Europe fund manager assets hit record €11.3trn as markets surge

European fund managers’ assets have hit a record €11.3trn as central bank support and government stimulus bolstered financial markets, according to ratings agency Moody’s.

Moody’s said that European fund managers have reported total net inflows of €156bn during the second half of 2020, as investor confidence improved as a result of the supports and optimism over the Covid vaccine roll-out.

But the agency has warned that its outlook for the global asset management sector remains negative due to a number of long-term challenges it faces.

Marina Cremonese, a vice president and senior analyst at Moody’s Investors Service, said that European fund managers had the record year in 2020 despite the pandemic.

“Management fee revenues climbed 10pc during the second half of 2020, reflecting the higher average of assets under management and stronger fund inflows,” she said.

“From a credit perspective, fund managers’ moderate debt burdens will also support their financial flexibility,” she added.

Moody’s noted that EBITDA (earnings before interest, tax, depreciation and amortisation) margins hit 32pc in the second half of 2020, compared to 29pc in the first six months of the year, due to higher management fees, lower operating expenses and stable distribution costs. It said that the pandemic also lowered travel and marketing costs.

However, Moody’s said its outlook for the global asset management industry remains negative, because the coronavirus crisis will intensify long-term challenges.

“Financial markets and investor flows remain at risk from the uneven global economic recovery,” it said.

“Trends such as a deteriorating operating environment, changing investor preferences, and a highly competitive market have also intensified during the pandemic.”

A new analysis by PwC published today reckons that assets under management in private markets in Ireland will rise 14.2pc a year on average for the next five years, reaching approximately €50bn by 2025 compared to €25bn last year.

PwC said this compares to growth of up to 8pc per year that’s expected globally.

The firm added that the projections for Ireland “confirm the success of the Irish funds industry and its potential”.

Andrea Kelly, PwC Ireland leader for private markets and alternative investment funds, said that Ireland has a 30-year track record of funds management and alternative investment.

More than 40pc of global alternative investment funds are currently serviced in Ireland, she pointed out.

“There are clear opportunities ahead for Ireland’s alternative investment funds and private markets industry, but work needs to be done to realise that potential”, said Ms Kelly.

She added that with the recent passing of the Investment Limited Partnership (ILP) Act, Ireland now has access to an improved product suite for the sector and is important to broaden Ireland’s appeal.

Online Editors