25/3/2020 | Viewpoint

50 years of BVI

'Our most important task today is to secure the prosperity of large parts of the population'


Mr Richter, the BVI has represented the interests of the fund industry for 50 years. What does it mean to celebrate an anniversary in the year of the Corona crisis?
Thomas Richter: Of course, we would have liked it to be different in every respect. In this situation, one cannot speak of 'celebrating'. On the other hand, in times like these, it doesn't help to concentrate only on the negative. One thing we have learned over the past 50 years is that the financial markets have recovered even after severe crises. This was the case after the dotcom bubble at the turn of the millennium, it was the case after the 2008 financial crisis, and I am confident this will be again the case even after the current upheavals.

What do you consider the biggest risks for the fund industry right now?
Richter: In times of crisis such as those we are currently experiencing with volatile markets, robust liquidity management of the funds is essential. Portfolio managers must be able to react to redemption requests appropriately in order to protect all investors remaining in the fund and to protect the market. Already before the Corona crisis we had advocated expanding the toolbox for managing liquidity bottlenecks. With success: in future, the KAGB will allow swing pricing, redemption periods and redemption restrictions. Compared to fund closures, these are less severe measures for dealing with excessive redemption requests. However, these new instruments are not yet in force in the KAGB. Should the situation on the markets deteriorate further, it will therefore be decisive what leeway the BaFin will give the funds in terms of liquidity management. We hope that the supervisory authority will make discretionary decisions appropriate to the situation. In an emergency, they would certainly be helpful in easing the situation.

(Editor's note: The liquidity tools entered into force only a little later after the interview was published, on 28 March 2020. The fund industry is working together with BaFin, depositaries, custodians and service providers on the technical and practical implementation).

What do you see as the greatest achievement of the fund industry since the founding of the BVI?
Richter: The fund industry has undergone an immense change in importance. Just a few years ago, the public perception of funds was that they were a financial product for retail investors. Today, the importance of funds as a transmission belt for occupational and private pension provision is generally known. The fund industry is the largest manager of retirement capital in Germany. People may have access to others via insurance companies, pension schemes, employers, etc., but ultimately a large part of social capital is managed in mutual and special funds. Particularly in the last ten years, the fund industry has developed into a separate pillar of the financial industry, alongside banks and insurance companies. And its importance is increasing in times of low interest rates.

How has the German fund market developed over the last 50 years?
Richter: The fund companies currently manage around EUR 3.4 trillion. For comparison: in 1970, the figure was DM 10.5 billion. Nowadays, the fund industry is considered a third pillar of the financial sector in Germany. It provides 16,000 direct jobs and over 300,000 indirect jobs, mainly in sales, but also in law firms, agencies and consulting firms. In terms of assets, Germany is the largest sales market for funds in the EU.

Half a century of interest representation - during this time the industry has seen a lot of regulation. Which phases shaped the fund industry most?
Richter: As early as 1970, funds were a heavily regulated product. From the 1990s onwards there were two common phases: the phase of financial market promotion laws and the phase of over-regulation. In the first phase, the German successful product 'Spezialfonds' for institutional investors was launched, among others. With the financial crisis, the pendulum then swung and the financial sector was hit by an unprecedented wave of regulation. This was also the birth of the European supervisory authorities ESMA, EBA and EIOPA (ESAs) with unprecedented detailed regulation at EU level through technical implementation regulations.

What do you want to work on most in the future?
Richter: For a regulatory shift in EU regulation. The excessive regulation hinders Europe's asset managers in global competition. It ties up huge amounts of resources that could be far better used for investments in technology and the development of new markets. The EU has to think more globally and and make the competitiveness of Europe's financial industry a defined regulatory objective, in addition to consumer protection and financial market stability. Currently, supervisory and regulatory decisions do not factor in the consequences for the global competitiveness of the European asset management sector. This must change. In the United States the competitiveness of the financial sector has long been a regulatory objective – with visible success.

