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25 February 2016

2014 key figures in asset management - Outstandings under management

In 2014, gross assets under management in France rebounded 15.7% after a slight drop (-0.5%) the year before. This expansion was not uniform across all asset classes, however, and stemmed from the inclusion of new market participants falling within the scope of the Alternative Investment Fund Managers (AIFM) directive as well as the market rally. Here we examine the volumes and nature of outstandings managed by French asset managers in 2014.

    A marked rise in assets under management

    Following the biggest gain of the decade (up €449 billion), assets under management in the Paris market hit €3,301 billion in 2014. 47.2% (€212 billion) of the rise is due to the inclusion of securitisation and real estate investment companies upon the entry into force of the AIFM directive(1) ; the remaining 52.8% resulted from vigorous growth in existing French asset managers' outstandings (up €237 billion). This adjusted increase, related to buoyant markets and subscriptions, still represents remarkable performance. Moreover, outstandings of European products managed by French asset managers also increased significantly.

    Directive 2011/61/EU on Alternative Investment Funds Managers has been transposed into national law. It aims to establish a standard regulatory framework for managers of alternative investment funds throughout Europe while strengthening investor and saver protection.

    Following the implementation of the AIFM directive, the balance of investment portfolios continued to shift in 2014. UCITS outstandings rose by 11.9%, compared to 2013, to €879 million, and the increasing use of European passports(2). lifted European UCITS assets 44.3%, from €134.4 billion in 2013 to €193.9 billion in 2014. Aggregated outstandings in managed alternative investment funds (AIFs) surged by €245.8 billion in 2014, to €896.7 billion. The underlying increase in FIA assets (i.e. excluding securitisation and real estate investment funds) was €33.8 billion.

    Gross assets under discretionary management rose for the fourth year in a row. With a major contribution from higher subscriptions to life insurance schemes, discretionary management was up 7.7% to €1,525 billion.

    Arbitrage between asset classes

    At the end of 2014, gross assets managed by French undertakings for collective investment, or CIS (i.e. UCITS, AIFs excluding specialised management, and employee investment funds(3)Employee investment funds ) totalled €1,216 billion, some €37 billion more than the year before (up 3.1%). Low interest rates have affected investor behaviour, prompting arbitrage between asset classes. 

    excluding those invested in listed and unlisted company shares, which represent €38.3 billion.

    Equity CIS outstandings

    Buoyed by bullish markets, equity CIS assets increased by 6.1%, or €17.2 billion, in 2014. Although these funds reported net outflows, they benefited from a positive market effect worth an estimated €22.8 billion.

    Fixed income CIS outstandings

    2014 saw a trend reversal in bond CIS aggregate outstandings, which climbed €31 billion to €247 billion. A subscription effect more than offset a slightly negative market effect estimated at -€0.4 billion. Bond products benefited most from increased subscriptions in France, as they are offered as appropriate alternatives for private and institutional investors seeking a risk-return profile adapted to a low-interest environment. Given the prevailing uncertainty, managers can still view bond funds as safe havens.

    Money market CIS

    Money market CIS assets declined by €24.3 billion in 2014, mainly because of a negative subscriptions effect (estimated at -€24.2 billion). Outstandings fell by slightly less than in 2013 and stemmed from transfers to other asset classes, with investors seeking better performance. Returns from these funds have been affected directly by the continuing slide in interest rates to minimal levels because of the ECB's accommodating monetary policy. As a result, the range of money market products has contracted, chiefly via fund mergers.

    Diversified CIS

    Diversified CIS managed to increase their assets by €21.5 billion in 2014. This result partly reflects greater interest for unit-linked life insurance products, which benefited from higher subscriptions and the marketing in 2014 of new life policies ("euro-growth") based on diversified funds.

    Formula funds and funds of alternative funds

    At 31 December 2014, formula fund assets totalled €35.9 billion. Outstandings in these funds have been shrinking steadily since 2009 and were down another €8.4 billion in 2014. The continuous decline in interest rates and their low current level explain these results, as formula funds are highly dependent on interest rates. In the meantime, fund of alternative fund assets were largely unchanged in 2014, rising €0.5 billion to €12.5 billion.

    Large funds: money market CIS strongly represented

    An analysis of French CIS with net assets of over €1 billion highlights a characteristic feature of the French asset management market, namely that money market CIS run by credit institutions' asset management subsidiaries make up a substantial proportion of large CIS. Nine of the top ten funds are in the money market category and are managed by subsidiaries of credit institutions. Only the largest in terms of assets (€24.3 billion) is a diversified fund managed by an entrepreneurial management company.

    Despite the decline in money market fund outstandings in 2014, this asset category still dominates the French CIS landscape. Money market products with over €1 billion in net assets average €4.4 billion in net assets, compared with €2.8 billion for diversified CIS, which rank second. Note also that 66.3% of the 178 funds shown on the chart below are managed by subsidiaries of banks with considerable deposit bases and extensive distribution networks.


    Breakdown of large funds (> €1 billion) by category


    The concentration of outstandings

    The chart below reveals the concentration of a majority of gross managed assets among a limited number of management companies.


