8th February 2021
Source: L'Agefi Hebdo
Interviewer: Corentin Chappron
In 2020, MFEX announced the integration of several firms. Has the Covid crisis had an impact on your business?
Jean Devambez: 2020 was indeed a turning point for MFEX, with the late-June integration of Global Fund Trading of Société Générale Security Services, which manages post-market services offered to funds. We also finalised the integration of RBC’s Global Fund Platform, which widened our offering of services and our international footprint. Our businesses were not disrupted by Covid. Our platform absorbed the big volume swings of 2020. The first half of the year was marked by a drop in volumes and AuM, but late in the year we moved back to the projected AuM at €320bn for 950 asset managers and 350 distributors. On the French market we consolidated our leadership in the insurance segment with Groupama Gan Vie and Allianz Vie, which joined the platform in 2020.
What are your objectives for 2021?
Our priority is to keep growing our volumes, first by expanding our offering. We are working on developing data-centred products for which demand is strong from asset managers. The other big trend in fund distribution services is developing better liability-management tools, an issue that the Covid crisis has made more acute. We also plan to broaden our know-your-customer solutions, which we already offer with the regtech developed within the group, Global Fund Watch. But growth in AuM will also come with the expansion of our international footprint, in Europe, of course, and also in Asia.
30% of AuM in Europe is currently managed through platforms like MFEX.
Speaking of Europe, the fund distribution sector has consolidated fast in recent years. What room is left on that market?
Fund distribution is ultimately a very simple business. It involves connecting managers and distributors. And yet, this model has become accepted as an efficient way of managing, as we come from a fragmented, inefficient market. Consolidation has been fast, as there are now only three major players left on the European market, down from dozens of more or less equivalent platforms three years ago. Of course, there is still some way to go! 30% of AuM in Europe is currently managed through platforms like MFEX. Meanwhile, there are still many specific national features that involve the existence of smaller platforms able to grasp them. And, lastly, for the past two years global custodians have wondered about their place in this fast-changing fund distribution market. In short, there are still some nice deals to be had.
You mentioned “three major players”. Could the European market ultimately have room for all three?
At this stage, we believe the European market has room for several platforms. Look at the US market – several distributors coexist around a single entity. Moreover, the purview of fund distribution is sufficiently broad for several players, each with its individual capabilities, to co-exist. But it’s true that the distribution market is evolving at a great speed. In two or three years, we could see the emergence of a global leader, which is not the case in many other industries! I might add that prospects are bright for the European market. The distribution sector is expanding by 15% annually, while the regulatory burden is becoming heavier for asset managers – one good reason for them to turn to a platform able to lighten that burden, given that we take care of distribution agreements. And, lastly, asset management is growing fast and, with it, AuM volumes that distribution platforms can help manage.
Calling on private equity has accelerated our development in terms of industrial construction.
MFEX has private equity firms as shareholders. What role are they playing in market movements? Some managers are worried about the balance of power that could take shape with increasingly powerful platforms.
Calling on private equity has accelerated our development in terms of industrial construction. The presence of long-term shareholders also reassures asset managers and distributors, for whom shareholder stability is a sign of confidence. Our shareholder set-up guarantees a complete lack of conflicts of interest. Of course, some managers are concerned about dominance by big players. Some fears may be due to practices on some markets. As for us, we call on an open, partnership-based approach in order to avoid such abuses.
Index management became dominant in 2020. How are you positioned with regards to ETFs?
Index funds account for only a marginal portion of the funds we distribute, since they are bought like shares. Moreover, they have grown far less rapidly in Europe than in the US, for example. And keep in mind the correlation between market gains and inflows into passive management. Once the market turns, the balance of power will reverse itself.