The total assets under management (AUM) in the European asset management industry reached almost EUR16 trillion in June 2013 and the industry is expected to continue growing in 2014, supported by improving investor confidence and a more solid macro-economic background, according to the report published by Fitch Ratings.
However, Fitch said that growth will be unevenly shared, as competition remains intense and market conditions as well as investor demand continue to change.
According to analysis from Fitch Ratings, half of European managers had no fund inflows in the three years to end-July 2013 while the top 10 European asset management firms received 50% of inflows in bonds and mixed asset funds and 75% of inflows into equity funds in the three years to end-July 2013.
Fitch has studied the financial statements of 24 major European asset managers, with combined AUM of almost €8,000bn (£6,670bn), to produce the report.
However, the report entitled European asset management, tapping growth through rationalisation, innovation; diversification has revealed that investors are also returning to the industry with net inflows of €110 billion in 2013 YTD and €186 billion in 2012.
The research also showed the majority of the inflows were into cross-border funds, defined as having more than 20% of their allocation outside the fund’s domicile country.
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Fitch also added that European managers had seen assets under management (AUM) rise by 14% over the last three years, and expected further growth.
Fitch’s study found that independent asset managers are more profitable than subsidiaries of banks or insurance companies, benefiting from higher margin on AUM and lower cost/income ratios.
A number of subsidiaries may be looking to improve their cost structures with rationalisation and restructuring, to bring cost/income ratios in line with the 65 basis points median 2012.
In the first half of 2013, the European fund industry has eliminated around 500 funds on a net basis, after 1,000 in 2012, mainly through fewer fund launches. However, there are still 65% of cross-border fund ranges without a single flagship fund of more than €1 billion of assets.
Aymeric Poizot, managing director in Fitch’s Fund and Asset Manager Rating Group, said: “European managers who are well positioned in the cross border space and in global bonds, global equities, specialities or multi-asset are likely to grow more as these areas will attract investor flows.
“AUM in traditional asset classes such as domestic equities or government bonds are threatened by changing investor allocations. In particular, managers that have large AUM in government bonds or aggregate portfolios would suffer from rising interest rates,” said Alastair Sewell, director in Fitch’s Fund and Asset Manager Rating Group.