    The top 30 entities, representing 5.1% of the number of investment management companies, manage 77.7% of total gross assets. Of these entities, 72% are subsidiaries of credit institutions, 21% are subsidiaries of insurance or mutual companies and 7% are entrepreneurial management companies. The bottom 488 management firms in terms of outstandings, making up 83% of Paris market participants, account for only 5.9% of assets. 73.4% of them are entrepreneurial management companies and share around €104.8 billion in assets, or an average €214.7 million per entity.

    Spotlight on… discretionary portfolio management

    Analyses based on type of shareholding makes it possible to highlight the structure of the individual portfolio management market, particularly in terms of market shares and clientele.

    Generally speaking, and in terms of number, retail clients dominate in all shareholding types (between 97.3% and 98.6%), except among insurance and mutual companies. In these two cases the breakdown between the number of professional and non-professional clients is reasonably balanced.

    Two types of market participants stand out in terms of the structure of their outstandings:

    1. Insurance companies and mutuals, subsidiaries of credit institutions, investment services providers and public sector firms whose professional clients generally account for almost all their assets under discretionary management.
    2. Entrepreneurial management companies, whose outstandings are split reasonably evenly between professional and non-professional clients.


    In terms of market share, subsidiaries of credit institutions and of insurance companies and mutuals dominate the discretionary management market for professional clients (48.5% and 41.9%, respectively). These management firms benefit greatly from intra-group clients: a significant proportion of banking and insurance group assets is consigned directly to their own asset management companies. Subsidiaries of credit institutions also have this advantage among retail clients, hence their almost 78.1% share of the discretionary retail market. Entrepreneurial management firms are in second place (16.4%), targeting mid- to high-end clients through niche strategies (i.e. other than benchmarked management).

    Discretionary unit-linked management

    Between 2011 and 2014, the market for discretionary strategies based on arbitrage between units(4) increased every year to €13.9 billion. Since 2011, €7.2 billion has been added to outstandings of discretionary unit-linked management (up 108.5%). Life insurance has gained from transfers out of Livret A accounts, where interest dropped to 1% on 1 August 2014, and from new subscriptions following the go-ahead by the government in its 2013 supplementary finance bill to two new life insurance policy types ("euro-growth"(5) and "life-generation"(6)).

    Spotlight on… AIFM reports

    On the basis of data extracted from AIFM quarterly reports, which cover the vast majority of AIF outstandings, we note that AIFs declaring themselves as implementing hedge fund strategies make up a very small proportion of the French industry. In contrast, most funds declare that they do not belong to any of the categories on offer and are therefore 'Others'.


    It is clearly important that the high proportion of funds designating themselves as 'Others' strongly biases any analysis. Relating these funds to their AMF classifications can add more definition to this category, however: around 20% of the funds concerned are employee saving schemes, for example, with the balance made up of funds implementing 'traditional' strategies similar to those applied in UCITS (money markets, fixed income, diversified, equities etc.).


    Within the context of monitoring asset management on behalf of third parties, the AMF provides annual information documents issued by asset management companies (AMCs). These documents contain quantitative information on managed assets as well products and fees linked to management operations for third parties conducted in France. This information allows the Authorisation and Monitoring division of the AMF's Asset Management Directorate to analyse the market. Since the AIFM directive took effect in July 2013, managers of European AIFs have been subject to a new reporting requirement. The information received relates in part to portfolio exposures to different types of risk and is collected quarterly, semi-annually and/or annually. Despite the great care taken in compiling and processing data, taking into account information documents received late and possible data-entry errors, some inaccuracies may exist.

    2014 key figures in asset management
    Every year, the AMF publishes a series of five articles entitled "key figures on asset management" . These publications are available via the section Publications > Reports, research & analysis > Savings and services providers of the AMF website and cover the following: management company overview, profiles, outstandings under management, financial data and supervision. A follow-up compilation of these five documents contains additional data and tables.


    1. Directive 2011/61/EU on Alternative Investment Funds Managers has been transposed into national law. It aims to establish a standard regulatory framework for managers of alternative investment funds throughout Europe while strengthening investor and saver protection.
    2. The European ‘passport’ enables investment management companies that have obtained authorisation in their home country to operate throughout the European Union or in a country forming part of the European Economic Area (EEA). 
    3. Employee investment funds excluding those invested in listed and unlisted company shares, which represent €38.3 billion.
    4. An investment management company is deemed to be in the business of discretionary unit-linked management “when subscribers to a unit-linked life insurance policy “entrust the asset management company, via mandate, the option, depending on the trade-offs, to modify on a discretionary basis, in their name and on their behalf the units which were initially selected”, cf. AMF Position-Recommendation DOC-2012-19.
    5. “Euro-growth” is a policy based on the way diversified funds work and combines a euro fund and units. Assets are used to finance the financing of the French economy and guarantee principal only after an 8-year minimum investment period. 
    6. “Life generation” is a unit-linked policy in which at least a third of outstandings are invested in SMEs, industrial agencies, housing and/or social businesses. Capital transferred to inheritors in the event of the subscriber’s death benefit from a 20% tax rebate.