Tectonic changes are sweeping across global financial and political landscapes. With global supply chains creaking and ongoing geopolitical conflicts raging, market volatility is rarely far away.

Yet beyond this unsettling backdrop, Adrian Whelan, BBH Head of Market Intelligence, sees a more constructive engagement emerging between policymakers and the investment industry, as governments across Europe look to private markets to help fuel increased citizen engagement and economic growth.

“After the global financial crisis, politicians were deeply suspicious about the investment industry,” he says. “Now there are signs the political class genuinely sees asset management as a social utility which can assist in the deployment of new sources of capital to help the real economy and its citizens.”

Whelan points to the EU’s nascent Saving and Investment Union (SIU), designed to encourage diligent European savers to make longer term investments in capital markets, as a classic example of this new approach.

“Several governments are looking at ways to get more people involved in capital markets and investment funds, to boost their own returns and help revitalize their economies. The concept of democratization or increasing retail access to a broader range of investment products such as private market funds is taking root, and we are seeing rapidly rising interest in this space.”

While he welcomes this move, Whelan emphasizes the need for improved investor education to explain the complexities of these investments and potential risks to end investors.

ETF and private markets spotlight

Commenting on wider market trends in the ETF and private markets sectors, BBH Head of Distribution Intelligence, Killian Lonergan, points to healthy demand for more liquid products and continuous rapid growth in the exchange traded fund (ETF) market, with active ETFs on the rise.

“Most of the of the conversations we are having with clients looking to launch products are about active ETFs or private markets. Our recent Private Markets Investor Survey found that 91% of the 500 institutional investors and wealth advisors we surveyed intended to increase their holdings of private markets alternatives within the next two years. In Europe semi-liquid products and European Long-Term Investment Funds (ELTIFs) are also in the spotlight.”

On the European front Whelan believes the long success story of the UCITS fund passport still makes it the “golden goose” of investment wrappers. But both he and Lonergan acknowledge cross-border distribution of funds, including UCITS, can be hampered by local regulatory complexities. Expert knowledge of local markets and understanding these idiosyncratic nuances, says Lonergan, can help deliver positive sales results.

“Effective fund distribution is not just a case of domiciling your product in Luxembourg or Dublin and selling it across Europe. There are barriers that have prevented distribution of funds across some markets. Local rules and regulations are hurdles managers need to be aware of."

"Europe is not impenetrable, but you need to do your homework and approach each country in a slightly different way. It is important to identify your target audience and be clear about your direction. Go to where the investors are not just where you think they might be.” he concludes.