Assets held in Ucits funds could reach €42 trillion over the next 30 years, according to a study by the Association of the Luxembourg Fund Industry (Alfi).
The study claims that the assets in Ucits funds have the potential to grow at a compound rate of 5% over the next three decades, with average annual net sales flows rising from €201 billion in 2017 to €860 billion by 2048.
However, the report added, this would only be possible if certain risk factors – such as measures to guard against a flash crash in relatively illiquid sectors – are addressed.
The report, which was produced by data analysis company Broadridge, says that the EU’s embryonic Capital Markets Union and other initiatives to enhance long-term savings will encourage future growth in Europe.
Outside Europe regulators are likely to wish to protect their own markets, but the strength of the Ucits brand means that its structure is most likely to be the adopted vehicle.
Denise Voss, chairman of Alfi, said: “The report, which looks at the development of Ucits funds since they first came into being in 1988, demonstrates the success of the brand in terms of growth of assets and its global reach.”
The report also concluded that:
• Although designed for European investors, Ucits has proved to be a successful European export: Asian markets account for 13% of cross-border assets, with Latin American markets contributing 3%.
• Ucits has made Europe an attractive centre for fund groups worldwide: groups from EU countries manage 56% of assets, with US groups accounting for 30%.
• Cross-border groups source 77% of their assets from Europe, with five countries (Italy, Switzerland, Germany, the UK and Spain) accounting for 70% of assets.
• MiFID 2 has been a game changer, disrupting the traditional value chain, and the impact has been increased transparency and pricing pressure, leading to a new focus on low-cost passives.
Diana Mackay, Broadridge’s managing director for global distribution solutions, said: “The success of the Ucits brand is remarkable but the industry cannot afford to be complacent.
“Like any brand it must be guarded by all those who benefit from its recognition because any lapse will be destructive not only to the pool of assets invested in Ucits, but potentially to the investors that have been persuaded to believe in the brand.”
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