One of our main concerns is also the promotion of Germany as a financial centre. The government's tax plans, such as the financial transaction tax or the restriction on the loss offsetting of securities, are all damaging signals. Anyone who wants to strengthen private prosperity and retirement provision in Germany should ease the burden on savers and not burden them with additional taxes.

Where do you see the greatest opportunities for the fund industry?
Richter: Our most important task today is to secure the prosperity of broad sections of the population. Even fully-funded pension provision is no longer conceivable without asset managers. Another major opportunity is the issue of sustainability. The fund industry, as a major source of capital, has a key role to play here. The share of sustainable funds in the net inflow of open-ended mutual funds has increased by more than 700 percent in the past three years, from a 5 percent share in 2017 to 40 percent last year.


BVI's milestones and development of the German fund market:

25 March 1970Foundation of the BVIThe BVI is founded as Bundesverband Deutscher Investment-Gesellschaften e.V. (Federal Association of German Investment Companies) by seven companies. The aim is to promote the investment idea and to safeguard the common interests of the members.
1971DM 10 billion AuMThe assets under management of public securities funds in the Federal Republic of Germany exceed DM 10 billion - an increase of around 15 percent over the previous year.
1982DM 50 billion AuMThe assets under management of German mutual and special funds exceed the DM 50 billion mark.
198330 membersThe 30th member joins the BVI. In terms of fund volume, the association now represents over 99 percent of all German investment funds.
1985DM 100 billion AuMFund assets in Germany rise to over DM 100 billion for the first time. Nearly 59 billion of this is attributable to public funds, about 46 billion to special funds and one billion to real estate funds.
199050 membersThe number of BVI members rises to over 50 with a total of 58 existing companies.
1995500 billion DM AuMFund assets of German investment funds rise to over DM 500 billion. 254 billion of these are invested in around 600 mutual funds.
1998DM 1 trillion AuMFor the first time, fund assets of German mutual and special funds exceed the mark of one trillion German marks. Of this, 730 billion is invested in special funds and around 400 billion in 800 mutual funds.
200070 membersThe number of BVI members rises to over 70 members.
2002Berlin office establishedThe BVI opens its Berlin office. Currently, eight BVI employees work for the BVI in the capital.
2003BVI Code of ConductThe BVI members develop voluntary codes of conduct that go beyond the legal requirements. They formulate a standard of good and responsible handling of the capital and the rights of the investors. Today, the principle of 'comply or explain' applies here: the fund companies must explain to investors whether and to what extent they deviate from the rules.
2004EUR 1 trillion AuMFor the first time, fund assets in Germany exceed one trillion euro. About EUR 540 billion of this amount are invested in special funds and EUR460 billion in public funds.
2004Introduction of the BVI Associated MembershipFor companies and private persons who cannot become full members of the BVI, the BVI introduces the Associated Membership. Today, more than 140 members such as banks, auditors, law firms and IT service providers take advantage of this possibility.
2011Foundation of the Brussels officeThe BVI establishes its Brussels office. Today four employees are actively involved in the monitoring of legislative projects in the centre of the European Union.
2011Foundation of the ombudsman's officeThe ombudsman's office for investment funds starts its work. Since then, consumers have received free and neutral assistance in disputes concerning funds or services of investment companies.
2012EUR 2 trillion AuMAssets under management exceed the EUR 2 trillion mark for the first time. Of this, around EUR 980 billion are invested in special funds and EUR 730 billion in public funds. Asset management outside funds accounts for around EUR 330 billion.
2012Guidelines for responsible investingThe BVI takes up the topic of sustainability and ethics and formulates guidelines for responsible investing for the first time.
2013Revision of BVI statutesAs a logical consequence of the new investment code, foreign fund companies with a presence in Germany and KVGs that manage closed-end funds can now become full members of the BVI.
2017EUR 3 trillion AuMAssets under management in the German fund industry exceed the EUR three trillion mark for the first time. Around 45 percent are used solely for retirement provision purposes.
2020114 full members
146 associated members
EUR 3.4 trillion AuM
Today the BVI has a record number of members. The German fund industry also manages record assets.

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