Money management firms, think tanks and representative associations are taking the temperature of ambitious European plans to strengthen the region's economy and stimulate investment, particularly in light of the U.K.'s decision to leave the European Union.
The European Commission launched its Capital Markets Union action plan in 2015, outlining aims to "build a true single market for capital" across the 28 member states. By promoting stronger capital markets to complement the region's bank financing, the commission aimed to unlock more investment from the EU and the rest of the world, mobilizing capital in Europe and channeling it to companies and long-term sustainable projects; better connect financing to investment projects across the EU; make the financial system more stable; and deepen financial integration and increase competition.
And while sources highlighted a number of opportunities for money management firms and institutional investors going forward, they also warned ongoing Brexit negotiations will need to be carefully navigated for the CMU to realize its ambitions.
"We need to think carefully about what we want the overall CMU picture to look like," said Mike O'Brien, Europe, Middle East and Africa CEO and global co-head of solutions at J.P. Morgan Asset Management in London. "Brexit presents a crossroads, and we have a choice to make. We can either move toward an 'open CMU' that aims to attract investment from abroad and keep Europe at the center of a highly connected global market, or we can turn our back on global markets and create a fortress Europe approach which will benefit no one."
Mr. O'Brien said JPMAM has been a "strong supporter" of the initiative, with particular focus on removing barriers and improving the cross-border market for investment funds — defined by the European Commission as investment vehicles — "created with the sole purpose of gathering investors' capital, and investing that capital collectively through a portfolio of financial instruments such as stocks, bonds and other securities."
Said Mr. O'Brien: "Europe is a fragmented market with a proliferation of smaller funds scattered across the 28 EU member states, whereas the U.S. has many fewer, much larger, funds that have achieved economies of scale that make them more competitive."