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Asset Management Industry in the PIGS Nations - Investment Analysis
Frost & Sullivan, March 2011, Pages: 67
Frost & Sullivan's business and financial services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research. A key aspect of this offering is the financial benchmarking and analysis (FBA) in the asset management space. This FBA is on the analysis of the asset management industry in the PIGS nations. It primarily focuses on the asset management industries in Portugal, Spain, Italy and Greece and related investment themes.
Research Overview
This Frost & Sullivan research service titled Asset Management Industry in the PIGS Nations - Investment Analysis provides market drivers and restraints, trends in net assets and industry challenges. In this research, Frost & Sullivan's expert analysts thoroughly examine the asset management industries in Portugal, Italy, Greece and Spain (PIGS).
Market Overview
Asset Management Industry in the PIGS Nations to Gain Traction with Economic Recovery in 2012 and Low Mutual Penetration
Long-term Structural Reforms Required to Pull the Industry out of the Red
The asset management industry in the PIGS nations is expected to grow at a compound annual growth rate (CAGR) of 4.0 per cent until 2016. Lower valuations of various large and mid-cap companies will lure investors. Infrastructure spending in the medium (2 to 3 years) and long term (5 to 7 years) and better regulatory reforms is expected to aid the recovery of the PIGS economies and boost investments. As the sovereign debt crisis intensified in mid-2010, the EU nations had to resort to strong measures to stem the downslide. The region is facing a huge liquidity crisis as funds dry up in the credit market. “The net assets in the PIGS nations had declined by 12.7 per cent between 2006 and 2010 Q3, and Greece was the worst affected among these nations,” notes the analyst of this research service. “The Greek financial crisis resulted in massive outflows of institutional funds; besides, there was also a severe dent in investor confidence.”
Greece entered into an agreement with the European Union (EU) and the IMF for financial assistance of 110.00 billion Euros over a period of 4 years, from 2010 to 2013 in May 2010. Greece was expected to reduce an additional 30.00 billion Euros deficit over the same period. An emergency fund, amounting to 750.00 billion Euros was created in May 2010. The fund was formed from contributions from EU member states and amounted to 440.00 billion Euros in guarantees, 60.00 billion Euros in European debt instrument and 250.00 billion Euros from the IMF. Germany had announced a ban on naked short selling of shares in the country's top ten financial institutions, on Euro Government bonds and on related transactions in credit default swaps (CDS) in May 2010. Portugal, Italy, and Spain passed bills in their respective Parliaments to cut government spending.
Planned fiscal consolidation could weaken private demand in the region and poses a major industry challenge. Refinancing maturing sovereign debt could lead to stress in the sovereign debt markets. A debt of $4.000 trillion needs to be refinanced in 2011 and 2012 in the Euro region. Declining disposable income is resulting in reduced household savings ratio. Apart from this, low investor confidence is likely to discourage the launch of new funds in 2011. “High uncertainty in the financial market policies, such as taxation, could impact the market adversely for a one-to two-year period,” says the analyst. “Attracting investments in the region and discouraging the investors from disinvesting remains a challenge.” Inflation targeting and long-term structural reforms are required to maintain steady economic growth. Expected economic recovery in 2012 and low mutual penetration are likely to attract investments in the PIGS nations.
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