The FERI Fund Market Information report highlighted Germany for showing increased demand in 2001 and the first quarter of 2002
Germany is the most important market for fund managers and distributors selling cross border in Europe and, for most, has been the only bright spot on their continental European horizon, according to a study of the German fund market.
Published by FERI Fund Market Information (FERI FMI) the report says that in increasingly difficult stock market conditions, Germany was one of only two European fund markets to show positive sales in every month of 2001, a trend that has continued into the first quarter of 2002.
Bank influence has muted investors' instinctive responses to the general market turmoil and encouraged continued investment, particularly through asset allocation vehicles, according to the study. Foreign groups have already sourced E70bn of assets from German investors.
Opportunities for foreign groups will be improved by developments in the distribution mix that will increase competition and open up access to investors, it adds. At highest estimates FERI FMI calculates that foreign groups could be managing up to E180bn of German-sourced assets within five years ' half of which will be within funds of funds.
As domestic groups face increasing competition from third-party funds within their proprietary channels, their reliance on third-party distributors will increase, according to the study.
Although they will still retain their dominant position in the market their role will change from that of single proprietary distributor to multi-channel distributor, it says. Client demand will require banks to offer advisory services, rather than just selling their own products.
FERI FMI estimates banks will not only directly or indirectly control both bank and fund supermarket channels but will also acquire or develop their own IFA channels. By 2006, the market share of banks as distributors will have fallen to 56%, but they will own many of the non-proprietary outlets.
Diana Mackay, joint managing director of FERI FMI, and author of the report said: 'Activity in the German market is proving a safety net for the cross-border strategies of some fund management groups saving some from the harsher realities of the economic downturn. In many instances, it will have been the only bright spot on their radar screens.
'We consider that the future for cross-border fund groups active in Germany remains very positive. Foreign groups will source increasing volumes of assets from banks as open architecture develops in their favour. Our highest estimates are that the total market size will be E1.2 trillion by 2006 as compared to today's E418bn; of this foreign groups will have a 15% market share.'
'Necessary steps' taken
Penalty payments and enforcement policy
Fees as low as 0.04%
Client procurement costs ‘unsustainable’
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