BVI research: Fund managers show a bias towards their home market
- Investment in EU’s real economy could be boosted by more fund managers based in the EU
- Potential: EUR 3 billion additional investments in the EU through global equity funds alone
- Location policy is important in competition between financial centres
Fund managers often prefer investing in companies based in the country where they work. This ‘manager home bias’ is demonstrated by a study of the German Investment Funds Association BVI. The study quantifies the higher portfolio share in global equity funds at 1 to 2 percentage points. The EU's real economy benefits little from this home bias, as 62 per cent of fund managers of these funds distributed in Europe primarily work in the UK, the USA and Switzerland. If each fund from the sample, which is distributed across the 27 EU member states, had at least one fund manager in any member state, an additional of EUR 2 to 3 billion in investments in the EU’s real economy could be expected. ‘The study highlights the importance of location policy in competition between financial centres, even for the real economy. We have been supporting Frankfurt as a financial centre for many years. An attractive legal framework can draw capital market players and thus capital to Germany’, says Thomas Richter, BVI’s CEO.
BVI focused the study on global equity funds. The managers of these funds have sufficient information about the portfolio companies, suggesting a relatively low home bias. For infrastructure funds, private equity funds and venture capital funds, the impact on the real economy is expected to be stronger, as closeness to the investment plays a much larger role in information gathering.