The Benefits of Creating an Integrated EU Market for Investment Funds

19 Pages Posted: 10 May 2002

See all articles by Friedrich Heinemann

Friedrich Heinemann

ZEW – Leibniz Centre for European Economic Research; University of Heidelberg - Alfred Weber Institute for Economics

Date Written: April 2002

Abstract

The fast growing EU market for investment funds is still characterised by a continuing relevance of national borders. This papers assesses this market's degree of integration, the potential benefits from more integration and the obstacles to cross-border sales of funds. The analysis shows that markets of small member countries are particularly isolated since for suppliers of funds the market potential is too small to compensate for the fixed costs of market entry. But also in the big markets foreign funds lack market success. A better integrated European market for investment funds would provide three kinds of benefits: It increases choice of products, it allows to realise economies of scale and it intensifies competition for the benefit of private investors. It is argued that the present characteristics of fund distribution channels are mainly The fast growing EU market for investment funds is still characterised by a continuing relevance of national borders. This papers assesses this market's degree of integration, the potential benefits from more integration and the obstacles to cross-border sales of funds. The analysis shows that markets of small member countries are particularly isolated since for suppliers of funds the market potential is too small to compensate for the fixed costs of market entry. But also in the big markets foreign funds lack market success. A better integrated European market for investment funds would provide three kinds of benefits: It increases choice of products, it allows to realise economies of scale and it intensifies competition for the benefit of private investors. It is argued that the present characteristics of fund distribution channels are mainly responsible for fragmentation besides regulatory and tax issues.

Keywords: UCITS, investment fund, European integration

JEL Classification: G23, G38

Suggested Citation

Heinemann, Friedrich, The Benefits of Creating an Integrated EU Market for Investment Funds (April 2002). ZEW Discussion Paper No. 02-27, Available at SSRN: https://ssrn.com/abstract=309099 or http://dx.doi.org/10.2139/ssrn.309099

Friedrich Heinemann (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

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D-68034 Mannheim, 68034
Germany

HOME PAGE: http://www.zew.de

University of Heidelberg - Alfred Weber Institute for Economics ( email )

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Heidelberg, D-69117
Germany

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