Cerulli: marketshare of Europe’s passives ‘in line for a MiFID II boost’

 Having ended 2017 on a high, emerging market funds, passives, and “products that combine both themes” are likely to be among the best-selling funds in Europe during the early months of this year, according to Cerulli Associates, the US-based global research and consulting firm.

Europe’s new MiFID II rules, which took effect across the bloc yesterday, will help to boost sales of passive funds at the expense of active funds, the Cerulli research, which is contained in the December issue of the company’s monthly analysis of product trends in Europe.

Demand for funds that meet various environmental, social, and governance criteria is also expected to grow, the Cerulli research shows.

Other findings in the report:

  • The S&P 500’s near-nine-year bull run is continuing to fuel concerns about valuations in developed markets
  • While the MSCI EM Index is also in record territory, emerging market company earnings estimates “are still rising markedly”
  • In their growing fondness for passive investments, European investors are expected to opt for both “plain vanilla” products that track the likes of the S&P 500 as well as smart-beta variations
  • October was a negative month for UK fund sales, with net outflows of almost £500m (US$667m), as British investors “in the main…bucked the positive European sentiment, opting to sell, stay on the sidelines, or invest in safer options”
  • At a cross-border level, Europe’s funds industry is enjoying record sales, with net inflows reaching €391bn at the end of October, reflecting “the jubilant European investor sentiment”
  • It will be cross-border funds, Cerulli believes, that will “push the European total beyond the €600bn mark in 2017”

In a statement accompanying a summary of the Cerulli findings, the company’s director of European retail research, Angelos Gousios noted that, with many “pundits” forecasting a pullback for the developed markets in 2018, the emerging markets “could prove the best bet among equities”.

“With data suggesting that EM funds are no more likely to beat their benchmark than others, there may be easier money in passives, including exchange-traded funds,” Gousios added.

As for the trend towards passive funds at the expense of actively-managed ones, Gousios  noted that the greater transparency given to investors by MiFID II would inevitably “shift the balance further in favor of passive investing”, but added: “Passives might not need any regulatory help to boost their cause.”

To read more about the findings contained in the December issue of The Cerulli Edge – European Monthly Product Trends – click here. 

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