The European Fund and Asset Management Association (EFAMA) has today released its latest Market Insights report entitled “Perspective on the net performance of UCITS”.
The European Fund and Asset Management Association (EFAMA) has today released its latest Market Insights report entitled “Perspective on the net performance of UCITS”.
The report was developed using data available in the latest ESMA’s Annual Statistical Report to put ESMA’s comments on the costs of UCITS into perspective by highlighting the extra return UCITS have delivered compared to bank deposits over the last ten years.
Bernard Delbecque, EFAMA Senior Director for Economics and Research, says: “Our report illustrates the financial loss that European households have incurred by holding too much of their savings in bank deposits during the last decade. Policymakers should also emphasize the benefits of investing instead of focusing primarily on the cost of doing so, to avoid putting people off from investing altogether, which goes against one of the main CMU objectives.”
On average, net annual performance of equity, bond and mixed UCITS was 7.6 per cent, 2.3 per cent and 3 per cent, respectively, during the 2010-2019 period. These positive returns contrast with the 1 per cent loss recorded on bank deposits.
Considering all costs as well as the impact of inflation, a ten-year investment of EUR10,000 in a portfolio composed of equity (40 per cent), bond (30 per cent) and mixed (30 per cent) UCITS generated a total net performance of 61 per cent in real terms, whereas the value of EUR10,000 left in a bank account in 2010-2019 fell by 10 per cent in real terms.
The report finds important differences between the performance of the higher- and lower-performing active and passive funds, reflecting the heterogeneity of the fund universe. Many active funds outperformed passive funds in net terms, and vice versa. The report also shows that a significant number of top-performing active equity UCITS remain top performers in subsequent years.
The strong net performance of UCITS in recent years can also be explained by decreasing fees, driven mainly by measures taken under MiFID II and the UCITS Directive on costs disclosure. The cumulated decrease in the ongoing charges of UCITS over the last four years reached 16 per cent for equity UCITS, 7 per cent for bond UCITS and 3 per cent for mixed UCITS. This is particularly clear with recently launched funds. While the average ongoing charges calculated for the whole universe of active equity UCITS was 1.39 per cent in December 2020, the average cost of the active equity UCITS launched last year was 0.81 per cent.
Vera Jotanovic, EFAMA Senior Economist, says: “Our analysis of Morningstar Direct’s UCITS data revealed a downward trend in the ongoing charges of recently launched UCITS partly due to increased competition between fund managers seeking to attract investors into their new funds.”
