Total assets under management in Europe amounted to 28,400 billion euro by the end of September, reflecting a decline of about 12 percent from year-end 2021 levels as bond and stock markets fell amid rising inflation and interest rates and slowing economic growth following the outbreak of war in Ukraine.
The latest European Asset Management Report published by Efama, the European Fund and Asset Management Association, shows that asset management in Europe is concentrated in six countries where almost 85 percent of asset management activity takes place. The United Kingdom is the largest European asset management market, followed by France, Germany, Switzerland, the Netherlands and Italy. In each of these six countries, AuM exceeded 1,500 billion euro.
Below 150% of GDP
In relation to Gross Domestic Product, Efama projected that assets will have decreased to below 150 percent of GDP by the end of September from 171 percent at the end of last year and compared to 98 percent at the end of 2011.
“2022 has been a difficult year for asset managers and their clients, as the war in Ukraine, the sharp rise in inflation and the tightening of monetary policy have had a very negative impact on global financial markets,” said Efama director general Tanguy van de Werve (photo) in a statement. “The current difficulties should not make us lose sight of the bigger picture and the need to further develop and integrate European capital markets and support the sustainability transition.”
At the end of September, net assets of sustainable bond and equity funds amounted to 343 billion euro and 1.1 trillion euro respectively, based on data from Refinitiv Eikon and Morningstar Direct. Efama said its analysis shows that high environmental scores tend to be associated with high social and governance scores.
30% outsourced to third-party managers
“Institutional investors outsource about 30 percent of their assets to third-party asset managers, with the remainder managed in-house. There is therefore a huge untapped potential for asset managers to increase their share in the institutional market,” said Bernard Delbecque, senior director at Efama. “The rise in regulatory requirements, the need to develop ESG investment solutions and engage with companies to improve their ESG performance, the increase in the cost of market data, data analytics and artificial intelligence applications, are good reasons to believe that a growing group of institutional investors will rely on asset managers in the coming years, to benefit from the economies of scale that can be achieved in the asset management industry.”
The share of retail clients increased to 28 percent of total AuM in 2021, as European households regained confidence in capital market instruments. Two other trends are also noteworthy, Efama said. Among these, the steadily increasing share of other institutional clients, such as foundations, charities, holding companies or large corporations, and the increased importance of foreign clients in the client base of European asset managers.
The outstanding amount of debt securities and listed equity issued in Europe and held by European asset managers at the end of 2021 stood at an estimated 6,989 billion euro and 3,648 billion euro, respectively, Efama said.
Delegation model
Luxembourg, home to 246 asset management companies, or 5 percent of all of these in Europe, is not listed among the top jurisdictions in Efama’s report, and neither is Ireland. Although both these countries are the legal home to a very significant number of European investment funds, Efama pointed out that most global asset management groups with a fund range in Luxembourg or Ireland operate under a delegation model whereby the key investment management functions are not carried out in those countries, but in the groups’ asset management centres.
As a result, Efama includes the assets under management data for Luxembourg and Ireland in the ‘rest of Europe’ category, which in total accounts for 2.93 billion euro, or 9.1 percent of all assets under management in Europe.
The latest data reported by Luxembourg financial supervisor CSSF shows that Luxembourg was the legal home to a total of 5,854 billion euro in assets at the end of September.