mm: Mr. Saluzzi, the EU-Commission intends to regulate the allegedly harmless moneymarketfunds (MMFs) - your comment on that?
Saluzzi: I am afraid the politicians and the Commission in Brussels have forgotten that these funds are quite regulated already, i.e. by the UCITS regulation. If the aim is to improve this regulation - no problem. But Brussels seem to assimilate MMFs to banking accounts und to treat both of them equally. This is indeed not appropriate.A fund, contrary to a bank account, is a special investment vehicle, it spreads over various instruments, issuers and maturities, and is extremely liquid. Additional liquidity requirements or a capital buffer of 3% of CNAV funds are not economically viable as it will further dent the current very low return of these funds without reducing the risk of a run, if any.
mm: Why - are politicians just regulation-crazed?
Saluzzi: I do not believe that they understand what we are doing. Yes, there were a few runs on MMFs during the crisis, but they were isolated cases and for most of them, caused by the inconsequent declarations of politicians, guaranteeing all bank deposits.
mm: And the fact that financial service providers have a poor reputation with the population? After all, the commission plans to regulate shadowbanks - most of the voters would supposedly welcome that.
Saluzzi: That too is an aspect, for sure. But again the fund management industry did not cause the crisis and did not exacerbate it. It started very clearly as a banking crisis. Moreover, the UCITS directive and AIMFD are already imposing significant and strict regulatory requirements on our industry. In that context, I still find it difficult to accept that a regulated European fund could be in the scope of shadow banking.. But in fact it could be likely that the financial industry is a favourite goal for regulations.
mm: Well, only funds with a steady "NAV - Nettoinventarwert" are in the focus, a Luxembourg specialty. Is Germany able to lean back - or do you see a danger of infection in that way, that investors hear the buzzword "regulation" and instantly pulls back? .
Saluzzi: To be extremely precise, even the additional liquidity and diversification requirements for VNAV are under criticism from the French asset management industry. But you are right when saying that the capital buffer requirement for CNAV funds is the most debated issue. Clearly, France, where the distribution of these products is forbidden, sees an opportunity to get rid of CNAV funds. But from a technical point of view, CNAV funds have a role to play and they do not create an additional risk for the investor. Otherwise why would sophisticated investors prefer these products on both sides of the Atlantic? I trust Germany will carefully review the issue and will objectively respond to it. This is an important topic as MMFs still represent more than 15 percent our UCITS assets, 50 percen in VNAV funds and 50 percent in CNAV funds. They represent also an important part of the funding of many European financial institutions and States.
Trust, where are you?
mm: And political leaders don't see that?
Saluzzi: Slowly, they recognize it but it's likely to be a very slow process.
mm: Take the wave of current regulation - isn't it possible to make is more simple, with a big legislative book for investments, life insurances, pension funds and so on?
Saluzzi: That would be quite a big book but we would love it in the fund management industry as coming up with that book could be the opportunity to achieve a true level playing field between all financial products sold to the retail public. This level playing field does not exist today and as a result, European regulated funds are clearly at a competitive disadvantage.
mm: You mention retail investors. Currently, funds are mainly sold to institutional investors, not retail.
Saluzzi: Yes, retail is still quite a difficult business. But in some countries we see in fact a slow recovery in fund retail distribution like in Italy even if right now this is only a "blip on the radar screen of asset managers.
mm: Actually, how big is the chance that the Telecom as well as the Financial crisis has scared off a whole generation?
Saluzzi: Well, it is clear that today financial markets are not inspiring a lot of confidence to retail investors. It is a unique opportunity for fund managers to come with the right solution to convince these investors to invest again. I am confident our industry can do it and therefore, I don't think that a whole generation has been lost.
mm: Which role can play the industry?
Saluzzi: This is a complex question but it is clear that our industry needs to come up with a new value proposition. Fewer, simpler and less expensive funds would be a good start.