According to research by asset management consultancy Cerulli, one in three asset managers believe sales of third-party funds will fall post-Mifid II, which is scheduled to come into force in January 2018.
Only 4% of interviewees think Mifid II will help fund sales, while 54% expect sales to be unaffected.
Many of those fearing a slump in fund sales may well have a large foothold in Europe’s most lucrative market for cross-border asset managers: Italy. A massive €18.4bn of the country’s net inflows were directed to foreign asset managers.
These sales may have been helped by generous retrocession provisions for these funds: according to Cerulli, half of cross-border asset managers pay more than 50% of their fee income back to distributors in the form of retrocessions. That’s more than in any other European country.
Italy – no appetite for index-trackers, yet
While Mifid II stops short of banning inducements altogether, it introduces a degree of transparency that will likely reduce the reliance of local distributors on retrocession fees, and stimulate the introduction of retrocession-free share classes.
Mifid II will also reduce the incentive for distributors to recommend actively managed funds to their clients. According to Expert Investor data, penetration of index trackers in Italy is the lowest in Europe. In countries that already banned retrocession, such as the UK and the Netherlands, ETFs have quickly become dominant over the past few years.