Efama finds US mutual funds ‘not necessarily cheaper’ than Ucits

The European Fund and Asset Management Association (Efama) has found that US mutual funds are not necessarily cheaper than their European counterparts, Ucits.

In a report, titled ‘The Cost of Ucits and US Mutual Funds – We can only compare like with like’, Efama found that the cost of Ucits is not always more than US mutual funds, overriding the common argument that European citizens cannot fully benefit from the single market for investment funds.

The report found that the average cost of actively-managed long-term and index-tracking equity funds, which excludes the costs of distribution and advice, is currently “slightly lower” in Europe than in the US.

It also found that the cost of ownership of US mutual funds can be “as high, or even higher” than Ucits, on average, when US investors pay for holistic financial advice.

The association said the findings from its report are relevant to the debate around a possible EU-wide ban on ‘inducements’, as they suggest that unbundling of the product and distribution costs would not guarantee a lower all-in price for retail investors.

However, Efama said its findings revealed that investors lack an understanding of whether they are paying for the financial product, investment advice, or both. It recommended reassessing the volume of cost and charge disclosures to enable consumers to better understand how much, and for what, they are paying.

The report did find, however, that the asset-weighted average product cost of US mutual funds is “significantly lower” than that of Ucits.

Efama said this was due to the US mutual fund market’s large client base, the role of US mutual funds in the US retirement system, and the inclusion of institutional shares in the calculated product cost of US mutual funds, which was not the case for Ucits funds in Efama’s study.

Bernard Delbecque, senior director of economics and research at Efama, said: “Our findings highlight the significance of two policy objectives for the European Union: the need to further deepen the single market for Ucits and the importance of achieving the Capital Markets Union project, in particular in the area of pensions and investor education.”

© 2022 funds europe

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