Equity, bond, and mixed collective investment schemes (UCITS) have achieved annual net returns of 7.6%, 2.3%, and 3%, respectively, over the period 2010- 2019. These positive returns contrast with the 1% loss on bank deposits.
Equity UCITS delivered a total net return of 108% in real terms over the period 2010-2019, while bank deposits lost 10% in net value. This is according to the latest Market Insights report “Perspective on the net performance of UCITS”, prepared using the latest Annual Statistical Report of the European regulator ESMA.
EFAMA, the interest group of asset managers in Europe, is releasing its Market Insights report in response to Esma’s comments on the cost of UCITS. EFAMA tries to put that into perspective by pointing to the additional returns that UCITS have delivered over the past decade compared to bank deposits.
Emphasize the benefits of investing
Bernard Delbecque, EFAMA Senior Director for Economics and Research: “Our report illustrates the financial loss that European households have suffered by holding too large a proportion of their savings in bank deposits over the past decade. Policymakers also need to emphasize the benefits of investing rather than focusing primarily on its costs, to prevent people from abandoning investing altogether, which runs counter to one of the key CMU objectives.”
Taking into account all costs and the effect of inflation, a 10,000 euro investment over ten years in a portfolio composed of equity (40%), bond (30%) and mixed (30%) UCITS generated a total net return of 61% in real terms, while the value of 10,000 euro remaining in a bank account over the period 2010-2019 fell by 10% in real terms.
The report identifies significant differences between the performance of better and worse performing active and passive funds, reflecting the heterogeneity of the fund universe. Many active funds performed net better than passive funds, and vice versa. The report also shows that a significant number of the best-performing active equity UCITS continued to deliver top performance in subsequent years, EFAMA said in its Market Insights.
Declining fees
The strong net performance of UCITS in recent years can also be explained by declining fees, mainly due to the measures taken under Mifid II and the UCITS Directive regarding disclosure of charges.
The cumulative decline in UCITS ongoing charges over the past four years was 16% for equity UCITS, 7% for bond UCITS and 3% for mixed UCITS. This is particularly evident for recently launched funds. While the average current cost calculated for the entire universe of active equity UCITS in December 2020 was 1.39%, the average cost of active equity UCITS launched last year was 0.81%.