Vincent Dessard, Senior Regulatory Policy Advisor, EFAMA, spoke at last month’s WFE Working Committee meeting, and shares a summary of his presentation here, outlining the key issues impacting the European asset management industry.
Please can you explain what the European Fund and Asset Management Association (EFAMA) is, and explain its role?
EFAMA is the trade body representing regulated funds and asset managers in Europe. Founded in 1974, the organisation has 28-member associations and 62 corporate members with total net assets of EUR 15.6 trillion. This is made up of 32,000 UCITS funds (Undertakings for Collective Investments in Transferable Securities) and nearly 28,300 AIFs (Alternative Investment Funds).
We also publish quarterly statistical data and international releases on the trends in the investment fund industry in Europe and from across the world.
How is EFAMA organised and what is your role?
EFAMA represents funds and asset managers from across continental Europe: from Finland, Spain, Portugal, and Turkey. Unlike other associations, we also have direct membership of global and regional investment firms, as well as law and consultancy firms.
The association employs 15 people split into three teams: economics, public affairs, and a team of five regulatory affairs advisors. As one of those advisors, my responsibilities include working on capital markets topics and issues around pre-trade transparency rules and post-trade reporting duties.
There are a number of interrelated issues that I’m currently working on: EMIR Refit, and CCP regulation regarding supervision, recovery and resolution. I’m also focused on ongoing issues such as the frequent updates to European Securities and Markets Authority’s (ESMA) Q&As on the different aspects of MiFID II and MiFIR. Alongside my position at EFAMA, I am part of several ECB harmonisation groups focusing on securities and collateral, such as the Advisory Group on Market Infrastructures for Securities and Collateral (AMI-SeCo), and more recently, the Association of National Numbering Agencies- Derivatives Service Bureau (ANNA-DSB) Technical Advisory group.
Why asset management? And why are investors choosing to invest in this way?
Asset management is the preferred investment vehicle for many because of the service we provide to end investors. What separates asset management investors from banks is our primary, and sometimes unique function, in only managing the clients’ assets.
The industry helps clients - who either have a limited knowledge of financial markets, or don’t have the time to manage their investments - to invest money via investment vehicles (funds).
It is also interesting to mention that, in proportion, net investment inflows were much higher in Europe than any other region. Net inflows reached €223 billion in Europe, compared to €81 billion into the United States, and €62 billion in both China and Japan.
Speaking of figures, we also note a year-on-year increase of AUM since 2009.
What are your views on MiFID II and MiFIR?
This is an important opportunity to share EFAMA’s key messages on MiFID II:
-The protection of investors is at the heart of our analysis, both from their perspective (e.g. no conflict of interest, adequate product offering, etc..) and from the information they receive (which must be meaningful).
-Access to data should be facilitated.
-Liquidity should be protected in primary markets (also for book building and investment research), in secondary markets, and in collateral management.
-The reporting format must be enhanced. Therefore, EFAMA is a supporter of LEIs (Legal Entity Identifier) and ISINs (International Securities Identification Number) for every instrument (among other identifiers).
With these elements in mind, let me revert to your question regarding MiFID II. This legislation imposed unfair treatment on end-investors whose assets are managed by asset managers. From our perspective, rules on pre-trade transparency are impacting the possibility for end-investors to benefit from our services, as well as affecting their return on investments.
We also consider that the regime of post-trade transparency offers too-short a delay in reporting large transactions on the one hand, while on the other hand it does not offer sufficient trade data access. We note that markets have adapted in the following ways:
-There are new market infrastructures creating new venues.
-There are artificial intelligence systems providing robo-advice
-There is a mix of OMS and EMS which are sometimes linked to smart contracts.
These developments are impacting how we would like our business to be organised. This is also due to the increased recognition of the need to involve end-investors in the secondary market to develop EU capital markets: one of EFAMA’s consistent messages.
The term ’regulatory tsunami’ has been constantly used, perhaps even overused. What does it mean for an association such as EFAMA?
This terminology represents our perception of the legislative developments we have faced since 2011 rather well! At the European level we’ve seen:
-49 new directives and regulations.
-445 new measures implemented and.
-325 new guidelines and recommendations.
At the International level, we work with organisations such as the International Organization of Securities Commissions (IOSCO), the Basel Committee on Banking Supervision Board of IOSCO (BCBS-IOSCO), and the Legal Entity Identifier Regulatory Oversight Committee (LEI-ROC).
How could EFAMA work even more closely with regulators, and with the WFE?
From my perspective, I would highly welcome the following developments by legislators, regulators with the support of market participants: align data requirements and format across legislations including non-financial services; use existing reporting structures and existing identifiers; and require useful and meaningful data that must be different for authorities and for investors.
I believe that EFAMA and WFE could:
-Exchange in dialogue more frequently.
-Participate jointly in global identifiers systems.
-And, be ready to discuss the best ways to protect end-investors in a fast-moving and increasingly technical environment.