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Impact Investing

IPE special report May 2018

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Use of third party funds booming in Europe

LONDON - The European third party fund market is booming at an explosive rate, according to the London-based research firm Sector Analysis.
The firm, which has just made public the results of its latest survey on the development of this aspect of the fund industry in Europe, predicts that the value of third party funds held by organisational buyers - these are pension funds, corporates, insurance companies, intermediaries, universal banks and portfolio managers - will grow by 28% during 2001.

The firm first analysed in 1998 what they call the enthusiasm for third party funds among European organisations - this is the ratio of the amount of third party assets held to the total amount of all assets managed by those organisations. Based on interviews with 1,000 organisations operating in eight countries, the average enthusiasm for third party funds was 4.3% in 2000. This figure is significantly higher than the 1.8% in the 1998-9 study where only four countries were covered.

The survey also shows that the proportion of total pension fund assets invested in third party funds was 10.6% last year. While this figure is the highest among the different types of organisation analysed, Sector points out that the proportion of investments in these products is very high in one country and very low in the other seven, thus influencing the overall average.

However, the increasing interest among pension funds in third party investment is set to increase. "At a global level, the awareness of managing pension money is growing and the buying and selling of financial products will increase accordingly," says Catherine Friedrich, associate director at Sector Analysis.
"In the previous study we considered pension funds as part of the corporate segment since we mainly focused on corporate pension plans," she says. "We thought that this approach was not the most appropriate and we decided to consider pension funds separately looking at both public and private pension funds."

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