When thinking about Austria, typically its varied history, world-class skiing and classical music come to mind. Not so well known is the fact that Austria has a longstanding tradition in the investment fund business. This dates back to 1956 when the Selecta fund, issued by Österreichische Investment Gesellschaft (ÖIG), was launched. Moreover, in 1963, Austria had been the fourth European country to establish a regulatory framework for investment funds, which has been revised over the years, mostly due to EU regulation.
Today, slighty more than 2,000 investment funds issued by 21 Austrian management companies, managing both Ucits and alternative investment funds with approximately €170 billion of assets under management (AuM), constitute the Austrian investment fund industry. In addition, five Austrian real estate investment fund management companies manage ten open-ended real estate investment funds with a total of more than €7 billion of AuM. For a small country like Austria with a heavily bank-dominated home market, these numbers are impressive. In any case, it is noteworthy that the Austrian real estate investment fund industry – with the excecption of a slight dip in 2008 – has experienced an increase in its total AuM every year in its modern history.
The challenges for the Austrian fund industry can be explained by the massive regulatory responses to the global financial crisis, the challenging economic environment of the post-crisis years and reputational setbacks due to various banking scandals, both in Austria and abroad. These challenges have been aggravated by strict, partly gold-plated implementations of EU regulatory frameworks into national law, as well as harsh taxation rules. Moreover, the strong expansion of the Austrian financial industry in Central and Eastern Europe (CEE) created some throwbacks.
Nevertheless, it seems that a turnaround has been achieved and the growth in AuM for the last five consecutive years underscores this. The high level of innovation, the advancing internationalisation, the vibrant start-up community, especially in Vienna, as well as clear intentions and first steps to improve financial regulation and taxation rules are likely to have positive effects on doing business in Austria.
Despite its challenges in the past, the continued strong engagement in CEE will re-boost Austria‘s reputation as gateway to the East. The fact that Vienna has been voted the most liveable city in the world for the eighth time (according to the annual Mercer survey) reflects the attractiveness of the country which – in combination with its safety and political stability, its qualified workforce and its international links – will serve as the basis for a prosperous future for ‘Gateway Austria’, the traditional link between East and the West.
Given its increased economic importance, the Austrian investment and real estate investment fund industry will clearly benefit from that and is ready for expansion.
Armin Kammel is head of legal and international affairs with the Austrian Association of Investment Fund Management Companies (VÖIG) and professor of banking law and securities regulation at Lauder Business School, Vienna
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