in ETFs is included in the equity figure. In fact, the increase in investment in passive management has been one of the catalysts for the growth of asset volume, according to the report, motivated by the interest of retail investors, who have thus come to represent almost 31% of the assets in funds by type of client, five percentage points more than five years ago. Passive vehicles already represent 17% of total assets under management, four points more than a decade ago.
“Over the past three years, money flows have been directed towards monetary funds and passive management strategies, a trend that raises questions about the role of active management and how it can differentiate itself in an increasingly competitive environment,” the report highlights. from Efama.
The study also highlights the importance of the investment fund industry in financing the European economy, by having 6.6 billion euros in debt assets and 3 billion in variable income28% and 27%, respectively, of the total bonds and shares listed in Europe.
By country, the United Kingdom dominates the investment fund market, with a share of 35%, followed by France, with 16.1%, Switzerland, with 11.2%, and Germany, with 10%. Spain is among the seven largest markets, with 1.7% of total assets.
The disbursement that fund managers have had to make in technology and to adapt to new regulatory requirements has caused a drop in the profit margins of European firms, to levels not seen since the financial crisis of 2008. If last year the Costs represented 20.1% of the average asset volume, profits fell to 11.1%, when in 2021 they represented 15.1%.
And this trend is not going to slow down. “Fund fees expected to continue to decline in the coming years, driven by greater cost transparency and increasing competition from passive management, so that asset classes and strategies with lower management fees will be those that will experience the greatest growth in asset volume,” highlights the report, which warns that passive fixed income strategies can grow at a CAGR of 11% by 2028.
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