The European Funds and Asset Management Association (EFAMA) has said it is not pointing the finger at index providers for the high allocation to US equities in European-domiciled funds.
Responding to a LinkedIn post by the former S&P Dow Jones Indices CEO Alex Matturri criticising the trade body, EFAMA director general Tanguy van de Werve said the group’s proposals were designed to make EU companies more competitive, not punish index providers.
It comes after EFAMA president Sandro Pierri recently warned of the “unintended consequences” of passive growth pushing flows away from Europe’s capital markets and in the US, calling for a political framework to “incentivise savings towards Europe”.
“EFAMA is not criticising index product providers, we cannot blame US companies for being far more competitive than EU ones,” van de Werve said.
“What we need is to increase the competitiveness of EU companies and deepen EU capital markets.”
Writing in ETF Stream, Matturri said EFAMA’s proposals – which have also been backed by the French Association of Financial Management (AFG) and former Italian prime minister Enrico Letta – were a “vailed attempt to boost fee income” as asset managers look to mitigate the shift of assets from active to passive.
An EFAMA spokesperson said: “EFAMA has never called for index product issuers to have a home country bias or increase allocation to European equities. This is false.
"The increasing share of US stocks in equity UCITS reflects the performance of US companies and results from investors’ choices and asset managers acting in the best interests of their clients.
"We do not support any regulatory intervention in the area of asset allocation, which is market driven."
It added is aim was to support policymakers to unlock the investment potential of European savings to finance European companies by cutting red tape, encouraging innovation and deepening the single market, including the Capital Markets Union.
US equities currently account for 70% of the MSCI World, which policymakers argue pushes investment away from Europe.
The proposals to relaunch the EU’s capital markets would involve “mobilising private capital on a large scale” to finance the continent’s transition.
It could mean the creation of a European label for savings products invested in the EU and facilitating the supervision of asset managers in several European jurisdictions.
Vanguard also hit back at the trade body’s criticism of passive investing, noting investors’ choice to invest in US equities was an “asset allocation decision”.
