Fund professionals expect the number of mutual funds in Europe to fall by as much as 30% this year due partly to cost-cutting at asset management firms and a “herd mentality” among
investors leading to fund closures and consolidation.
“Despite the variety [of funds] available in open architecture, fund buyers have leaned toward bigger brands and larger funds,” says Yoon Ng, associate director of Cerulli Associates. “Consolidation of capital is likely to worsen which raises questions regarding sustainability for the majority of funds.”
Cerulli Associates and The Platforum found that 42% of fund professionals they surveyed believed the number of European funds will fall between 10-20% this year, and a fifth believe the number will fall between 20-30%.
The predictions are plausible given that between 2008 and 2011, an average of 1,743 mutual funds closed each year.
The researchers suggest the administrative burden posed by regulation, such as the implementation of Ucits requirements, is behind cost cutting at asset management firms,
Meanwhile, the concentration of investment flows to large funds may reflect investor caution in the volatile markets since the financial crisis.
The researchers say the market conditions will affect the release of new products.
“Fund launches are likely to be more cautious and managers will be considering fund rationalisation, though the cost and effort involved in the latter could act as a huge impediment,” says Ng.
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