The German Investment Funds Association (BVI) has called on the country’s politicians to implement a backlog of reforms needed to promote Germany’s funds industry.
More specifically, the BVI would like to see deregulation and a reduction of bureaucracy in order to make the funds market more attractive to savers and more competitive against European neighbours.
“Overregulation causes high costs,” said Thomas Richter, BVI chief executive (pictured). “This money would be better invested in technology.”
Richter would also like to see reform of private pension schemes – a move that is long overdue and necessary to make savings more attractive, according to the association.
“The product must be more attractive if it is to become more widespread,” he said. “Above all, this includes less bureaucracy in the form of applications to the authorities and more freedom to the pay-in and pay-out phase.”
The BVI is also calling for the elimination of the statutory obligation to provide guarantees and lifelong annuities in order to “open up higher returns opportunities”.
This would put Germany on equal footing with other international markets such as the US, Sweden and France, where state intervention in the private market is “unknown”.
The funds association also stressed the potentially positive role that private market capital plays in supporting national infrastructure projects in Germany in a more deregulated market.
“So far, however, tax regulations have prevented German funds from investing in domestic infrastructure projects such as renewable energy plants on a large scale,” said Richter. “This means that German capital flows to portfolio managers abroad, who then invest it in foreign projects instead of German ones.”
Richter called on the new government to revive the draft for a second Financing for the Future Act, legislation that was dropped by the previous government.
The BVI is also calling for regulatory action at an EU level. This includes reducing the extent of sustainability reporting as well as more oversight of the market data industry.
Market data has become a cause of concern for fund managers in recent years with the price of this critical resource continually increasing. As Richter said: “Companies can unilaterally set the terms of the contract because customers, such as fund companies, cannot function without this data.”
Richter called for an EU Data Vendor Act in order to regulate the data providers. “If we do not do this, the already significant cost pressure in the funds industry will increase even further – also to the detriment of investors.”
The BVI’s comments come in the wake of what has been a relatively successful year for Germany’s funds industry.
Despite what the BVI called a “challenging year”, the industry recorded €60 billion in new funds and mandates and record assets of €4.5 trillion by the end of 2024.
