© Reuters. FILE PHOTO: European Union flags flutter outside the European Commission headquarters in Brussels
By Huw Jones
LONDON (Reuters) – Retail mutual fund investors are paying a cost 40% higher than that of large institutional investors, making it difficult for the European Union to get broader support for its capital market, the bloc's securities commission said Wednesday.
The European Securities and Markets Authority (ESMA) said in its third annual report on the cost and performance of investment products for retail investors that costs remain high and reduce returns for end investors.
"Private customers pay an average of around 40% more than institutional investors in all asset classes," said ESMA in its report, in which no recommendations for regulatory measures were made.
Private investors have saved around 4.5 trillion euros (5.38 trillion US dollars) in UCITS, the fund regulated by the EU.
Actively managed equity and bond funds, where an asset manager selects assets rather than passively tracking an index, incurred higher costs, but ultimately showed net underperformance compared to trackers, according to ESMA. (Graphic: ESMA UCITS Graphic 2, https://fingfx.thomsonreuters.com/gfx/mkt/oakpewmgdpr/ESMA%20UCITS%20Graphic%202.PNG)
Investments in funds promoting their "green" or environmental, social and governance (ESG) qualifications have increased in recent years.
The net assets in ESG funds based in the EU 27 amounted to 564 billion euros in almost 1,600 funds at the end of 2019.
"The evidence shows that actively managed ESG funds showed lower costs than non-ESG funds, which does not support the view that ESG funds are systematically greenwashing," ESMA said, citing an overly optimistic assessment of green credentials. (Graphic: ESMA UCITS Graphic 1, https://fingfx.thomsonreuters.com/gfx/mkt/ygdpzldrlpw/ESMA%20UCITS%20Graphic%201.PNG)
($ 1 = 0.8358 euros)
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