Regulation to cost Europe’s funds industry up to $500 mln a year

The burden of addressing regulatory requirements will cost the European funds industry between $300 million and $500 million – or €220 million and €365 million – a year in the next three

years, say new estimates.

These costs may lead to consolidation in the asset management sector and create barriers to entry into the market, suggests the study by BNY Mellon and consultancy EY.

Asset managers may be pushed to sign more middle and front-office outsourcing deals as they seek to control their expenses, says Daron Pearce, EMEA head of global financial institutions at BNY Mellon.

“There are a multitude of initiatives that fund managers could consider in the face of falling profitability and rising costs/income ratios,” he says. “These include reconsidering the opportunities of long term restructuring and building partnerships with third-party providers for middle and front office functions.”

The study, The Impending Profitability Challenge for European Fund Managers, suggests the cost of complying with regulation will lead to an increase of at least 3% in cost/income ratios for asset managers.

Another pressure on profits is the growing investor preference for passive investment products such as exchange-traded funds (ETFs), which generally have lower fees than actively managed funds. The survey found that assets under management in passive funds and ETFs are growing at twice the rate of active funds.

Regulatory costs affect investors as well as asset managers. A recent report  by Allianz Global Investors claims institutional investors miss out on 2.3% a year of potential returns because of capital controls and other investment requirements set by regulators.

©2013 funds europe

HAVE YOU READ?

THOUGHT LEADERSHIP

The tension between urgency and inaction will continue to influence sustainability discussions in 2024, as reflected in the trends report from S&P Global.
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

CLOUD DATA PLATFORMS

Luxembourg is one of the world’s premiere centres for cross-border distribution of investment funds. Read our special regional coverage, coinciding with the annual ALFI European Asset Management Conference.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST