The European fund industry looks as if it’s emerged unscathed from the havoc created by the COVID-19 – just looking at its buoyant figures for assets under management. But the reality is that the pandemic has accelerated several pre-existing trends that will cause major changes over the next few years.
Digitalisation will speed up. The increased use of technology pre-pandemic was already helping to optimise transactions, information exchange, and interaction between fund selectors, intermediaries and end investors. Now our experiences of life under lockdown have removed much consumer and industry resistance to the advance of technology in fund distribution.
The pandemic has moved European end investors to reflect on how their wealth connects with the world they and their families live in. Crucially, it has made them more likely to change their behaviour, prompting a surprisingly uptick in demand for all kinds of ESG-labelled funds. Thematic funds without an explicit ESG mandate – such as those with a focus on the technology or healthcare sectors – have also experienced record flows.
This sea-change in the European investment industry is about more than simply shifts in product preferences. It is re-shaping the relationships between end investors, intermediaries and providers. Trust will be key to success, with investors’ perceptions around ‘greenwashing’ playing a critical role in creating winners and losers among fund managers.
The pandemic has changed how people build wealth and buy investments, boosting new household savings – perhaps temporarily – and consequently assets held on direct-to-consumer platforms, especially in northern Europe. It has also nudged wealthier investors to look beyond the public markets and seek out opportunities in private equity.
Some of those trends might reverse abruptly once economic activity returns to more normal patterns. But personally, I wouldn’t bet on it.
Our European Fund Distribution: Routes to Market report is being published today. For more information, please get in touch.