Europe's fund expenses at a crossroad

The global investment fund industry is much larger today than it has ever been. Its European component more than doubled in size over the past ten years, with total assets under management surpassing the €10 trillion mark in the course of 2015. Despite these impressive achievements, the industry will still have many challenges to overcome in order to secure and strengthen its growth.

Investement Fund Trends

This report originates from the observation that three trends will directly impact the future success of our investment fund model:

• The strong expansion of non-European fund domiciles, as their share of global GDP and financial wealth significantly increased over the last 10 years. The development of passports and trade agreements within these emerging regions represents both a challenge and an opportunity for the European fund industry.

• The financial requirements of an ageing population and the need to provide cost efficient pension solutions via well-governed, diversified and risk managed collective investment schemes.

• The public demand for increased investor protection and systemic stability of the financial system, with a potential growing role for non-bank financial solutions and intermediaries.

Cost Reduction Actions

The following three actions would substantially reduce the cost of reconciliations, the number of error corrections, and the reliance on client support:

• Automate the residual portion of manual orders and review the opportunity to maintain bilateral STP links against the adoption of a central ordering system

• Push automation and process mutualization beyond orders to include highly manual processes such as transfers, corporate actions, and dividend processing

• Limit the number of payments by netting settlement flows through a central cash compensation account