MBR_ISSUE 47_JAN_LR

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Malta Business Review EU: INVESTMENTS ESMA report finds investment product performance highly impacted by charges By Solveig Kleiveland institutional investors. On average, retail clients pay twice as much as institutional clients. The impact varies across asset classes, with costs on average accounting for 25% of gross returns in the period from 2015 to 2017. On-going costs such as management fees constitute over 80% of the total cost paid by customers, whilst entry and exit fees have a less significant impact. In terms of overall returns, passive equity funds consistently outperform active equity funds. This is further demonstrated by the fact that costs for actively managed equity funds are found to be significantly higher than for passively managed funds and ETFs. The European Securities and Markets Authority (ESMA) today publishes its first Annual Statistical Report (Report) on the cost and performance of retail investment products. The Report covers Undertakings for Collective Investment in Transferable Securities (UCITS), Alternative Investment Funds sold to retail investors (retail AIFs) and Structured Retail Products (SRPs). The analysis complements ESMA’s risk assessment, supervisory convergence and investor protection work, and contributes to the European Commission’s project on cost and performance of investment products under the Capital Markets Union Action Plan. The report documents the significant impact of costs on the final returns that retail investors make on their investments: • the charges for UCITS funds, taken all together, reduce their gross returns by one quarter on average; • the cost impact varies widely, especially depending on the choice of product, asset class, fund type; and • management fees and other on-going costs constitute over 80% of investors costs, whilst entry and exit fees have a less significant impact. Market transparency is particularly limited for retail AIFs and SRPs for which practically no up-to-date data on costs and performance are available. Steven Maijoor, Chair, said: “The Report is an important building block in our investor protection work. Retail investors in the EU benefit from the choice among thousands of UCITS and alternative funds and structured investment products. It is key that they are aware of the costs and performance of these products. “Our Report shows that fund costs are substantive, can severely impact returns, and vary strongly. It demonstrates the importance of cost disclosure to investors, and the need for asset managers and investment firms to take costs into account when acting in the best interest of investors. This evidence should prompt investors to carefully compare the costs of investment products when making investment decisions. “Costs, their level and structure are relevant for investor protection, and we will monitor and assess what the evidence implies for our supervisory convergence work.” Highlights The data shows that for UCITS the total costs of a fund presents a significant drain on fund performance, impacting retail investors to a much higher extent than Moreover, the report finds significant variation in costs and gross performance across Member States. Finally, the report highlights the lack of available and usable cost and performance data, especially for retail AIFs and SRPs, which is a significant issue from an investor protection perspective. The report provides National Competent Authorities with useful information to support the implementation of the Capital Markets Union, and aims to facilitate increased participation by retail investors in capital markets by providing consistent EU-wide information on cost and performance of investment products. It also demonstrates the relevance of disclosure of costs to investors, as required by the MiFID II, UCITS and PRIIPs rules and the need for asset managers and investment firms to act in the best interest of investors, as laid down in requirements of MiFID II, the UCITS and AIFM Directives. <strong>MBR</strong> Credits: ESMA Press Office 32
BUSINESS DEVELOPMENT: JAPAN Malta Business Review Fostering business relationships with Japan Malta-Japan Business Opportunities was the theme of a seminar organised by Bank of Valletta in collaboration with the Malta-Japan Chamber of Commerce and the Japan External Trade Organisation Milan Office. The aim of the seminar was to bring together stakeholders and business players from both countries to share their personal experiences in doing business with Japan. Kentaro Ide, the director general, Jetro Milan gave an insightful presentation on the size of the Japanese economy, third largest economy in the world and how the Jetro office in Milan can play a key role in business matchmaking between Japanese and Maltese companies.http://ads.independent. com.mt/www/delivery/fc.php?script=deliveryLog:oxLogVast:logImpressionVast&banner_id=4192&zone_id=84&source=&vast_ event=start&r95108=95108 Moderating the seminar, Mark Scicluna Bartoli, executive EU & Institutional Affairs at Bank of Valletta provided an insight to the EU-Japan Economic Partnership Agreement that will come in force in February and used it as a platform for various entrepreneurs, in the electronics, gaming, tourism and financial services sectors, to share their personal experiences of their dealings with Japanese businesses which provided the audience with valuable insight into doing business with Japan. André Spiteri, Ambassador of Malta to Japan underlined the importance of timing and how 2019, with the coming into force of the EU-Japan economic partnership, will be a key year in fostering a stronger business relationship between Malta and Japan. Joe Gabriele, John Schembri and Joe Small On a concluding note Kenneth Farrugia, chief Business Development officer at Bank of Valletta highlighted that: "As Malta's leading banking group, the internationalisation of local investment and attracting foreign direct investment features highly on our agenda. Events like these are key in sharing knowhow with Maltese enterprises assisting them to grow by leveraging on our experience and contacts." <strong>MBR</strong> Credit: BOV/The Malta Business Weekly www.maltabusinessreview.net 33
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