Why Europeans don’t like collective investments all that much?

Have you ever wondered why 1/3 of the U.S. population are mutual fund investors? According to the Investment Company Institute’s data at the end of 2008, U.S. mutual funds managed $10 trillion for 93 million U.S. investors. Putting the numbers in perspective, the entire population of Germany, the most populated European country, is just under 82 million, while France has 65.4 million living on its territories.

Are there cultural or legal impediments for a broader acceptance of collective investments in Europe? With this research question I turned to Rudolf Siebel, Managing Director of the BVI, the German Investment and Asset Management Association. BVI represents 75 members, the Kapitalanlagegesellschaften and Asset Managers, with more than €950 billion in assets under management.

According to Rudolf, securities business in Europe is not intermediated, but mostly associated with banking. Therefore, European investment managers do not have to offer a cash product to their clients along with equity or fixed-income investment options, because uninvested cash balances are kept by the sponsoring bank. Before the Glass-Steagall Act was lifted in the U.S., fund managers have had to place clients’ cash in a bank. Each time a fund investor sold shares of a bond or equity fund, the asset manager would lose money to a bank. When money market funds came about, they were embraced by asset managers as a way to keep all cash in house. Accidentally, in 1970s - 1980s, which was a period of high inflation in the U.S., interest rates on bank deposits were regulated. Money market funds offered much higher market interest rates and attracted hoards of retail investors. Money market funds introduced a few generations to mutual fund investing fueling the growth of U.S. middle class.

At our seminar on Wednesday, April 14th, I’ll talk about nailing down my research question(s) and more generally about a super-important step of putting together an MPhil/PhD Transfer application. A wise PhD Candidate strives to learn from a painful experience of others!

Find my presentation slides titled 'Financial Regulation and Development of Financial Products: a Case for Money Market Funds' at my page:
http://westminster.academia.edu/ViktoriaBaklanova/Talks

I hope to see you all on Wednesday!
Viktoria

Why Europeans don’t like collective investments all that much?

European Money Market Funds: Definition in the Heart of Darkness

The 41th Session of the Philosophical Foundations of Law and Finance on Friday, February 12th will focus on the evolution of money market funds and their significance to the normal functioning of global capital markets. MMFs have been around for more than 35 years representing about 1/3 of assets under management of collective investment schemes, or mutual funds in the U.S. language, and yet, remained largely unknown to the general public. Not until September 2008, when a run on the third world-largest MMF triggered a global liquidity squeeze resulting in the Great Recession.

We will take a bird-view of the money market fund landscape on the both sides of the Ocean. A symbolic reading of the title contrasts between light and dark, portfolio transparency and a lack of information. Comparisons will be also made between MMF regulation in the U.S. and conflicting views on what constitutes a money market fund among European regulators.

We will review MMF definitions that are currently in effect along with various MMF industry proposals, including those put forward by the SEC in the U.S. and IMMFA, EFAMA, and CESR in Europe. There is a high level of cooperation amongst all interested parties in supporting the primary goal of establishing a common definition of European MMFs. Will the regulators arrive to a solution equally workable for investors and the industry is remained to be seen.

The CESR Consultation Paper “A common definition of European money market funds” is available at http://www.cesr-eu.org/popup2.php?id=6141

European Money Market Funds: Definition in the Heart of Darkness

Philosophical Foundations of Law and Finance - 41st Weekly Meeting

NOTE: CHANGE OF VENUE, last update 10 February

Dear all

We are well in 2010 and it is high time to recommence gathering for the Philosophical Foundations of Law and Finance. The next 40-lecture cycle – yes, we are turning to the 41st – will start on Friday 12 February and will be inaugurated by Viktoria Baklanova presenting a paper on

“European Money Market Funds: ‘Definition in the Heart of Darkness’”

Viktoria is a PhD Candidate at the University of Westminster, School of Law and Senior Director at Fitch Ratings, New York.

The meeting will take place from 6.00 to 8.00pm, in room 358, 309 Regent Street (University of Westminster). We will adjourn at Vapiano (19-21 Great Portland Street, W1W 8QB) at 8.00pm for meal and drinks.

I look forward to seeing you in one week!

Warm regards,
Laura

Philosophical Foundations of Law and Finance - 41st Weekly Meeting