EFAMA: Decisive shift in policies is required to mobilize private savings towards the EU economy
24 June 2024
A growing share of equity UCITS is invested in US assets. By the end of 2023, 44.6% of the portfolio of equity UCITS were invested in US assets, compared to 19.2% in 2012.
Latest EFAMA research finds that the outperformance of US stock markets has led to increasing allocation of equity UCITS assets to US stocks
Today, EFAMA published the latest edition of its Market Insights series, titled “The EU Must Adopt a New Deal to Mobilize EU Savings”.
Key findings:
- A growing share of equity UCITS is invested in US assets. By the end of 2023, 44.6% of the portfolio of equity UCITS were invested in US assets, compared to 19.2% in 2012.
- The high exposure of equity UCITS to foreign assets is specific to Europe. In 2023, equity funds domiciled in the EU and the UK had 27% and 29% of their portfolios invested in local stocks, respectively, compared to 78% and 84% for equity funds in the US and Asia-Pacific region.
- Several factors can explain the lower home bias among European investors, including their views on the benefits of cross-border investments, the role of financial advisers, the development of fund platforms facilitating investments in funds tracking global indices, the relatively small size of EU stock markets, and enthusiasm for leading US technology companies.
- The strong performance of US markets, which led to an increased allocation of equity assets to US stocks, reflects a combination of factors and policies, including robust population growth, greater spending in research and development, substantial fiscal stimuli, and lower energy prices. As a result, economic growth in the US has surpassed that of the EU in recent years.
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Attracting capital to the EU economy requires unlocking the potential of the Single Market, creating an effective Capital Markets Union, strengthening the competitiveness of the EU economy and its firms, and reorienting the Retail Investment Strategy.
Bernard Delbecque, Senior Director at EFAMA added: “A decisive shift in EU policies, particularly competition and industrial policies, is required to enhance investment opportunities, boost the valuation of Europe-based companies in global stock indices, and increase asset owners’ investments towards EU companies. Once asset owners foresee more promising prospects in the EU, they will increase their investments in the region, thereby supporting the financing of the green and digital transitions.”
EFAMA
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