Mon, 18/03/2013 - 16:17
A report from the Fund Platform Group (FPG) has revealed that European fund buyers, sellers and platforms believe MiFID II will have the most significant impact on their cost bases out of all forthcoming regulation.
This was followed by UCITS IV for fund buyers and fund platforms and Solvency II for fund sellers.
MiFID II and UCITS IV were further identified as the regulations that would have the greatest effect on fund buyers’ and sellers’ future revenue generating potential. Fund platform professionals, however, felt AIFMD was more important in terms of its likely impact on revenue streams.
The report, A Snapshot of European Platforms, was commissioned by the Fund Platform Group, an industry association that aims to ensure the coordination between all the fund distribution platforms worldwide. Research was conducted on the Fund Platform Group’s behalf by Cerulli and The Platforurm.
Edouard Bokuetenge, chairman of the FPG, says: “The squeezing of fund managers’ margins has been well documented, but the reality is that the entire distribution value chain is likely to be impacted by regulatory change. Given the focus of new legislation is largely focused on protecting consumers, the biggest material impact will be faced by firms that are closest to the end investor. In this cost-cutting context, fund platforms have a key role to play, given the numerous efficiencies that we have brought during the last decade and continue to bring to the industry today. Moving forward, we will have to continue proactively to redefine ourselves by increasing our value proposition to products, and exploring new client segments or geographies that remain untapped today.”
In total, 70 institutions, comprising fund buyers (13 per cent), fund sellers (51 per cent), fund platforms (26 per cent) and a selection of trade bodies and other industry players (10 per cent) were surveyed as part of the study. Approximately 50 per cent of those interviewed anticipated falling profit margins in 2013 as a result of upcoming industry regulation.
Bokuetenge says: “While upcoming regulations present many challenges to the fund industry, they can have a potentially revenue enhancing effect as well. The UCITS brand, for instance, has been further strengthened by UCITS IV, the benefits of which will be felt across the fund distribution value chain.”
“Interestingly, our research also reveals that, despite the anticipated cost of regulation, 25 per cent of platforms anticipate greater profit margins in 2013, driven by scale, global expansion and cost control. There is also a general consensus that many groups are looking to outsource non-core functions, and so the pipeline for platforms in Europe is looking healthy.”
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