No Pain, No Gain

There is much work to do in order to prepare for the new regulatory regimes, which come against a backdrop of fundamental change taking place within the institutional space

May 23, 2014 8:56 IST | India Infoline News Service

It should come as no great surprise that regulation poses the greatest challenge to European financial institutions over the next 12 to 24 months.

There are less than two months to go until the July 22 deadline for fund managers to comply with the Alternative Investment Fund Managers Directive (AIFMD), the Markets in Financial Instruments Directive (MiFID II) is expected to be implemented during the course of 2015, and Solvency II the year after that.

There is much work to do in order to prepare for the new regulatory regimes, which come against a backdrop of fundamental change taking place within the institutional space.

"Amid aging populations and low birth rates, governments across Europe have been forced to address the pensions system, which is a ticking time bomb exacerbated by the financial crisis," says Barbara Wall, Europe research director at Cerulli Associates. "Many have attempted to shift the burden of saving for retirement from the state to individuals, resulting in a move away from defined benefits and toward defined contributions. It is a shift that Cerulli believes can only gather momentum in the

years to come."

Cerulli senior analyst Angelos Gousios notes, "The financial crisis can also be seen as one of the catalysts for the pension industry's growing reliance on passive and smart beta. It has also resulted in the creation of a growing list of financial products, including hedge fund managed accounts and Spezialfonds, to cater for a more demanding and cautious client." 


Other Findings:

  • The trend of pension fund investing is growing more passive friendly, and the boundaries between pure indexing, active management, and more recently, smart beta are blurring. Cerulli suggests this will result in an increasingly
  • short-term outlook for pension funds, and is storing up future problems for the industry as a whole.
  • Assets under management in the global hedge fund industry are expected to rise 15% to US$3 trillion by the end of this year. Cerulli estimates that hedge fund managed accounts will make up between 5% and 15% of this figure and
  • examines why this increase in popularity has come at the expense of commingled funds and funds hedge of funds.
  • Spezialfonds have become the investment vehicle of choice for institutional investors' real estate allocations. In 2013, Germany's asset managers attracted a record €76.7 billion (US$106.2 billion) of inflows, notching up three of the best four years seen during the last decade. Cerulli looks at why institutional investors have increasingly turned to Spezialfonds rather than investing directly, or in open-end real estate retail funds.
  • A recent survey of request for proposal (RFP) teams conducted by Cerulli and MoneyMate, a provider of investment data management solutions, found that almost one-third of respondents were unable to answer as many RFPs as
  • they would have liked. This survey investigates the challenges faced by respondents, and offers RFP teams advice on how to improve their overall win rates.

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