On January 10, ESMA published its first annual statistical report on the performance and costs of retail investment products in the EU (ESMA 50-165-731).
The report highlights, in particular, the significant impact of costs on the final returns that retail investors make on their investments. It covers undertakings for collective investments in transferable securities (“UCITS“), alternative investment funds sold to retail investors (“retail AIFs“) and structured retail products (“SRPs“)..
Issues raised in the report include:
- In terms of overall returns, passive equity funds consistently outperform active equity funds. Much of this is due to the fact that costs for actively managed equity funds are significantly higher than for passively managed funds and exchange traded funds (“ETFs“).
- For UCITS funds the charges, taken all together, reduce their gross returns by one quarter on average. Retail investors are impacted to a much higher extent than institutional investors, with retail clients paying on average twice as much as institutional clients. On-going costs such as management fees make up over 80% of the total costs paid by customers.
- The lack of available and usable cost and performance data, especially for retail AIFs and SRPs, is a significant issue from an investor protection perspective.
- There is significant variation in costs and gross performance across member states.
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