The annual report by the European Union’s financial markets watchdog has highlighted a downward trend in the costs associated with prominent retail investment products, yet it also points out continued variations in expenses across its member states. This report by the European Securities and Markets Authority (ESMA), which delves into 2021 data, examines a range of products targeted at retail investors in the EU’s 27 countries, including investment funds, ETFs, and structured products.
ESMA Report Indicates Investing Costs Fell Across the Eurozone
According to the ESMA’s findings, there was a noticeable reduction in the average cost of investing in these products compared to the previous year. However, the report emphasises the ongoing disparity in costs among different EU countries.
Enhanced transparency and potentially reduced expenses are attributed to more explicit fee information, a requirement under EU regulations.
Verena Ross, the Chairwoman of ESMA, said: “Costs and performance are key determinants of whether retail investors benefit from their investments, and whilst it is to be welcomed that the cost incurred by investors has slowly declined, retail investors still need to consider costs carefully in their investment decisions.”
The report also pointed out performance challenges, particularly in funds focusing on environmental, social, and governance (ESG) criteria, which faced difficulties during last year’s energy crisis and fluctuating interest rates. However, over three years, ESG funds generally performed better. The costs associated with ESG funds were found to be on par with those of non-ESG funds.
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Retail investor participation in the alternative investment funds (AIF) market remained around 14%, with the majority being professional investors. The report noted positive returns in real estate funds in 2022 despite potential upcoming market challenges.
The ESMA also raised concerns about CFDs (Contracts for Difference), noting that brokers often misrepresent these instruments, leading to confusion among investors.
The ESMA underscores the importance of its annual reports in enhancing retail investment product transparency. These reports provide crucial information to help investors evaluate the historical performance and costs of products available throughout the EU, thus aiding in informed decision-making.
Throughout the year, ESMA publishes various reports and industry directives. A recent focus has been on the Markets in Crypto-Assets Regulation (MiCA), advising market participants to prepare for the upcoming MiCA regulations.
