EU regulation should focus on necessity

EU financial regulators should temper their approach to regulation to avoid stifling growth and innovation in asset management, according to industry sources.

Panellists at the ALFI European Asset Management Conference in Luxembourg on Tuesday questioned the effectiveness of post-2008 regulation, including the Alternative Investment Fund Managers Directive.

“If I may pose a question, was the AIFMD really needed? Does the institutional investor need all that protection?” André Muller-Wegner, managing director of fund management services at UBS, asked.

“I would say AIFMD can be harmful and beneficial, but do we need it?”

He added the industry should “regulate as much as needed, but as little as possible” and said in some respects it may have gone too far.

But Danny Dolan, managing director at China Post Global, a Hong Kong-based asset manager, said investors were better off and better protected against the key risks in the current regulatory environment.

“The risk of market instability is less now than it was before 2008,” he said.

Innovation

Current regulation is supressing innovation in the European funds industry, said Jeremy Soutter, global head of product development and management at Standard Life Investments, who was also on the panel.

“Partners Group has taken a Luxembourg fund and invested in a defined contribution scheme in Australia,” Soutter said. “I think that we need to get more of those product types into the hands of retail individuals and we’re starting to see a huge shift in that direction. There is a subtle change going on, with more investment into of long term equity structures.”

Switzerland-based Partners Group launched its private market offering for the US, UK and Australian defined contribution markets in December 2015. The fund offers private equity exposure to DC pension plans, which have traditionally been unable to invest in the asset class due to its illiquidity.

Souter added that overregulation was probably the driver for some of the high-profile Brexit sentiment in the City of London.