In an interview with Investment & Pensions Europe magazine, Michael Schmidt, managing director at Union Investment, said that regulatory myopia is driving German institutionals out of equities. According to him, a growing number of German institutional investors had reduced their equity exposure in recent years and were instead increasing exposure to real assets such as infrastructure and real estate. Schmidt wagged his finger to regulators since they failed to consider “the bigger picture” and “are not supporting long-term equity investors or encourage them, despite their important role for the capital market”.
In its response to the Green Paper on Long-Term Financing of the European Economy in June 2013, EuroFinUse equally stressed the lack of promotion of long term investments by the European Commission. The direct holding of assets by end investors - and especially by retail investors - is the easiest and most efficient way to encourage long term investment.
In 2007, the European Commission recognised that the nature of long-term savings and pension plans implies the need to ensure that consumers are offered products that are really adapted to their needs. However, the necessary and effective implementation of these objectives has been a long time coming.
In June 2013, in order to address this issue, the EC proposed to create EU Long Term Investment Funds or ELTIFs that should provide investors with long term, stable returns.
ELTIFs are to be voted by the ECON Committee at the European Parliament and some amendments allowing access for retail investors are under consideration. BETTER FINANCE insists that ELTIFs need to focus on the root causes of the insufficient long term financing of the European economy through the rehabilitation of investments in equity and in particular by individual investors, as households are the main source of funds to finance investment.
Please read the interview here.
Please find EuroFinUse's Response to the Green Paper on Long-Term Financing of the European Economy here.
Cartoon by Craig.