EUROPE - Almost half of European fund managers expect greater cost disclosure to lead to lower commissions, according to Mercer's pan-European Fearless Forecast survey.
Mercer’s survey, which covered European institutional investment managers with some US$10trn assets under management, found four out of five managers or 83% expect commission arrangements in the UK to be unbundled within five years and most likely within two. Three-quarters (75%) expect the rest of Europe to follow suit.
The survey found that managers continue to increase cost analysis with one in five (20% in UK and 16% in Europe) expanding their monitoring last year and a third (35% in UK and 34% in Europe) planning to implement additional analysis this year.
Andrew Kirton, worldwide partner and UK head of Mercer Investment Consulting said: The survey lends support to the FSA’s efforts to encourage greater transparency of transaction costs.”
He added: The widespread belief that the execution and research elements of commission payments will be unbundled appears at odds with the finance industry’s general opposition to this development.
In November, the UK regulator - Financial Services Authority - published a supplementary policy statement outlining for brokers, fund managers and customers which services could not be paid for from commission and the key characteristics of execution and research.
Managers predicted annual returns of around 7% for European equities compared to 3% for European bonds.
Telecommunications stocks are expected to perform well this year with Vodafone the most frequently listed stock in managers; top five for the UK while France Telecom was top in Europe.
Over the next three years, managers anticipate an increased demand for tactical asset allocation and portable alpha investment strategies.
The survey also found that the biggest growth areas for the pensions industry are expected to be in liability-driven investment and hedge funds.
According to the survey, performance-related management of assets should become more popular. Currently less than 5% of managers manage assets on a performance-related basis.
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