The Fund Platform Group (FPG) commissioned “A Snapshot of European Platforms” to Cerulli and The Platforum. The survey was conducted over a four week period throughout October 2012 among some of the most influential platform groups, fund buyers and fund sellers across Europe. It sought the opinions of key players in the platform industry regarding future development opportunities, challenges and growth outlook.
The common theme was a story of a continued need for open architecture solutions. Having said that, concentration of funds is getting more pronounced with the majority of platforms predicting that 70% of assets would flow to just 10 fund managers by 2015.
There are a varying number of platform models in Europe, which have all evolved in response to the different distribution dynamics of each market. Italy is very bank-dominated and the platforms are correspondingly highly institutional. The UK’s IFAs have been historically very fragmented and so platforms have been much more retail focused. Looking to the future, each different European country has a slightly different focus. Switzerland, for example, is felt to offer great opportunity for those supporting the private banks. In continental Europe, insurance is felt to offer appealing growth potential.
As funds are sold in more countries, and as global agreements become more commonplace, the challenge for platforms is to deliver similar (or the same) underlying product in different jurisdictions with varying distribution channels at play.
Against the difficult backdrop of falling margins, fee pressure and the green shoots of increasing transparency, some believe that consolidation in the number of European platforms is inevitable. Scale continues to be a primary concern and platforms are looking to other European markets as well Asia for growth potential. Latin America would be the third option whereas the US market is felt as impenetrable, mainly due to regulatory issues.
Figure 1. If you are a European platform, which other markets are you considering expanding to?
42% of European platforms think that growth opportunities are presented by other European markets, with Asia the next most appealing option
The source of growth for European platforms is largely felt to come from other European markets, Allfunds Bank is an example of an international platform which has expanded its operations from original parent Santander’s Spanish roots to operate in other juristrictions, including the UK, Italy, Luxembourg, Chile and Dubai.
Outside of Europe, 38% of participants in the survey pointed to Asia as providing opportunities. Asia is a great seductress, promising tales of opportunity and expansion, but she is seen by some as a fickle mistress. Nevertheless, everyone believes that Asia is a great opportunity but participants pointed out that Asia is like Europe: it is a very fragmented market and so arguably doesn’t exist as a single concept.
Singapore is generally reported to be the most interesting opportunity because of the private bank market there – this is the core target market of many European platforms. Additionally, SICAVs are sold in Singapore so the product environment is arguably more familiar.
Latin America is regarded as a growth opportunity for 17% of respondents whereas US, the largest mutual fund market in the world, is attractive for only 4% of participants. The main cause is a complex regulatory environment, though the strong market share of no European platforms in this market might also be a concern.
The Fund Platform Group was established in 2011 in Luxembourg as a trade association made up of the largest fund platform providers with a European reach to build relationships and promote understanding between all stakeholders in the global fund distribution platform business.
Through the promotion and development of our industry, the FPG aims to establish high professional standards and facilitate the efficient and secure distribution of investment funds to end investors.
Cerulli Associates is a Boston headquartered independent asset management research firm with international offices in London and Singapore. The firm was established 20 years ago, and produces actionable research on asset management markets in over 45 countries around the world.
The Platforum is a London-based specialist research firm with a focus on European investment platforms. In 2012 it published its first report on European platforms and distribution - The European Platform Guide.