European funds struggle to bridge trust gap

London : European funds are welcoming back client money after an enforced sabbatical, but face a tough task to convince investors they should again be paying top whack for products which left them exposed in the financial crisis.

Industry players will gather in Luxembourg this week at the Reuters European Funds Summit and the concurrent Spring conference of ALFI, the Grand Duchy's funds association, to wrestle with the new realities of the industry.

High on the agenda is the battle to win back investors whose confidence in the industry was shattered during the financial crisis after star fund managers fell with the pack and innovative products were punished.

"The financial crisis has damaged investor trust. We cannot go on conducting our business in the same way," Jean-Baptiste de Franssu, president of European industry association Efama and CEO of Invesco Europe, told reporters last week.

Battering

The industry took a battering in 2008 when clients pulled more than 350 billion euros (Dh1.75 trillion) from EU-regulated UCITS funds, which meet a common regulatory standard and make up the bulk of the European industry.

However, data from Efama showed a rebound last year, with net inflows reaching 123 billion euros, while January data confirmed the trend with 32 billion in net sales.

On the surface, that looks encouraging for the industry, but the money is only now starting to return to the lucrative active investment funds and left-field strategies which pull in the heaviest fees.