The past year has been very complicated for financial markets due to a health crisis that still remains, although with the prospect and hope that it will abate over the course of the year. That is why we face 2021 with a certain optimism.
In 2020, after a turbulent first quarter in terms of returns and refunds, the performance of investors was certainly exemplary and this, together with the subsequent stabilisation of the markets, enabled the year to end on a positive note in terms of returns, with the international equities’ category standing out, and with hardly any loss of assets.
This new year could be positive in terms of subscriptions and returns as the economic recovery is confirmed in parallel with the evolution of the health crisis and its gradual easing.
The channelling of savings in 2020 has been focused on precautionary savings via deposits, although they should be channelled into investment funds, an optimal savings instrument due to their characteristics (diversification, professional management, liquidity, taxation, supervision, etc).
The challenges in 2021 for fund managers are numerous, including adaptation to the new ESG regulations, digitalisation and the processes of agreements between fund management companies and possible mergers (some of which are already underway). Regarding ESG regulation, the approval process at the European level can clearly be improved, forcing managers to adapt to level-one standards with development texts that are still pending approval. In this context, national supervisors and Esma (the European Securities and Markets Authority) are obliged to establish criteria which, in our opinion, should be aimed at supervising the degree of risk integration, transparency, disclosure and incorporation of investors’ sustainability preferences, leaving the intensity of the sustainability commitment and the integration policy of the fund managers to their own strategy, applying the principle of proportionality.
The domestic regulatory framework, which prevents our fund managers from being able to compete on an equal footing with EU firms, must continue to be optimised. The regulation of securities lending, the elimination of the minimum number of investors, or the elimination of additional information requirements, among others, should be implemented as soon as possible, taking advantage of the forthcoming transposition of the directive on cross-border fund sales.
In addition, the forthcoming revision of the AIMFD Directive, the MiFID Directive and the PRIIPs Regulation stand out in the regulatory landscape. These are some of the regulatory changes that are on the horizon, so the regulatory focus, both at European and domestic level, should be based on as few new requirements as possible and, instead, include more actions to promote, boost and remove obstacles and fees.
In this regard, the protection and promotion of the ‘Investment Fund’ brand must be intensified by the tax regulator, improving its tax regime (in cross-border sales of Spanish funds, recovery of withholdings or regulating the taxation of FIPSES participants (investment funds that invest part of their assets in sustainable SMEs). Financial education promoted by regulators and supervisors should also encourage investment in savings instruments, such as investment funds, which are an efficient pillar for managing our savings.
By Ángel Martínez-Aldama, President of Spanish fund body, INVERCO
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