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What Hurdles Do European Investment Managers Face In The US?

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What Hurdles Do European Investment Managers Face In The US?

Making a mark in the U.S. and Asia has long been a target for many European companies looking to expand their international profile. Unfortunately, many European asset management firms and banks struggle to expand their footprint stateside.

A number of European fund houses have a meaningful presence in the U.S., such as Amundi, which is Europe’s largest fund manager and has $62 billion in U.S. assets — a fraction of the total of $39 trillion managed on behalf of American investors, according to the Financial Times

Tull: 'There Are Very Few RIAs' In Europe 

In contrast, U.S. fund managers have a successful presence in the European market. Both BlackRock, Inc. (NYSE: BLK) and Vanguard are prominent in the European fund management industry.

What are the main obstacles and differences between the U.S. and European fund management sectors?

Bob Tull, co-founder and president of ProcureAM, an exchange-traded product issuer, said Amundi bought Pioneer Funds and acquired the firm's assets under management in the transaction.

“The assets in the U.S. are OTC [over-the-counter] mutual funds, not in ETFs. The Undertakings for the Collective Investment in Transferable Securities (UCITS) structure in Europe works like a hub and spoke. The issuer holds all of their assets in an Irish or Luxembourg trust and clones a UCITS fund in each country/market in order to comply with local tax laws.”

Distribution is achieved through either employees or sale agents in each European country that has relationships with private banks, he said. 

“The majority of the public don’t 'manage' their accounts. They pay private bankers to do that," Tull said.

No equivalent for E*TRADE Financial Corp (NASDAQ: ETFC) and Charles Schwab Corporation (NYSE: SCHW) exists in Europe, he said. 

"There are very few RIAs, as the common relationship is similar to our financial consultant at the major brokerage houses like Morgan Stanley or UBS." 

Europe's Flatter Market Structure 

The European market structure is “flatter” than the U.S., which is why many U.S. ETF issuers have been successful, Tull said. 

"The other key factor is that fee sharing or wholesaler compensation is easier to pay under the European market structure. The public is used to paying higher fees in return for the higher touch of the relationship." 

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