The recent asset management industry event, organised by the Association for Progress and Direction (APD) and Inverco, provided interesting insights into the health of the sector, the concerns affecting the industry, and the challenges it faces. Attended by more than 650 people, the event was well represented by regulators, large, medium and small asset managers, advisory firms, and the media.
Figures
The figures reflect that the sector has continued to grow, driven both by the favourable market scenario to date and the changes introduced by Mifid II.
Since 2008, the industry has grown from €232bn AUM to an expected €472bn by the end of 2019. More than doubling. This year alone, AUM has grown by €10bn. And the number of unitholders has now reached 15 million. The average yield of funds in any category in Spain is 5.34%, taking into account the low interest rates.
At present, there are 119 CIS management companies registered in Spain, of which four have been created this year. A total of 1.9 million retail clients have contracted advisory services and 1.3 million discretionary management services. AUM for both amounted to €75 bn, generating revenues of almost €600 million.
Concerns
The new economic scenario is one of the industry's concerns. The uncertainties arising from the US-China trade war, Brexit, the very low interest rates that have inverted the curve and caused negative yields on some bonds, and the expectations of a slowdown all pose a problem for fund managers as to how to maintain current levels of profitability and business growth.
Another concern, this time shared with the regulator, is the impact of regulatory changes relating to customer information on markets, as well as transparency of information on revenues and expenses. Added to this is the prospect of reduced revenues from regulatory changes regarding incentives.
It is in the regulatory area where the CNMV regulator admits that most progress has been made. The regulation of omnibus accounts, the telematic sending of information to participants, the reduction of the capital required for the creation of entities, the reclassification of customers, the sending of analysis reports to customers, and the establishment of criteria to limit fund subscriptions, are measures that have already been implemented.
However, all this has meant an extra effort for the fund managers, which "weakens the business expectations of the operators", as the CNMV's vice-president herself acknowledged in her speech.
Challenges
To face this complex scenario, industry representatives pointed out several challenges they need to address in order to preserve their business model.
The first is to preserve customer confidence by maintaining the level of profitability of products in a scenario of low interest rates and worsening expectations of the cycle. The regulator, for its part, reported on the efforts made to preserve liquidity in investors' portfolios, through strict monitoring and supervision of control procedures, surveillance measures, stress tests and contingency plans.
The second is to defend against the narrowing of margins caused by higher expenses and lower revenues. The CNMV, on the other hand, explained the measures taken for the correct selection of financial intermediaries by fund managers, and to speed up the authorisation procedures for new operators. Despite this, the fund managers see a process of concentration of operators as feasible in the short and medium term.
The third is to bring the size and trends in the manager-client relationship in force in the Spanish market into line with the situation in other European markets around us. The industry is committed to broadening the diversification of the assets in which it invests - one example is the expansion of vehicles that invest in real estate assets - and to making the most of the possibilities of digitalisation, as a tool that facilitates efficiency in distribution models.
The last challenge is to strengthen the implementation of ESG criteria in the management of investment vehicles in order to increase competitiveness. There is still a long way to go in this field, as according to the CNMV itself, as of June 2019 there are only 17 solidarity funds registered, and 37 funds managed with ESG criteria, which accumulate AUM worth €2bn.
Javier Ferrer
Financial Communications Director Proa Comunicación