Speaking at a European asset management conference in Luxembourg on Tuesday, Maijoor said that EU investment funds are “clearly more expensive” than US funds and that the industry should do more to bring down the costs of investment products.
“The US has more competitive fees and the EU can do a better job in this area. This is not only the responsibility of the asset management sector, but also the distribution network and the regulators.
“Fee compression is a reality in the asset management industry and I truly hope that this continues and makes the asset management industry more efficient and better able to reduce costs to the end investor,” Maijoor told delegates attending the Association of Luxembourg Fund Industry (Alfi) event.
US vs EU fees
The average cost of investing in an actively managed EU Ucits fund is 145 basis points, much higher than the US where it is 84 basis points, noted the ESMA official, who is in charge of regulating financial markets in the EU.
Maijoor added that the upcoming Mifid II and Priips regulations, due to be introduced in January 2018, should go a long way in reducing fees.
“The importance of reducing the cost of asset management products and more generally asset management products is especially important in low interest rate environments where it is so difficult to make a reasonable return on your investment,” he said.
Passive investing
Maijoor also explained that the huge disparity in fees between the EU and the US is partly because in the US there is a “longer tendency of passive investing” so money being invested in low cost passive products in the US is clearly higher than in the EU.
However, he added that this doesn’t account for all of the differences, pointing out that regulators need to do more to remove barriers to cross-border investing.
“There are still barriers in moving across the EU, where it’s more difficult to sell and distribute products across the EU than in places like the US,” said Maijoor.
Also speaking at the two-day conference, Alfi chairman Denise Voss agreed with Maijoor. Adding that “bringing costs down has to be the ultimate goal while still maintaining positive margins”.
