The Task Force Rethinking Asset Management was set up by the Centre for European Policy Studies (CEPS) and the European Capital Markets Institute (ECMI) in late 2010 to research four topics, in view of their relevance for the European economy, the single market and investors:
(a) the future of the asset management industry after the financial crisis and the adoption of the alternative investment fund managers’ directive (AIFMD)
(b) product innovation in UCITS and the way forward to complete the single market and strengthen product integrity
(c) the distribution of investment funds and other products to strengthen the choice and protection of (retail) investors
(d) the contribution of the asset management industry to the economy and how to unleash its untapped potential.
For this purpose, CEPS and ECMI brought together a wide range of stakeholders, including asset managers, custodian banks, academics, experts and policy-makers, under the chairmanship of Jean-Baptiste de Franssu, Chairman of INCIPIT and former President of EFAMA, and with the support of the CFA Institute, the global not-for-profit association of investment professionals. A total of four meetings took place at CEPS in Brussels during 2011.
Rethinking Asset Management: From Financial Stability to Investor Protection and Economic Growth
The final report of the Task Force 'Rethinking Asset Management' examines the asset management industry and its links with financial stability, product integrity, investor protection and the real economy. A landmark study, the report evaluates the many legislative proposals on the table – including implementation of the AIFMD, MiFID II and PRIPs – as well as the discussions on product integrity in UCITS and ‘shadow banking’.
Task Force Meetings
Successful start for this task force, which managed to put together a very diverse group of market participants to the wider asset management industry, from hedge-funds to private equity, but also banks and insurers. The topic under discussion was the convergence of traditional and alternative asset management after recent legislative measures at European level. Task force members agreed that so called ‘hedge-fund UCITS’ were difficult to define but cause some concerns for the UCITS brand and the protection of investors. Present to everyone in the meeting was the widening pension gap in Europe and the necessity to come up with reforms to boost long-term savings. The meeting benefited from the participation of the European Commission and CESR/ESMA who contributed intensively to the debate. The task force is sponsored by the CFA Institute.
Academic experts, public officials and industry representatives met again to discuss the future of asset management at CEPS-ECMI in Brussels. The focus this time was on depositaries and distribution, given the forthcoming revision of UCITS and the proposals for packaged retail investment products (PRIPS). It was felt that the new rules on depositaries were very helpful in clarifying their duties and responsibilities but still needed some refinement by ESMA. It may be that asset managers have not yet fully understood the impact of the new rules for their businesses. The effects of these rules were also discussed with regard to investments in emerging economies. As to distribution, it was felt the effects of the third country rules in the alternatives Directive could be negative for some investors. In addition, private equity was compared to other products, evidencing the differences in distribution across the alternatives space.
Task force members met to discuss the contribution of asset management to the economy, where the final report of this task force will seek to put forward concrete proposals. In this context, the group looked at the operational principles of social responsible investment (SRI) and considered ways to implement them across the industry. Participants agreed that environmental, social and governance criteria are useful tools to manage risks and boost returns over the long term. Yet, it was felt that much of the responsibility falls upon institutional investors rather than asset managers, who nevertheless can play an important role by offering SRI vehicles to retail clients. Initiatives to foster long-term investment via dedicated pan-European vehicles were addressed, including a proposal to introduce a long-term UCI for retail investors. The role of hedge funds and other sophisticated investors in the economy was also discussed, next to private equity and venture capital.
Defining 'complexity’ for retail financial products should be done with reference to the ability of investors to understand their risk-return pattern. A clear line should therefore be drawn between ‘complexity’ for retail investors and financial stability concerns, which should be separately addressed. These two were the main conclusions of the last meeting of this task force which took place in Brussels in late September to discuss exchange traded funds and structured UCITS, together with the competitive threats to the EU asset management industry in Asia and Latin America. Under the heading ‘From Financial Stability towards Investor Protection’, a forthcoming task force report will consider the best way to improve investor protection and the contribution of asset management to the European economy.
More information
- Please download the prospectus to find a detailed account of the objectives, methodology and work plan of this task force: Task Force Prospectus
Final Report of the Task Force: 'Rethinking Asset Management: From Financial Stability to Investor Protection and Economic Growth'
