Fund launches fell to record low in 2011

Businessman_graph_downFund launches in Europe fell to the lowest level in five years in 2011 as the asset management industry focussed on consolidation.

Lipper, a data firm, found that 483 equity funds, 219 mixed-asset funds and 192 bond funds were liquidated. Another 483 equity funds, 219 mixed-asset funds and 192 bond funds were merged.

The asset management industry is often criticised for launching too many products while continuing to run subscale or poorly performing funds.

Philippa Gee, managing director at UK-based Philippa Gee Wealth Management, is one of these critics. In one of her recent blogs she wrote that there were “rare occasions when a new fund launch is necessary”.

Gee warned that “fund management groups ignore the risk of constant reinvention” and urged them to focus on improving their existing fund range instead.

Christoph Karg and Detlef Glow, researchers from Lipper who observed the decline in the number of fund launches in the latest Lipper Fund Market Insight Report, argued that last year’s fall was mainly the result of changes to the regulatory framework.

“The year 2011 was a period of focus on consolidation of the available fund ranges offered by fund houses in response to EU passport policies,” they wrote.

“The Ucits IV regulation ... led to huge administrative efforts for all fund management companies.”

One feature that proved to be particularly challenging was the key investor information document that needs to be produced for all funds, replacing the simplified sales prospectus.

In addition, the authors identified the demand to distinguish real money market products from products with a similar targeted performance but different underlying securities as another reason.

Europe’s fund launches last year were dominated by equity funds, a total of 576, followed by 339 bond funds, 326 mixed asset funds and 99 money market funds.

Meanwhile, Gee blogged: “Fund management groups need to understand that they are dealing with money that people have worked extremely hard to save and invest.

“It is a responsibility that should not be treated lightly.”

©2012 funds europe