US/EUROPE- The Depository Trust & Clearing Corporation, the world’s largest securities clearance and settlement organization, and PROMETHEE, an independent, Paris-based think tank, have released a study of the main issues regarding the growth of the investment fund industry in Europe.
Based on research and interviews with a cross-section of European leaders, the study, “Bridging the Funds Divide,” looks at some of the key obstacles to expansion of the European investment fund business.
The absence of legal, regulatory and tax harmonisation; a lack of connectivity and standardisation are some areas identified as precluding expansion and preventing investors from reaping the full benefits of a unified capital market.
Said Jill Considine, chairman and chief executive of DTCC: “we’ve sponsored this research because it’s essential to find ways to help our customers who are increasingly global players in the investment fund business.”
Not only are they processing a “significant volume of cross-border fund transactions,” says Considine, but over half is directed towards investment funds domiciled in Europe.
“However, our customers are telling us that a lack of connectivity, along with high operational costs and risk, are major barriers to further growth.”
Albert Bressand, managing director of PROMETHEE, said that given the euro is now a reality and given the emerging European equity culture, it was important to try and find out why some people cannot easily invest in a cross-border investment fund.
The central barriers impeding opportunities for European investors identified by the study ranged from limited choice due to anything from tax legislation and selective distribution to the fact that processing investment fund orders is highly labour-intensive, costly and inefficient.
Moreover, a lack of a pan-European market infrastructure to facilitate cross-border transactions, combined with tax disincentives to cross-border investing were also areas of difficulty identified by the report.
“This publication explores a number of important issues related to creating a more open environment for investment funds in Europe and globally”, said Ann Bergin, DTCC’s managing director for Mutual Fund Services.
“If there were adequate support among funds and the distributors of those funds in Europe, DTCC is prepared to partner with European firms an leverage its experience and technology to help create a solution capable of serving our customers’ needs for connectivity and a streamlined global infrastructure”.