Last updated: 00:06 / Friday, 11 September 2015
Lipper Thomson Reuters

Exceptional High Net Inflows in the European Fund Industry Brings Consolidation to a Standby Mode

Exceptional High Net Inflows in the European Fund Industry Brings Consolidation to a Standby Mode

As of the end of June 2015 there were 32,044 mutual funds registered for sale in Europe. Luxembourg continued to dominate the fund market in Europe, hosting 9,061 funds, followed by France, where 4,670 funds were domiciled, according to Lipper’s ‘Launches, Liquidations & Mergers in the European Mutual Fund Industry: Q2 2015’ report.

“As mentioned in the last report, it seems European fund promoters are in a standby mode, even though the activity regarding fund closures, mergers, and launches went up in Q2 2015 compared to Q1 2015. One reason for this can be seen in the still-exceptional high net inflows witnessed by the European fund industry during Q2 2015; higher assets under management (AUM) lead to a higher income stream and therefore to lower pressure with regard to the profitability of single funds within the product ranges. In addition, we have already seen a lot of activity with regard to the cleanup of product ranges, meaning European fund promoters have done a lot to realize economies of scale within their product offerings. This might have eased pressure on profits. That said, the activity in the equity segment during Q2 2015 showed there is still a lot for promoters to do on this front”, says Lipper.

During Q2 2015, 459 funds were launched in Europe. The quantity of newly launched products was 11% behind the number of launches during second quarter 2014, but it was in line with the average of the last four measured second quarters (the number of launches for Q2 2011 needs to be considered as exceptional).

“It is remarkable that the industry has not started to launch a massive number of new products to profit from the ongoing trend toward asset allocation/multi-asset and income products as has been seen in the past. Nevertheless, the European fund industry still has a lot of room for consolidation, since the AUM in Europe is still far behind the average AUM in the United States”, according to the report.

The number of liquidations went down approximately 11%, comparing Q2 2015 with Q2 2014—to 359 from 402, for the lowest number of liquidations in the five-year observation period.

The number of fund mergers went up approximately 28%, from 257 for Q2 2014 to 329 for Q2 2015, but–similar to launches–fund mergers were in line with the average of the last four measured second quarters.

“Since there is still a lot of activity regarding mergers and acquisitions in the European asset management industry, the alignment of product ranges and the resulting mergers and closures of funds will be one driver of future consolidation in the industry. This is the easiest way to increase the potential profits from an acquisition. That said, we see no lack of innovation in the European fund industry, and therefore we still expect the European asset management industry to show net growth in terms of new funds at some point in the near future. That will depend on general market conditions staying in the favor of investors, i.e., that no negative trend hits the stock or bond markets. The growth pattern of the industry is heavily dependent on market conditions and investor confidence”.